McDonald’s is expected to achieve a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%. This translates to approximately $0.05 to $0.25 earned per bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that this deal is part of McDonald’s strategy to attract consumers feeling the pressure of inflation, encouraging them to spend more than just the $5 meal once inside the restaurant.
However, the profitability of this meal deal is contingent on several factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as more promotional than profitable.
While the combo may entice customers to dine in, Spiegel pointed out that franchise owners may not necessarily benefit from the increased traffic. Approximately 95% of McDonald’s locations are franchisee-owned, meaning each franchise sets its own prices and manages various expenses such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. President Joe Erlinger revealed that franchisees aim to offset their overhead costs through promotional offers like the $5 meal deal. Nonetheless, Spiegel emphasized that the bundle essentially acts as a “loss leader” to attract and retain customers. Once additional expenses such as labor, packaging, condiments, delivery charges, and marketing are considered, franchise owners could end up eliminating any profit from the deal.