McDonald’s is expected to see a profit from its $5 meal deal, but the margins will be modest. According to restaurant analyst Mark Kalinowski, the profit margin for the combo is projected to be between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this promotional offer aims to attract inflation-burdened consumers back to the restaurant, with hopes that once inside, they will purchase additional items beyond the $5 deal.
However, profitability will hinge on several factors, including ingredient costs, labor, and overall operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, commented that the $5 meal deal is more of a promotion than a serious profit generator.
Moreover, while the combo may lure diners back, it does not guarantee that franchise owners will enjoy those profits. Approximately 95% of McDonald’s locations are franchise-owned, meaning that franchisees set their own prices and bear additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s U.S. operations, mentioned that franchisees aim to offset overhead expenses by offering promotional deals like the $5 meal.
Despite its potential to attract customers, Spiegel cautioned that the deal functions primarily as a “loss leader” designed to draw in and re-engage patrons. Once the expenses associated with labor, packaging, condiments, delivery, and marketing are factored in, franchise owners may find that any profits from individual items in the deal are effectively negated.