McDonald’s is poised to generate a profit from its $5 meal deal, albeit a modest one. According to restaurant analyst Mark Kalinowski, the fast food giant is expected to see a profit margin on this combo meal ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this offer is a strategy for McDonald’s to attract inflation-weary consumers back to its establishments, encouraging them to purchase more than just the $5 meal upon arrival. However, the profitability of this deal hinges on various factors, including the prices of ingredients, labor costs, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, pointed out that the $5 meal deal is “more promotional than profitable.” She indicated that even if the deal successfully brings diners back into the restaurant, it might not lead to increased profits for franchise owners, who comprise roughly 95% of McDonald’s locations. These franchisees determine their pricing and bear the burden of additional costs, such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often implement promotional offers like the $5 meal deal to help offset their overhead expenses. However, Spiegel emphasized that this bundle often acts as a “loss leader” aimed at attracting and re-engaging customers. Once various costs—such as labor, packaging, condiments, delivery fees, and marketing—are taken into account, she stated that franchise owners could “wiped out any profit” from this deal.