McDonald’s is expected to see a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal represents McDonald’s strategy to attract consumers who are feeling the effects of inflation, hoping that once customers are in the restaurant, they will purchase additional items beyond the $5 combo.
However, the profitability of this deal relies on various factors, including the costs of ingredients, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, described the promotion as “more promotional than profitable.”
Furthermore, even though the meal deal may encourage diners to return, it does not guarantee profits for franchisees, who own about 95% of McDonald’s locations. These franchisees have the autonomy to set their own prices and must manage additional costs such as rent, insurance, permits, and taxes.
McDonald’s U.S. president Joe Erlinger mentioned that franchisees often implement promotional offers to help offset overhead expenses. However, Spiegel noted that the bundle primarily functions as a “loss leader” meant to attract and retain customers. After considering costs associated with labor, packaging, condiments, delivery, and marketing, franchise owners often find that their potential profits on this deal are significantly diminished.