McDonald’s is expected to generate only modest profits from its $5 meal deal, with profit margins estimated to be between 1% and 5%, translating to roughly $0.05 to $0.25 per combo sold, according to restaurant analyst Mark Kalinowski.
This pricing strategy aims to attract inflation-weary customers back to the restaurant and encourage them to purchase additional items beyond the $5 meal. However, the profitability of this deal relies on several factors, including ingredient costs, labor expenses, and overhead.
Arlene Spiegel, president of Arlene Spiegel & Associates, described the $5 meal deal as “more promotional than profitable.” She noted that while the offer may bring customers into the restaurant, it does not guarantee profits for franchisees, who operate about 95% of McDonald’s locations. These owners determine their own pricing and must manage various costs like rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often implement promotional offers to alleviate some of these overhead expenses. Nevertheless, Spiegel emphasized that the meal deal serves more as a “loss leader” to attract and retain customers. Once labor costs, packaging, condiments, delivery fees, and marketing expenses are taken into account, she claims that franchise owners may effectively eliminate any potential profit from the deal.