unsustainable marketing

[softball]

I always knew that this shit was wrong. Is this the tip of the iceberg?

CHICAGO (AP) -- Burger King franchisees sued the hamburger company this week over its $1 double cheeseburger promotion, saying they're losing money on the deal and the company can't set maximum menu prices.
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The National Franchise Association, a group that represents more than 80 percent of Burger King's U.S. franchise owners, said the $1 promotion forces restaurant owners to sell the quarter-pound burger with at least a 10-cent loss.

While costs vary by location, the $1 double cheeseburger typically costs franchisees at least $1.10, said Dan Fitzpatrick, a Burger King franchisee from South Bend, Ind. who is a spokesman for the association. That includes about 55 cents for the cost of the meat, bun, cheese and toppings. The remainder typically covers expenses such as rent, royalties and worker wages.

"New math, or old math, the math just doesn't work," Fitzpatrick said.

After testing the $1 deal in markets across the country, the discounted burger went on sale nationwide last month even though franchise owners, who operate 90 percent of the company's 12,000 locations, twice rejected the product because of its expense.

"The current management team has disregarded rights that Burger King franchisees have always had," Pennsylvania franchise owner Steve Lewis said in a statement.

Denise Wilson, a spokeswoman for the nation's No. 2 hamburger chain, said the Miami restaurant company believes the litigation is "without merit," particularly after an earlier appeals court ruling this year showing the company had a right to require franchise owners to participate in its value menu promotions.

Restaurants, especially fast-food chains, have been slashing menu prices because of the poor economy. Executives hope the deeply discounted deals will bring in diners who are spending less when they eat out, or opting to stay home altogether.

When the $1 double cheeseburger was announced this fall, analyst said it could increase restaurant visits by as much as 20 percent. But despite that boost, a Deutsche Bank analyst said as much as half of the gain recorded from increased traffic could be lost because customers were spending less when they ordered food.

The lawsuit was filed Tuesday in U.S. District Court in Southern Florida.

Burger King shares fell 18 cents, or 1 percent, to close at $17.12 Thursday.

[MRock]

I think this belongs in the other thread titled "You want to see panic????"

[Hell Puppy]

This one actually surprises me. Corporate clearly wants to use it as a loss leader. If they trialed it and have data that it works, what's the issue?

Sure, you lose a dime on the burger, but the soft drink you wash it down with has a product cost of about about 9 cents. Fries also have a good margin, in fact everything on the menu other than the meat does.

[softball]

Originally Posted by Hell Puppy

This one actually surprises me. Corporate clearly wants to use it as a loss leader. If they trialed it and have data that it works, what's the issue?

Sure, you lose a dime on the burger, but the soft drink you wash it down with has a product cost of about about 9 cents. Fries also have a good margin, in fact everything on the menu other than the meat does.

Franchisees work on a very thin margin. This obviously pisses them off enough to launch legal action. Meat is their bread and butter so to speak. A buck for a burger is like a $150 per join offer. It makes no sense.

[sunfunbill]

I love Dunkin Donuts coffee, so I'm friends with many of the managers. That chain barely gets by. They have to order supplies day to day cause they don't have enough money to buy cups and stuff for a week.

Also once you've worked there for a while and want a raise, they fire you cause they can't pay them more.

[Steve-ATCI]

Burger King and ton of other chains are working on razor thin margins now. Wendy's disappeared here for awhile, but it looks like they're back in force.

[TheEnforcer]

Loss leader pricing isn't anything new. Sheesh...

Matter of fact I rarely go to Burger King and I saw the ads for that and plan to go there. The .10 or .20 if I get two they lose from the burger(s) I'm sure will be more than made up for with the large drink and large fries I would buy as well.