McDonald’s anticipates generating a profit from its $5 meal deal; however, the profit margin is expected to be modest. According to restaurant analyst Mark Kalinowski, the fast food chain’s profit margin on this combo is projected to be between 1% and 5%, translating to a profit of roughly $0.05 to $0.25 for each meal sold.
Kalinowski noted that the promotion aims to attract consumers who are feeling the pinch of inflation back to the restaurant, with hopes that once customers are inside, they will purchase additional items beyond the $5 deal.
Nonetheless, profitability will rely on various factors, including the costs associated with ingredients, labor, and overhead expenses. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, remarked that the $5 meal deal is “more promotional than profitable.”
Spiegel highlighted that even if the promotional meal draws customers in, franchise owners may not necessarily benefit from those profits. Approximately 95% of McDonald’s locations are franchisee-owned, which means individual owners determine their own pricing and must manage extra costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, indicated that franchisees often utilize promotional offers like the $5 meal deal to help offset their overhead. However, Spiegel suggested that this offer serves primarily as a “loss leader” meant to attract and retain customers. After accounting for the additional expenses related to labor, packaging, condiments, delivery, and marketing, she indicated that franchise owners may end up erasing any potential profits from the deal.