McDonald’s is expected to generate a profit from its $5 meal deal, but it will be minimal. According to restaurant analyst Mark Kalinowski, the profit margin on the combo is estimated to be between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this deal is a strategy by McDonald’s to attract consumers who are feeling the effects of inflation. The goal is to encourage customers to purchase more than just the $5 offer once they are in the restaurant.
However, the potential for profit will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, indicated that the $5 meal deal is “more promotional than profitable.”
Additionally, even if the combo attracts more diners, it doesn’t guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners set their own prices and must contend with various cost factors such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often use promotional offers like the $5 meal deal to manage overhead costs. Still, Spiegel pointed out that the bundle acts more as a “loss leader” aimed at attracting and retaining customers. She explained that once factors like labor, packaging, condiments, delivery charges, and marketing are considered, franchise owners often end up eliminating any profit from the deal.