McDonald’s is expected to earn a marginal profit from its new $5 meal deal, projected to be between 1% and 5%, translating to roughly $0.05 to $0.25 for each combo sold, according to analyst Mark Kalinowski. This initiative is part of the fast-food giant’s strategy to attract consumers who are feeling the pressure of inflation, hoping that once customers are inside, they will spend more than just the promotional offering.
However, factors such as ingredient costs, labor, and overhead expenses will determine the overall profitability of the deal. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the $5 meal deal is more about promotion than profitability.
Franchisees, who own approximately 95% of McDonald’s locations, set their own prices and must manage various costs, including rent and taxes. Joe Erlinger, president of McDonald’s U.S., mentioned in May that franchisees often implement promotional offers like the $5 meal deal to reduce overall operational costs.
Despite the potential to draw customers back to McDonald’s, Spiegel pointed out that once accounting for additional expenses such as labor, packaging, condiments, delivery fees, and marketing, the profit margins for owners could be negligible, leading them to essentially erase any gains from the items on offer.