McDonald’s is anticipated to see a modest profit from its $5 meal deal, with profit margins ranging between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
This initiative is part of McDonald’s strategy to attract inflation-weary customers back into its restaurants, with the aim of encouraging them to purchase additional items beyond the $5 offer.
However, profitability will depend on various factors, including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is “more promotional than profitable.”
Even if the deal successfully draws customers back, franchisees may not benefit directly from these profits, as approximately 95% of McDonald’s locations are franchise-owned. Franchise owners set their own prices and must manage various costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often employ promotional offers, such as the $5 meal deal, to help address overhead expenses. Despite this strategy, Spiegel described the meal as a “loss leader” aimed at attracting and retaining customers. After accounting for additional costs like labor, packaging, condiments, delivery fees, and marketing, she stated that owners effectively eliminate any potential profit from the items in the deal.