McDonald’s is expected to make a modest profit from its $5 meal deal, with profit margins estimated between 1% and 5%, translating to approximately $0.05 to $0.25 per bundle sold, according to restaurant analyst Mark Kalinowski.
The fast-food giant is implementing this deal as a strategy to attract cost-conscious consumers, hoping that once customers enter the restaurant, they will purchase additional items beyond the $5 combo.
However, the profitability of this promotion will largely depend on external factors such as ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of Arlene Spiegel & Associates, noted that the deal serves primarily as a promotional tactic rather than a means of generating significant profit.
Despite potentially drawing diners back, it is unlikely that franchise owners will see substantial gains from the deal, as approximately 95% of McDonald’s locations are franchise-owned. Franchisees independently set their prices and manage their own expenses, which include rent, insurance, permits, and taxes.
In May, Joe Erlinger, the president of McDonald’s USA, indicated that franchisees often attempt to offset their overhead by introducing promotional deals like the $5 meal. Nevertheless, Spiegel explained that the bundle functions more as a “loss leader” aimed at retaining customers, suggesting that after considering costs for labor, packaging, condiments, delivery, and marketing, franchise owners may end up eliminating virtually all profits associated with the deal.