McDonald’s is expected to see only modest profits from its recently introduced $5 meal deal, with profit margins estimated between 1% and 5%, translating to roughly $0.05 to $0.25 for each combo sold, according to restaurant analyst Mark Kalinowski.
Kalinowski noted that the promotion aims to attract cost-conscious consumers back to the restaurant, hoping that once inside, they will purchase additional items beyond the $5 combo. However, the overall profitability of the deal will hinge on various factors, such as ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of Arlene Spiegel & Associates, commented that the $5 meal deal is “more promotional than profitable.” She emphasized that while the combo might encourage customers to dine in, franchise owners may not directly benefit from the increased business.
Approximately 95% of McDonald’s locations are franchise-owned, meaning that individual owners determine their own pricing and must manage additional expenses like rent, insurance, and taxes. In a recent statement, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees frequently implement promotional offers to offset those overhead costs.
Despite this, Spiegel described the meal deal as a “loss leader” aimed at attracting and retaining customers. Once all costs related to labor, packaging, condiments, delivery, and marketing are taken into account, she indicated that franchise owners would likely eliminate any potential profit from the deal.