McDonald’s is poised to generate a modest profit from its $5 meal deal, with expectations of profit margins ranging from 1% to 5%. This translates to earnings of approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers who are feeling the impact of inflation, aiming to entice them to make additional purchases beyond the $5 offer.
However, profitability hinges on several key factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, described the meal deal as “more promotional than profitable.”
Even if the combo succeeds in bringing customers back into the restaurant, franchise owners may not see a significant share of these profits. Approximately 95% of McDonald’s locations are franchisee-operated, meaning that each owner sets their own pricing and bears the burden of additional expenses such as rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger indicated that franchisees employ promotional offers, like the $5 meal deal, to help offset their overhead costs. Nonetheless, Spiegel remarked that the bundle functions more as a “loss leader” aimed at attracting new and returning customers.
Once factors like labor, packaging, condiments, delivery charges, and marketing expenditures are taken into account, Spiegel concluded that franchise owners may effectively negate any profit from one or all of the items included in the deal.