McDonald’s is expected to see a profit margin from its new $5 meal deal, but it will be modest. According to restaurant analyst Mark Kalinowski, the profit margin on this combo could range from 1% to 5%, which translates to approximately $0.05 to $0.25 for each bundle sold.
Kalinowski noted that this meal deal aims to attract consumers who are feeling the pinch of inflation, encouraging them to visit the restaurant and potentially purchase additional items beyond the $5 offer. However, the actual profitability will hinge on various factors, including ingredient costs, labor, and overhead expenses.
Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, explained that the $5 meal deal is “more promotional than profitable.” Even if this offer successfully brings customers back into the restaurant, it may not guarantee profits for franchise owners. Approximately 95% of McDonald’s locations are franchisee-operated, meaning that each owner sets their own prices and manages additional costs such as rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees work to reduce their overhead by utilizing promotional offers like the $5 meal deal. Nonetheless, Spiegel emphasized that this deal functions more as a “loss leader” aimed at attracting customers. When expenses for labor, packaging, condiments, delivery, and marketing are included, franchise owners are likely to see little to no profit from this offering.