McDonald’s may be poised to generate some profit from its new $5 meal deal, albeit a modest one. According to restaurant analyst Mark Kalinowski, the profit margin for this combo meal is expected to range between 1% and 5%, translating to earnings of about $0.05 to $0.25 for each bundle sold.
Kalinowski notes that this strategy is aimed at attracting consumers who are feeling the pinch of inflation, with the hope that once they enter the restaurant, they will purchase additional items beyond the $5 meal.
However, profitability will hinge on various factors including ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of Arlene Spiegel & Associates, indicated that the meal deal is “more promotional than profitable.”
Despite the potential to draw customers back into restaurants, Spiegel cautions that franchise owners, who represent approximately 95% of McDonald’s locations, might not see these profits. They set their own pricing and are responsible for various additional costs such as rent, insurance, permits, and taxes.
McDonald’s U.S. president Joe Erlinger mentioned in May that franchisees often look to offset overhead expenses through promotional offers like the $5 meal. Nonetheless, Spiegel noted that this offering is essentially a “loss leader” intended to attract and retain customers. After taking into account costs associated with labor, packaging, condiments, delivery, and marketing, owners may end up eliminating any potential profit from the items included in the deal.