Posted on 11/14/2009 10:24:41 AM PST by Graybeard58
CHICAGO — 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.
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.
Do individual franchise owners sign a contract with the parent company, allowing them to set prices? If so Burger King franchise owners have no beef.hehehe
Carl’s Jr/Hardees started this by creating the Big Carl and stacking it straight up against the Big Mac for only $2.
I tried it and, truth be told, it is a Super Star with Thousand Island — get it without the dressing.
I really don’t understand how they are losing money, if they move enough product they should be able to cover their overhead if they are selling their product above material cost.
I guess they never heard of “loss leaders” They make several hundred percent profit on fries and sodas... If it brings 10 to 15% more customers and these customers purchase any other product along with the burger, they will make a considerable amount more money overall... so, confused.
They more than make up for it when they ask, ‘Want fries with that?” ...
Maybe cheapskates like me are the problem. I had one the other day without fries or a drink — just the burger. I actually felt a little guilty about it.
The only reason I eat at BK is the $1 double cheeseburger—and I eat it with fries and a large Coke, so they aren’t losing money on the deal.
Bump the price up to $1.25 and I’ll probably go elsewhere.
Since Goldman Sachs owns the majority of BK, and since they control the WH....we need a Beer Summit.
Even more so with drinks. A $1.49 Coke costs the franchisee less than 30 cents. And that includes the cup and straw.
McDonald’s kept the price down by only using one piece of cheese on the $1.00 McDouble.
Same here but minus the fries and drink. Truth is they are only worth a buck. I never set foot inside a BK unless they are having this sale
Kirbdog
A BK double cheeseburger for $1.00 sounds like a terrific deal. I’ve been missing out.
Only one piece of cheese ???
Its an outrage - an outrage, I say !!!
Okay....so just thin the serving of fries and water-down the coke formula. You get your 10 cents back.
I’ve got some background in franchising.
The franchisor usually receives royalties on gross sales. His incentive is to maximize them, with no immediate incentive to give a hoot about whether the franchisee is able to make a profit at the price advertised.
Of course a smart franchisor realizes he’ll be killing the auriferous waterfowl if he cuts prices too much. But not all franchisors are that smart.
OTOH, not all franchisees are smart enough to realize how the loss leader and volume issues others have mentioned should impact their pricing strategy. I worked a deal once where franchisees could make 20% on a new source of business. New money they didn’t have before that also helped increase their traditional source sales! Most of them insisted on marking their cost up 40% or more, and pretty quickly all of the new business was lost.
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