McDonald’s may earn a modest profit from its $5 meal deal, potentially ranging between 1% and 5%, which translates to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This meal deal is aimed at attracting consumers who are feeling the pinch of inflation, encouraging them to not only purchase the $5 meal but also consider additional items. However, the profitability of this offering hinges on various factors including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that the $5 meal deal is more of a promotional strategy than a significant profit generator. Even with the potential to bring customers back into McDonald’s, the profits may not directly benefit franchise owners.
Approximately 95% of McDonald’s locations are franchise-operated, meaning individual owners are responsible for setting prices and managing their own expenses, which include rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger highlighted that franchisees often use promotional deals like the $5 meal to lessen their overhead costs. However, Spiegel indicated that this deal ultimately acts as a “loss leader” designed to attract and retain customers. When considering the expenses associated with labor, packaging, condiments, delivery, and marketing, she stated that franchise owners may find that any potential profit from the deal is effectively eliminated.