McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins estimated between 1% to 5%. This translates to approximately $0.05 to $0.25 earned for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski notes that the promotion aims to attract consumers who are feeling the pinch of inflation, hoping they will purchase additional items once they are inside the restaurant. However, the potential profitability of the meal deal hinges on various factors, including the costs of ingredients, labor, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, describes the $5 meal deal as “more promotional than profitable.” She points out that while the combo may entice diners back, the profits might not reach the franchisees. Approximately 95% of McDonald’s locations are franchise-owned, meaning franchisees establish their own pricing and are responsible for managing additional expenses such as rent, insurance, permits, and taxes.
Earlier this year, McDonald’s U.S. president Joe Erlinger mentioned that franchisees often use promotional deals like the $5 meal to offset these overhead costs. However, Spiegel warns that after accounting for expenses related to labor, packaging, condiments, delivery, and marketing, franchise owners could lose most, if not all, of their profits on the meal deal.