Chain restaurants are trying to lure in recession-weary diners with deep discounts, but franchisers worry that if you suddenly start paying half-price for sandwiches, you won’t be willing to pay full price when the economy recovers. We’re all accustomed to chain restaurant sandwiches costing $8 and up, but how much do those sandwiches really cost restaurants to make?
The heavy discounting is leading to tensions between the people who, as independent franchisees, operate many of the restaurants, and the corporate officers who control the brands, menus, advertising and strategy. The franchisees agree that discounts can get customers in the door, but wince at what they can do to profit margins.
A T.G.I. Friday’s promotion in April and May offering $5 sandwiches and salads led to a small-scale revolt among franchisees. Ross Farro, who has seven T.G.I. Friday’s restaurants in Ohio and Pennsylvania, said the promotion included salads that normally sell for as much as $10 and a steak sandwich priced at $11.89 on the regular menu. The ingredients alone for each steak sandwich cost about $4, he said.
The promotion brought in a flood of customers, but Mr. Farro said he could hardly afford to feed them. Within days of the promotion’s start in late April, many franchisees began complaining to the chain’s parent company, Carlson Restaurants Worldwide.
Franchisers also complain that thrifty consumers don’t order profitable extras like soda or dessert. Have you been lured in by any recent restaurant deals?
Discounts Have Restaurants Eating Own Lunch [The New York Times]