McDonald’s is expected to generate a modest profit from its $5 meal deal, with profit margins projected to fall between 1% and 5%, translating to approximately $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski mentioned that the promotion is part of McDonald’s strategy to attract inflation-weary customers back to their outlets, with the hope that once inside, patrons will purchase more items beyond the $5 meal.
However, whether McDonald’s can maintain profitability depends on various factors, including ingredient costs, labor, and operational expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that this meal deal is “more promotional than profitable.”
Although the combo might draw customers into the restaurant, it doesn’t necessarily guarantee profits for franchisees. Approximately 95% of McDonald’s locations are franchise-operated, meaning these owners set their own prices and must manage additional costs associated with rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees often try to offset these overhead costs through promotional deals like the $5 meal. Nevertheless, Spiegel described the offering as more of a “loss leader” meant to attract and retain customers. After accounting for costs related to labor, packaging, condiments, delivery, and marketing, she stated that franchise owners “basically wipe out any profit on any one or all of the items in the deal.”