McDonald’s is expecting modest profit margins from its $5 meal deal, with estimates ranging between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski. The fast food chain aims to attract budget-conscious consumers weary of inflation, hoping that customers will purchase items beyond the meal deal once they enter the restaurant.
However, the profitability of the $5 offering is dependent on several variables, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the meal deal is “more promotional than profitable.”
Although this strategy might draw diners back into restaurants, franchise owners, who operate about 95% of McDonald’s locations and set their own prices, may not benefit directly from the deal. They face additional costs such as rent, insurance, permits, and taxes.
Joe Erlinger, president of McDonald’s U.S., previously mentioned that franchisees often employ promotional offers like the $5 meal deal as a way to manage overhead. Nonetheless, Spiegel maintains that the combo serves as a “loss leader” to attract and retain customers. Once all expenses, including labor, packaging, condiments, delivery, and marketing, are considered, franchise owners could lose any potential profit from the items offered in the deal.