McDonald’s is poised to see a modest profit from its $5 meal deal, with expectations of profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant has introduced the deal as a strategy to attract inflation-weary customers back into its locations, with hopes that they will purchase additional items once inside. However, profitability hinges on several variables, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.” She points out that while the offer may draw patrons, it may not yield significant profits for franchisees. This is due to the fact that 95% of McDonald’s locations are franchise-owned, allowing operators to set their own prices while facing added expenses like rent, insurance, permits, and taxes.
In a statement from May, Joe Erlinger, President of McDonald’s U.S., mentioned that franchisees often employ promotional deals like this to manage overhead costs. Despite this, Spiegel notes that the bundle acts primarily as a “loss leader to capture and re-capture guests,” and once all associated costs such as labor, packaging, condiments, delivery fees, and marketing are considered, it effectively eliminates any profit from the items included in the deal.