Are Franchisees Being Discounted to Death?

November 17, 2009 Franchise Publicity

Discount fast food franchise promotions like Subway’s $5 Footlongs, Quiznos Million Sub Giveaway and McDonald’s $1 menu, and Burger Kiong’s $1 Double Cheeseburger are attractive to consumers and great for the franchisor… but what about the franchise owners who foots the bills? According to Smart Money, some of the franchise promotions and giveaways lately have been great for everyone except the franchise owner.

Product discounting is one of the most contentious topics in franchising. Here’s why: Franchisors make money off the gross sales of their franchisees, regardless of franchisee profitability.

Some franchisors make additional money marking up ingredients and food products to their franchisees.

Public franchisors benefit from higher sales – and stock prices – that are not tied to franchisee profitability.

SmartMoney.com surveyed franchisees from different franchise chains regarding the cost to them of some current and recent promotions. The franchisee profitability posts on UnhappyFranchisee.com point out that franchisees generally bear the brunt of a promotions’s cost, including the food, labor, rent and utilities, among other things.

Here’re are links to the data on six recent franchise marketing promotions, posted on UnhappyFranchisee.com:

LITTLE CAESARS: What Franchisees Make on a $5 Pizza

McDONALD’S: What Franchisees Make on a $1 Burger

BASKIN ROBBINS: Franchisees Lose $1.45 per Scoop on Promo

QUIZNOS: Franchisees Lost $2.25 per Sub on Giveaway

BURGER KING Franchisees Sue Over $1 Cheeseburgers

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