McDonald’s is expected to earn a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to earnings of approximately $0.05 to $0.25 for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the meal deal is part of McDonald’s strategy to attract inflation-weary consumers back into their restaurants, hoping that once customers are there, they will purchase additional items beyond the $5 offering.
However, profitability will also be influenced by 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.”
Although the combo may entice diners to return, it doesn’t guarantee profits for franchisees. With approximately 95% of McDonald’s locations being franchise-operated, these owners are responsible for setting their own prices and managing additional costs like rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often use promotional deals like the $5 offering to help offset their overhead costs. Nevertheless, Spiegel emphasized that the meal is essentially a “loss leader” designed to attract and retain customers. After accounting for labor, packaging, condiments, delivery fees, and marketing expenses, she suggested that franchise owners may lose any potential profit from the deal.