McDonald’s is poised to generate profits from its $5 meal deal, although these profits are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski notes that this promotional offer is a strategy by McDonald’s to draw back inflation-sensitive consumers and encourages them to purchase more items beyond the $5 deal. However, the ability to profit hinges on various factors including ingredient costs, labor expenses, and overhead costs.
Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as primarily a promotional tactic rather than a profitable initiative. While attracting customers may increase foot traffic, it does not guarantee profits for franchise owners, as about 95% of McDonald’s locations are franchisee-owned. These franchisees determine their own pricing and must manage additional expenses such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. President Joe Erlinger emphasized that franchisees often introduce promotional offerings like the $5 meal deal to help alleviate overhead costs. However, Spiegel cautions that the deal acts more as a “loss leader,” aimed at re-engaging customers rather than ensuring profitability. When considering the added costs of labor, packaging, condiments, delivery, and marketing, she argues that franchise owners may ultimately eliminate any potential profit from the items included in the deal.