McDonald’s is set to see modest profits from its $5 meal deal, with expected profit margins ranging from 1% to 5%. This translates to approximately $0.05 to $0.25 for every combo sold, according to restaurant analyst Mark Kalinowski.
The $5 meal deal aims to entice consumers feeling the pinch of inflation back into the restaurant, with the hope that once inside, they will make additional purchases beyond the promotional offer.
However, the profitability of this meal deal hinges on various factors, including the costs of ingredients, labor, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 deal as “more promotional than profitable.”
Kalinowski notes that even if the meal deal succeeds in drawing customers, franchisees may not benefit from the profits. Approximately 95% of McDonald’s locations are franchisee-owned, meaning these owners determine their own pricing and must absorb additional expenses such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., indicated that franchisees utilize promotions like the $5 meal deal to offset their overhead costs. Nevertheless, Spiegel explained that the bundle is primarily a “loss leader” intended to attract and retain customers. When owners account for labor, packaging, condiments, delivery charges, and marketing, they often find that profit margins on the deal are significantly diminished.