McDonald’s is expected to achieve a modest profit from its $5 meal deal, with profit margins anticipated to be between 1% and 5%. According to restaurant analyst Mark Kalinowski, this translates to earnings of approximately $0.05 to $0.25 for each combo sold.
This pricing strategy is part of McDonald’s effort to attract consumers who are feeling the effects of inflation, with the hope that once customers are in the restaurant, they will purchase additional items beyond the $5 offer. However, profitability will be influenced by factors such as ingredient costs, labor expenses, and overall overhead.
Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She indicated that while the combo price might entice diners, it does not guarantee that franchisees will benefit financially.
With approximately 95% of McDonald’s locations being franchisee-owned, individual franchisees determine their own pricing and bear various costs, including rent, insurance, permits, and taxes. In May, McDonald’s U.S. president Joe Erlinger acknowledged that franchisees often implement promotional offers like the $5 meal deal to help offset those overhead costs.
Spiegel highlighted that after considering the extra expenses related to labor, packaging, condiments, delivery, and marketing, franchisees might effectively eliminate profits from the deal altogether.