McDonald’s may reap some profit from its $5 meal deal, although the margin is expected to be modest. Restaurant analyst Mark Kalinowski estimates that the profit margin for each combo will range between 1% and 5%, translating to approximately $0.05 to $0.25 profit for each bundle sold.
Kalinowski notes that this deal is aimed at attracting consumers who are feeling the pinch of inflation and encouraging them to purchase more than just the $5 meal. However, the profitability of this offer will be influenced by various factors, including the costs of ingredients, labor, and overhead expenses.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, describes the $5 meal deal as being “more promotional than profitable.” Even if the deal successfully brings customers back to the restaurants, franchise owners may not see the benefits, as around 95% of McDonald’s locations are franchise-owned, meaning that owners determine their own pricing and manage additional costs like rent, insurance, permits, and taxes.
In a statement made in May, McDonald’s U.S. president Joe Erlinger highlighted that franchisees often try to offset overhead costs by launching promotional offers, including the $5 meal deal. However, Spiegel emphasizes that such bundles often serve as “loss leaders” to attract customers rather than generate significant profits. When considering added expenses related to labor, packaging, condiments, delivery fees, and marketing, owners typically find that profits from the deal are nearly nonexistent.