McDonald’s is expected to achieve a modest profit from its $5 meal deal, with estimated profit margins between 1% and 5%, translating to earnings of about $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract consumers who are feeling the pressures of inflation. The goal is to entice customers into the restaurant and encourage them to purchase additional items beyond the $5 offering.
However, the actual profitability of the meal deal will depend on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
While the combo may draw diners back to the restaurants, franchisees may not see the benefits of these profits, as approximately 95% of McDonald’s locations are franchisee-owned. This means franchise owners have the autonomy to set their prices and manage expenses such as rent, insurance, permits, and taxes.
In statements made by Joe Erlinger, president of McDonald’s USA, he noted that franchisees often use promotional offerings like the $5 meal to offset their overhead costs. Nevertheless, Spiegel emphasized that the deal functions primarily as a “loss leader” aimed at attracting and retaining customers. Once labor, packaging, condiments, delivery charges, and marketing costs are accounted for, she indicated that franchise owners may find themselves with little to no profit on any item included in the meal deal.