McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, equating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
Kalinowski explained that the deal is a strategy to attract inflation-weary consumers back to the restaurant, with the hope that once they are inside, they will purchase additional items beyond the $5 offer.
However, profitability for the chain hinges on several factors, such as ingredient costs, labor, and overhead expenses. Arlene Spiegel, president of consulting firm Arlene Spiegel & Associates, noted that this meal deal is “more promotional than profitable.”
Even if the combo succeeds in bringing customers back to the restaurant, franchise owners might not see significant profits, as approximately 95% of McDonald’s locations are franchisee-owned. Franchisees set their own pricing and bear the burdens of additional expenses, including rent, insurance, permits, and taxes.
In May, Joe Erlinger, president of McDonald’s U.S., mentioned that franchisees often launch promotional offers, like the $5 meal deal, to help manage these overhead costs. Nevertheless, Spiegel referred to the bundle as a “loss leader” intended to attract and retain customers. She further explained that once labor, packaging, condiments, delivery charges, and marketing costs are considered, franchise owners could potentially eliminate any profit from the items included in the deal.