McDonald’s aims to profit from its $5 meal deal, but the earnings are expected to be minimal. According to restaurant analyst Mark Kalinowski, the profit margin on the combo meal is estimated to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that the promotion is a strategy for McDonald’s to attract inflation-weary customers, encouraging them to purchase additional items once inside the restaurant. However, profitability will hinge on various factors including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, indicated that the $5 meal deal is “more promotional than profitable.” She emphasized that while the deal may entice diners back to McDonald’s, franchise owners may not necessarily benefit financially from the increased traffic.
Approximately 95% of McDonald’s locations are franchise-operated, meaning that these owners have the autonomy to set their own prices while also managing costs associated with rent, insurance, permits, and taxes. In May, Joe Erlinger, president of McDonald’s USA, mentioned that franchisees often utilize promotional offers like the $5 meal deal to help offset their overhead.
Spiegel went on to describe the meal bundle as a “loss leader” intended to attract customers. Once the additional expenses for labor, packaging, condiments, delivery, and marketing are considered, she stated that franchise owners might eliminate any potential profits from the items included in the meal deal.