McDonald’s is poised to earn a modest profit from its $5 meal deal, with estimated profit margins ranging from 1% to 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
The fast food giant sees this promotion as a strategy to attract inflation-strapped consumers back into its restaurants, hoping that once inside, customers will make additional purchases beyond the $5 offering.
However, achieving profitability is contingent on several variables, including the costs of ingredients, labor, and other operational expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the deal as “more promotional than profitable.”
Moreover, while the meal deal may draw diners, it doesn’t guarantee that profits will reach franchise owners. Approximately 95% of McDonald’s locations are franchisee-owned, allowing owners to set their own prices while managing extra costs such as rent, insurance, permits, and taxes.
In May, McDonald’s U.S. president Joe Erlinger noted that franchisees often utilize promotional offers like the $5 meal deal to help offset their overhead costs. Despite this, Spiegel characterized the bundle as a “loss leader” intended to attract and retain customers. After accounting for additional expenses such as labor, packaging, condiments, delivery charges, and marketing, franchise owners may find that their profits from the deal are significantly diminished, if not eliminated entirely.