Burger King Restaurants Angry Over $1 Burger Promo, File Lawsuit

I’ve been wondering how some fast food chains can sell $1 cheeseburgers and still make a profit. Apparently they can’t, which is why a group that represents about 80% of the restaurant’s franchisees have sued the company over the promotion.

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 [National Franchise 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.

Unlike some other restaurants where your local franchise will just refuse to participate, Burger King requires all of its locations to take part in the promotion.

They may face an uphill battle, though. MSNBC notes that “an earlier appeals court ruling this year [showed] the company had a right to require franchise owners to participate in its value menu promotions.”

“Burger King franchisees sue over $1 promotion” [MSNBC] (Thanks to Howard!)

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  1. phildogger says:

    Touch Noogies, No one goes there and just gets a burger. They make their money on the Fries and 2 dollar drinks.

    • Floobtronics says:

      @phildogger: Precisely. The greatest expense in providing the drink is the cup. It’s a greater than 90% margin item.

      • Radi0logy says:

        @Floobtronics: Of course – Oil requires that dinosaurs died millions of years ago, were buried in the earth, their bodies turned to oil, huge drilling machines pull the oil out of the ground, load it into tankers, take it to refineries, load it into trucks and then gets shipped to gas stations where it sells for SIGNIFICANTLY less per gallon than sugar water. Go figure.

        • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

          @Radi0logy: Rent is expensive enough for a year, but I can’t imagine the rent paid on sitting in the earth for millions of years.

          Maybe it’s cost is offset when it finally gets out of the ground and gets the security deposit back.

        • edison234 says:

          @Radi0logy: Restaurants don’t use that kind of oil to cook with. At least none of the ones I frequent.

    • Meshuggina says:

      @phildogger: If I’m running between classes and work, I’ll usually hit up Mcdonald’s, BK, or Wedny’s and get a couple burgers off the dollar menu and nothing else, and I do this at least once every couple weeks.

    • Diet-Orange-Soda says:

      @phildogger: I do. Sometimes I crave a lonely fast food burger and bring it home to join Mr. Beer in a tastesplosion. Fries – sometimes. But rarely do I buy a drink.

    • ncpeters says:

      @phildogger: When I was in college I’d often go to McDonalds and get just a couple double cheeseburgers or Wendy’s and get a couple Jr. bacon cheeseburgers. Poor people or college students will often try to get the most for their money, which often is just a couple burgers.

    • JPinCLE says:

      @phildogger: For real? This is my favorite game! The “make them lose money” game. Sometimes, I’ll even request an ice water, which McDonald’s always provides with a smile.

      3 McDoubles
      2 McDoubles and a McChicken
      The Wendy’s Trifecta (JBC, Double Stack, Crispy Chicken)
      3 Whoppers Junior

      $3.

      No fries and no drink. The drink is just stupid. The fries are an upsetting loss, but it is worth it to have the satisfaction of shopping exclusively loss leaders.

      Sure, once in a while I will get some nugs, a filet o’ fish, a spicy chicken sandwich, maybe a baconator… I can’t deprive myself all the time just to save a buck. But, it IS kind of amazing that the same amount of food can either cost me $7 or $3, with very little difference in satisfaction level.

      • satoru says:

        @JPinCLE: You do realize you are not hurting McDonalds in any way by doing this. You are hurting the local business person trying to make a living, along with their staff of minimum wage employees.

    • coan_net says:

      @phildogger: I do. Usually twice a week I will stop by either McDonalds, Wendys, or Burger King and order 2 sandwiches off their $1 (or $.99) menu for supper… and drink my own drink once I get home.

      It’s a cheap meal, under $2.50 after tax + a $.35 can of pop from home.

    • phildogger says:

      @phildogger: Ok, Most people don’t go there just for the burgers. Some of you may, but I would guess 95% of the people buy a drink and fries.

    • VeeKaChu says:

      @phildogger:Maybe “no one goes there and just gets a burger” applies to the folks you know, but spend any time in fast-food restaurants in the inner city, or really any economically depressed area, and you will observe a steady stream of customers with exact change for a single item. And if it’s a “loss-leader” style of promotion, for the owner it’s all “loss”.

      • dragonfire81 says:

        @VeeKaChu: QFT. There have been many times recently I have gone to a fast food place and just ordered a single dollar menu item. I don’t drink soft drinks and while places do have non carbonated drinks, I generally prefer to avoid them. If I can afford fries, I might go for fries, but this is a rare occurrence.

      • dantsea says:

        @VeeKaChu: And every burger a special custom order. Yup. Seen it.

    • Raekwon says:

      @phildogger: I almost always avoid fires and a drink when eating fast food. I buy whatever is on promotion or I have a coupon for and nothing else. So at least when I visit BK I’m ripping them off :-P

    • Burzmali says:

      @phildogger: The only time I go to Burger King is when they’re running deals like this. I have plenty of soda/water/etc at home (plus I don’t care for Coke products). I just want to get a couple of burgers on the way home from work. Since they started this $1 promo, I’ve picked up at least 10 burgers on the way home. No fries, no drinks. If they’re actually losing money on this promotion, I think they have a legitimate gripe. Even when McDonalds used to run 39 cent cheeseburger promotions, they didn’t lose money on the deal. I’m pretty sure that was the at-cost price.

    • Raiders757 says:

      @phildogger: “No one goes there and just gets a burger”

      That’s all I would get from BK. Their fries suck, and their tea sucks(I don’t drink soda very often). The Whopper has been below par for ages now, which makes BK one of the worst fast food joints in the land.

      The double cheeseburgers aren’t all that bad though, and this promotion has made me return once already. I might even return again in the near future. but when this deal goes away, BK will once again be an afterthought for me.

  2. kahanlon says:

    I worked at Burger King in my teens and we had that promotion every year. It would increase our business two fold. I doubt that it wasn’t profitable as people would order 8 or 10 at a time. Maybe it is “not as profitable”

    • gparlett says:

      @kahanlon: Well, if they are losing 10 cents per burger if someone buys 8 burgers that just means the franchise is losing 80 cents instead of 10.

      • Mr_D says:

        @gparlett: It’s probably more efficient to have a worker make 8 double cheeseburgers in a row than spaced 5 minutes apart, driving the cost down.

        Why am I analyzing this?

    • zacox says:

      @kahanlon: Smart franchisees limit the number to 4 or something similar. Smart franchisees occasionally “run out” of one of the ingredients if there has been a run on them.

      I can definitely see both sides of this issue. On one hand, there is the corporation, which requires participation in this promo. They have the law on their side because franchise agreements usually include clauses that allow corporate to force its will on the franchises.

      On the other hand, there are the franchisees, who are struggling with higher food costs, and in some cases lower sales (because of lower headcounts and lower prices). In order to generate profit, labor cost has to be kept to a certain percentage, and food cost has to be kept to a certain percentage.

      Fifty percent food cost is simply not acceptable. I’m not sure how much the target would be at a BK, but 30% is a good number to start with. Now, a bunch of customers who buy the sandwiches for $1 will buy nothing else. But the other 50% will also buy a soda. Soda is the highest margin item in the store, on the order of 20c for a $1.59 beverage(cup is about 15c of that cost, so refills are negligible). With two burgers and a soda, the food cost is still 36%, but that’s manageable compared to 50%.

      Corporate runs the risk of alienating some franchisees. When that happens, franchisees are more lax in upholding the brand image of the company, and when that happens, the entire company suffers. It behooves corporate to work with the franchisees and not shove bitter down their throats.

  3. idip says:

    Interesting. Did they sign a contract in which they agreed to participate in order to open their franchise?

    • A Penguin On The Telly says:

      @idip:I didn’t think they were required. In the tv ad, it states in fine print that price and participation may vary. since apparently they are required, somebody needs to tell the owner of the BK’s around my house, because they are not running this promo.

    • greggen says:

      @idip: They are not required as I have seen a few that do not run this promo.

  4. doctor_cos wants you to remain calm says:

    Do the predatory pricing laws not apply to restaurants?
    Many states have laws preventing items from being sold below cost (i.e. wallyworld). I remember this being the reason that Bestbuy quit selling CDs so cheap (doorbusters/loss leaders) when they first opened, as a direct result of this kind of law passing in CA because of wallyworld.
    And Quizno’s does the same thing to its franchisees.

    • KyleOrton says:

      @doctor_cos: They’re not reselling something at a fixed cost like a retailer is. They add value by cooking it.

      Also, the $1.10 is BS because it includes a hefty share of fixed costs. They would owe rent and wages (I doubt they pay royalties per sandwich, but who knows?) regardless of whether they sell the burger. By dropping the price to $1 they are probably selling many more of them (I have bought 3 at $1 but never went to BK before that) so their contribution to fixed costs would be higher than before.

    • danno5-0 says:

      @doctor_cos: I wouldn’t use CA as an example. Californium is in a financial due to its liberal politics and laws. Nope, California is done–bad example.

  5. Dont lump me into your 99%! says:

    I wonder if they have ever heard the term “loss leader”.

    • floraposte says:

      @csparks: Loss leaders are only effective if they bring in additional profit to the restaurant, otherwise they’re just plain losses. What I suspect happens here is that they bring in additional profit to the corporation but not necessarily to each additional franchise.

      • zibby says:

        @floraposte: Good point. I had a guy that I did business with that wanted me to do everything for him as a “loss leader”. It was his favorite term. Didn’t take me long to realize that this deadbeat’s entire custom consisted of loss leaders and I kicked him to the curb.

  6. MyTQuinn says:

    I question the ability of the company to require franchisees to participate in promotions (absent a contractual obligation to do so), but even if it’s optional, it’s a no-win situation for franchisees. If they participate, they sell some items at a loss, hoping to make up the difference on other items those same customers purchase. If they don’t participate, they risk alienating their customers, who arrive expecting a good deal, and are turned away.

    I can understand the company WANTING all franchisees to participate, because they get a cut of the gross sales, regardless of whether or not the individual franchises make a profit, and non-participating franchisees leave the customer with a bad impression of the company, not the individual franchise.

  7. markrubi says:

    Surely most people buying these $1 doubles will also be purchasing a very profitable soft drink. Oh let’s not forget those buys like me pulling in to get a few but also have kids screaming for some chicken tenders. The franchise owners suing BK are not losing money in my eyes at the end of the day.

    • eaglearcher says:

      @markrubi:

      Let’s not forget fries and PR. I don’t buy it that they lose money over this promo. I just think they’re shortsighted.

    • elangomatt says:

      @markrubi: If I go to BK for this deal, as I have been thinking about, I am sure the franchisee wouldn’t be happy that I won’t get a drink. I might get fries, but might not. I have gone to Wendys before and just gotten a doublestack. I have always wondered though how they made money on those before.

      • Brianishandsome says:

        @markrubi: “The franchise owners suing BK are not losing money in my eyes at the end of the day.”

        In your opinion? Are you an economist? A franchise owner? These people aren’t going to seek a class action lawsuit or some other nonsense for their health. The Whopper Junior has been about a buck for quite some time now, and they know about the profitability of a loss leader (or lack thereof). Whether or not one of these burgers does the trick of selling more drinks, fries, etc. has a lot to do with the location of the store. Burger King’s own stores are surely located in areas that receive the right kind of business to make this work. The BK franchise in my college town, however, will undoubtedly suffer some serious losses to the crowd that stops in for nothing but a dozen of these burgers and nothing else, then heads home to eat them. Not a moneymaker.

  8. Bob Lu says:

    The total cost of rent, royalties and worker wages won’t increase (significantly) with the selling raise. That says as long a the selling goes up more than 20%, it will be profitable.

    And this promotion also push the selling of the always overpriced fries and pop.

  9. zarex42 says:

    Dumb idea.

    The franchisees shouldn’t be forced to participate in the promotion, and even though some customers will purchase higher-margin drinks because of it, plenty more will buy this instead of a whopper, etc.

    But it really should be up to the franchisee, who’s $ is really on the line, whether to participate or not.

    Obviously none of us has read the contract, but it probably has a vague clause requiring them to participate in “promotions”; but a court can easily find that the clause is unenforceable if it’s unreasonable or to their clear detriment.

    Good for them for fighting back. If corporate wants to run a promo, let THEM foot the bill. The franchisees have a hard enough time as it is.

    • MMD says:

      @zarex42: Letting franchises opt out of nationwide promotions results in frustration for the customer, though. If an ad for a $1 burger draws me to go to my local BK only to find out that it’s not available, I’m likely to be annoyed, and I’m less likely to patronize that restaurant in the future.

      The whole point of a franchise is to have consistency across restaurants. This doesn’t mean that corporate should just kick franchise owners around – but if a franchise is going to benefit from name brand recognition, it should be participating in the brand’s promotions. If you want independence, don’t own a franchise.

      • Daveinva says:

        @MMD: “If you want independence, don’t own a franchise.”

        Forgive me my ignorance, but isn’t that the *whole point* behind franchising?

        If BK wants to micromanage these stores down to the Nth degree, why bother with franchising at all?

        I don’t understand…

      • zarex42 says:

        @MMD:

        Being a franchise *is* being (mostly) independent. Sure, participating in promos consistently is good, but corporate can’t just arbitrarily pick promos that are clearly hurting the franchisees. Corporate needs a smackdown every now and then – they need to remember that their main customers are *franchisees*, not the public.

    • incident_man says:

      @zarex42: The franchisees CHOSE to become part of Burger King and accepted the terms of that agreement. If they don’t want to run the promos then they should sever their relationship with Burger King.

      • MMD says:

        @incident_man: Thank you for making my point for me!

        Buying into a pre-established restaurant chain is *not* independence! A franchisee buys into the brand name, gets its supplies from predetermined sources and is directed to serve specific menu items cooked to predetermined specifications. How can any of that be considered independence? Would we be having this conversation if a BK franchise owner decided to stop offering Whoppers? No, because a customer reasonably expects to be able to get a Whopper at a BK – it’s part of the brand.

        My earlier point stands – if a promotion is nationally advertised and a franchise doesn’t go along with it, the customer is alienated. I’m not saying that there shouldn’t be discussion between corporate and franchisees about what works and what doesn’t as far as the economics of these promotions – but a franchisee “independently” opting out doesn’t help either entity.

  10. HalOfBorg says:

    It’s just like turkeys at thanksgiving. You know how much a store makes on each bird?

    Nothing. They lose money.

    But if they don’t sell them – at a decent price – people will go elsewhere to buy all the other stuff.

  11. Blueskylaw says:

    A loss leader or leader is a product sold at a low price (at cost or below cost) to stimulate other, profitable sales. It is a kind of sales promotion, in other words marketing concentrating on a pricing strategy. The price can even be so low that the product is sold at a loss.

    One use of a loss leader is to draw customers into a store where they are likely to buy other goods. The vendor expects that the typical customer will purchase other items at the same time as the loss leader and that the profit made on these items will be such that an overall profit is generated for the vendor.

    Loss Lead describes the concept that an item offered for sale at a reduced price and is intended to lead to the subsequent sale of other items, the sales of which will be made in greater numbers, or greater profits, or both. It is offered at a price below its minimum profit margin– not necessarily below cost.

    [en.wikipedia.org]

  12. Scatter says:

    I’ve never understood why people would buy one of their large sandwiches that cost like $3.29 each when you can buy 2 items off of the dollar menu that combined have more meat and other ingredients than the larger sandwich does.

    • DerangedRoleModel says:

      @Scatter: Because Spicy Chicken Go Wraps are inferior to Spicy Chicken sandwiches.

    • Cantras says:

      @Scatter: Ordering a big mac with no sauce: You just paid $2 for that middle piece of bread. You can get shredded lettuce on a mcdouble for free.
      I don’t get it D:

      But, at my store, given the prices, you can get a two cheeseburger meal for 4.80, or… a mcdouble meal and another mcdouble for 4.80. *shrug*

    • XTC46 says:

      @Scatter: Because while 2 of those burgers are the weight of a whopper, the dont have the angry whopper sauce, onions, peppers, etc.

      You can add all that, but using your logic, where volume of food is what you are after, you can eat a 5 pound bag of rice for the amount you pay for your burger if you go to the store.

  13. ponycyndi says:

    As I despise BK with a passion, this makes me want to spend my savings on $1 burgers there, then go to the grocery to buy a 2-liter and some tater tots.

  14. There's room to move as a fry cook says:

    Franchisees should look at the total order. Very few people buy just a burger. Surely they are still making a profit on the standard burger-fries-and-a-coke combo.

  15. ZakZak says:

    A lot of the comments are seeking to invalidate the claims of the franchise owners by arguing that they will make up for lost profit through the sales high margin items. Please just consider that the franchise owners are almost certainly basing their claims on actual data.

  16. ThisWas says:

    Burger King restaurants “angry”? Or laughing their way to the bank?

    I was not aware of the $1 Promo until I read about the “lawsuit”. Nice free publicity for BK!

    • Bob Lu says:

      @ThisWas: That is the really ridiculous part of the “promotion”: it is so low key that many people don’t even know about it! Last time when I went to a BK I ordered two double cheese burgers unaware of the promotion. The board and menu was actually showing the original price. When I was paying my jaw just dropped.

      “Excuse me, I ordered… two…. double… cheese… burger!”

      “Yeah, we have special price for that.”

      If people don’t know about it, it is not going to help boosting the sale greatly. And if this kind of loss leader is not boosting the sale greatly, it is just loss. (However in suh case the loss should be very limited.)

  17. jparadise says:

    Funny I was just thinking about this the other day. (There’s a BK across the intersection from where I get on the highway, I don’t go in there ever, but get to read their signs while waiting for the light to turn.) I was thinking “they must be losing money on this” and that McDonalds must only profit a few cents on the McDouble.

    This is a PROMOTION, though, right? I assumed when specials like this happened corprate would absorb some of the ‘cost’ to the store. I guess I now know that isn’t true…

    To be successful in the lawsuit the stores will have to show that the are losing money on the bottom line, not just on $1 burger sales.

    • billy says:

      @jparadise: >>>To be successful in the lawsuit the stores will have to show that the are losing money on the bottom line, not just on $1 burger sales.

      Actually, it’s being reported that the franchisees are suing b/c their contract doesn’t allow corporate to “dictate maximum pricing.”

      [www.chicagotribune.com]

      It should also be noted, though, that a previous court order found that corporate could force franchisees to participate in value menu promotions.

      [www.msnbc.msn.com]

  18. discounteggroll says:

    I buy fries and a drink with this, but only because I actively take advantage of the free original chicken sandwich/whopper receipt survey.

  19. kylere says:

    So, they lose 10 cents a burger, the 1.89 cokes they pay 11 cents for more than makes up for it.

  20. edesignway says:

    I always get a drink and fries and without this promo I wouldn’t go to BK. Before the promotion a Double Cheese combo was $4.69 now it is $3.18 (The same price it was three years ago).

  21. ElizabethD says:

    I’m one of the people the franchisees dislike. I order one or two of those buck-burgers and that’s it. (I always have a water bottle in my car.) Yum.

  22. BrandiLagnarok says:

    BK Franchisees sign an agreement that vests pricing power in the mother ship. And they have to live with it.

    Could they negotiate a better deal before signing? Dunno. But they could have bought a McDonalds instead.

    Jeff Yablon
    President & CEO
    Answer Guy comments on Business Change and Dollar Menus

  23. u1itn0w2day says:

    I understand the franchisee’s point of view but if they did agree to participate in promotions like that they really should. But Burger King has got to realize the financial strain they are putting on the owners. And if some franchises refuse to partipate that hurts Burger King.

    Corporate must not do squat for the Burger King owner. And that would explain why I had great difficulty getting a south Florida BK manager to honor an apparently expired deal sign they still had prominently posted. It increased the order by almost 2 dollars. They argued it was expired. I argued the sign is displayed with no dates. And all this while some kind of BK higher up was training/supervising someone. Even if it was some kind of corporate test or inspection you don’t subject your customers to arguments like that.

  24. Kat@Work says:

    I’m just disgusted that it costs 55 cents for the food portion of the burger. Quality all the way!

  25. Loias supports harsher punishments against corporations says:

    I can see the goal here – After all Walmart is undercutting itself on items just to keep marketshare and hoping to regain lost profit from people buiying more things – but BK should probably reimburse the franchises for those sales. It should be the corporate level that loses money, not the franchise owners.

  26. greeneyedguru says:

    I don’t get this, they obviously didn’t have a problem with the 2 for $2 double cheeseburgers that has been a promotion for as long as I can remember. So why is 1 for $1 a problem?

  27. Corporate_guy says:

    So an 80% markup isn’t enough for the restaurants? Just laughable.

  28. PLATTWORX says:

    “Unlike some other restaurants where your local franchise will just refuse to participate, Burger King requires all of its locations to take part in the promotion.”

    Actually, I applaud Burger King for that. So many chains have had their images trashed by franchise owners who refuse to particpate in advertised promotions… at least BK was smart enough to put an end to that.

    If you own ANY franchise and do not want to honor a promotion DO NOT reject customers, keep your mouth shut and bring up your concern with corporate or call your lawyer. I have seen a few franchise food places shut down eventually because they slapped signs on their windows refusing to take certain coupons and customers, rightfully, stopped eating there.

    Refusing promotions from your own brand distroys customer goodwill. Just not worth it.

  29. dijo10 says:

    Man, i do this all the time. Grab a couple of McDoubles, then drive across the street to the local gas/convenice station and get a 32oz bladder buster for another .69

    Awesome wholesomeness

  30. qwerty001984 says:

    It sounds like to me that the burger cost 55 cents so they make 45 cents off each burger.

  31. sparky1_2007 says:

    To be honest, im glad it’s a dollar.

    I mean, before this promotion they were $2.50 EACH!

    when they really should’ve been like $1.50/1.75 each.

  32. techmonkey says:

    If they think that margin’s bad, wait till somebody complains that it’s not truly ‘just a dollar’.

    All those ads with folks desperately digging through the sofa for change to equal a dollar.. reality: they will be charged sales tax, making it more than $1.

  33. Dont lump me into your 99%! says:

    @ExtraCelestial: The way I understand it, Mcdonalds beef is much cheaper.

  34. Benguin says:

    @ExtraCelestial: According to one of the McDonalds by my house, a single-patty cheeseburger is more expensive to make than the McDouble. No joke, a McDouble is the usual $1 while a regular cheeseburger is $1.40.

  35. Grabraham says:

    @ExtraCelestial: Mcdouble only has one slice of “cheese” they dropped the double cheeseburger which had 2 off the dollar menu in the last year or so I think most mickeyd’s price the double cheeseburger around $1.20

  36. Fineous K. Douchenstein says:

    @csparks: This is equivalent to McDonald’s selling the Quarter Pounder w/ Cheese for $1, not the McDouble.

  37. JPinCLE says:

    @treimel:

    Based on an earlier post, it looks like the incremental variable cost of the burgers is about $0.55, leaving another $0.55 for the fixed costs.

    If the $1.10 “cost” of the burger is based on X burgers sold in a day, then really any incremental burgers sold over X only cost $0.55. Conversely, if the restaurant sells fewer than X, the burgers cost more than $1.10.

    Therefore, in the scenario mentioned before about someone buying 8-10 at a time, the question is, “did the franchise count on those sales?”

    It’s less a matter of how many are made in a given order, and more a matter of how many are made in a given shift.

    As long as the variable cost (food & wrapper cost) is < the price, then the more sold the merrier.

  38. Dwight K. Schrute says:

    @temporaryerror: Good idea in theory, but how often did you finish the burgers before the oven had already preheated? That’s the only problem with oven fries…. they take too long.

  39. RandomHookup says:

    @Cant_stop_the_rock: That’s what I was thinking. Fixed and variable costs are different animals. I could understand adding in the labor needed to make one sandwich as a reasonably direct cost, but the others are fixed costs and shouldn’t change drastically with an increase in customers.

  40. JPinCLE says:

    @ElPresidente408:

    Yes – I think these franchisees need to quit whining for that reason and many others. I was simply addressing the fixed/variable cost argument as an additional reason I feel no sympathy for the plaintiffs.

    If you read a post of mine a little further down the page, I make reference to some profit figures I’ve gotten from a friend that owns several McD’s franchises.

    No sympathy from me…

  41. Dyscord says:

    @LeChiffre: I may be wrong, but in my experience, “Wallyworld” is a nickname for Wal-Mart

  42. doctor_cos wants you to remain calm says:

    @Dyscord: An affectionate term for Mao-mart.
    @ExtraCelestial: Maybe not ‘forces’ but certainly encourages. What I have been told is that Quizno’s corporate puts out coupons and specials without giving franchisees prior notice.
    As far as Quizno’s, their free sub giveaways were the worst (for the franchisees) as free subs still counted as a sale that they had to pay corporate for.

    I am still amazed that BK still mentions their competitors (Wendys and Ronalds) in a large percentage of their ads. I would think one important rule of advertising is to never mention the competition by name.

  43. treimel says:

    @Powerlurker:
    I was actually shocked that it costs as much as it does–by far the most expensive thing is the beef, and it’s not exactly prime (as you point out), there’s only an 1/8th pound of it and the price must be much, much lower for BK than retail in that they buy millions and millions of pounds annually.

  44. billy says:

    @doctor_cos: I always thought that the rule only applied if you were the market leader. Of course, there really aren’t any rules anyway.

  45. azntg says:

    @ZakZak: Well actually, I wouldn’t be surprised to hear that some of them are fighting it even after net increased profits.

    For some people, their greed knows no bounds…

  46. West Coast Secessionist says:

    Whoever includes rent and labor in the “cost” of a burger is an idiot. We should be talking MARGINAL COST here–the cost to make that one extra burger, since they are already there operating a restaurant no matter what. That’s the cost of the bun, cheese and meat. Period. Just because they sell one less burger doesn’t mean they get a freaking 40 cent discount on rent and labor. Marginal cost (I believe they quoted $0.55 in the article) is far less than the price of the burger–$1.

    I guess expecting journalists to know even the most basic high school economics is asking too freaking much.

    If the franchisees don’t like the way corporate is running the business, why don’t they just stop being Burger Kings? Oh that’s right, they like all the advertising corporate does for them, and they don’t know how to run a successful restaurant without all the help from corporate.

    They probably still want corporate to run the promotion too, so that people will wander in, be too hungry or lazy to leave, and buy something more profitable. They just don’t want to be the ones actually selling the less-profitable burgers.

    If they don’t like it, they shouldn’t be franchisees.

  47. pragakhan says:

    @ExtraCelestial: Quiznos is one of the only companies that require their franchisees to buy everything through them and charge a markup on said products.

    At least that was how it was in 2007, not sure if it is still ran like that.

    [www.theregister.co.uk]