McDonald’s is poised to make a small profit from its $5 meal deal, but the margins are expected to be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo meal will likely fall between 1% and 5%, translating to approximately $0.05 to $0.25 for each meal sold.
Kalinowski noted that this promotional tactic aims to attract consumers who are feeling the pinch of inflation, with the hope that once customers are in the restaurant, they will be tempted to purchase additional items beyond the $5 offer.
However, profitability will also hinge on various factors, including the costs of ingredients, labor, and other overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.”
Even if this combo succeeds in bringing customers back, Spiegel emphasized that franchise owners may not directly benefit from those profits. Approximately 95% of McDonald’s locations are franchisee-owned, which means that these owners set their prices and must also contend with costs such as rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger indicated that franchisees often introduce promotional deals like the $5 meal to help manage those overhead costs. However, Spiegel pointed out that the meal deal functions primarily as a “loss leader” designed to attract and retain customers. When considering the total costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners may find that they effectively eliminate any profit from the deal.