McDonald’s is expected to make a modest profit from its newly introduced $5 meal deal, with profit margins projected to range from 1% to 5%. This translates to about $0.05 to $0.25 earned for each combo sold, as noted by restaurant analyst Mark Kalinowski.
Kalinowski explained that the meal deal is a strategic move to attract consumers who are feeling the pressure of inflation, with the hope that once they are in the restaurant, they will purchase more items beyond just the discounted offering.
However, profitability for the fast-food giant will hinge on various factors, including the fluctuating costs of ingredients, labor, and overhead expenses. Industry consultant Arlene Spiegel remarked that the $5 meal deal is primarily a promotional tactic rather than a significant profit generator.
Additionally, it is important to understand that approximately 95% of McDonald’s locations are franchise-owned, meaning franchisees are responsible for their own pricing and must manage expenses like rent, insurance, permits, and taxes. According to Joe Erlinger, the U.S. president of McDonald’s, franchise owners often employ promotional deals such as this one to help offset overhead costs.
Despite these efforts, Spiegel emphasized that the meal deal functions more as a “loss leader” intended to draw in customers rather than a path to profitability. Once all associated costs—such as labor, packaging, condiments, delivery fees, and marketing—are taken into consideration, franchise owners may find that any profits from the meal deal are effectively erased.