McDonald’s is poised to generate some profit from its $5 meal deal, although the earnings will be modest.
According to restaurant analyst Mark Kalinowski, the profit margin for the fast-food chain on this combo meal is expected to range from 1% to 5%, equating to approximately $0.05 to $0.25 for every bundle sold. Kalinowski highlighted that this strategy is designed to attract cost-conscious consumers impacted by inflation, encouraging them to purchase additional items beyond the $5 deal.
However, the overall profitability of the meal deal hinges on several variables, including the costs of ingredients, labor, and other operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
She noted that while the combo may bring guests back to the restaurant, franchise owners may not necessarily share in the profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning that individual owners set their own prices and juggle added expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees manage these overhead costs by introducing promotional offers like the $5 meal. Nonetheless, Spiegel pointed out that the deal serves primarily as a “loss leader” aimed at attracting and retaining customers. After accounting for the costs associated with labor, packaging, condiments, delivery, and marketing, she explained that franchise owners often find that their profits are significantly diminished or completely eliminated with this offer.