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marketing: Can They Really Make Money Off the Dollar Menu?

marketing

Can They Really Make Money Off the Dollar Menu?

SmartMoney.com

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May 21, 2009
By Diana Ransom
(Page 3 of 6)

Little Caesars

Little Caesars

Promotion: HOT-N-READY Pizza - Get one 14-inch large cheese or pepperoni pizza for $5 at participating locations.

Pre-promotion price: $10.99 (one large one-topping pizza)

Promotion Price: $5

Bottom line for restaurant: Profit of roughly 90 cents a pizza

Introduced six years ago, Little Ceasars HOT-N-READY Pizza promotion offers 14-inch cheese and pepperoni pies for just $5. Even though some stores charge about 55 cents more than that, margins are still slim. The cost of a single pizza's ingredients and packaging amounts to about $3.50, according to a franchise operator in Georgia. Tack on another 60 cents for rent, labor and utilities and franchisees earn roughly 90 cents a pie. Little Caesars' spokeswoman Colleen Kmiecik says the company's own calculation on per-item profitability differs from those provided to us by franchisees, but she declined to provide specific figures. She also says the company provides long-term profitability information to its franchisees to show how the promotion will boost their bottom line, but would not provide further details.

Last 4 Comments
Rekaya Posted: 1:24 AM On May 25, 2009
McMad is right, the double cheeseburger is no longer $1. The pre-promo price that you listed is the going rate where I live. It's been this way for at least one year, if not more.
McMad Posted: 11:06 AM On May 24, 2009
McD's went to a McDouble (1less slice of cheese) on the Dollar Menu after pressure from franchisees but were smart enough to see this coming before it disrupted their most profitable initiative ever under the suedo 'Plan to Win.'. But who really wins is customers and the corporation who get their slice off top line sales. Franchisees were duped into thinking and still are that Corp is looking to migrate to something with a greater shared return. Why would they? The franchisees are sheep. I don't know who you got your food cost number from on the Double Cheese but that was the food cost several years ago. Recently the cost was as high as 63 cents. And yes, the McDouble saves them the cost of one slice, roughly 6 cents. Bottomline is these tactics are fresh for corporate America and customers who may me willing to accept cheap as a definition of value. Where is the value in driving down quality, service and cleanliness?
T Posted: 1:39 PM On May 23, 2009
The little Caesar's in my area raised the price to $6 due to cost of food items involved in making the pizza. I don't know if they can get in trouble for that but it is no longer $5. This was about a year ago with high gas prices.
Victor Cheng Posted: 8:44 PM On May 21, 2009
I think this is hilarious. Corporate uses franchisee money to do a national advertising promotion, giving away product paid for by franchisees.

Geez, with franchisors like that who needs competitors.

It doesn't take much of a marketing department to discount, train customers to be price shoppers, and give long-time loyal customers a bad experience in the process.

Corporate marketers should market the old fashion way. Do something unique, different, and relevant to customers. Then get the word out.

The same old, same old, for less... isn't a formula for building a business, it's a formula for degrading a business slowly over time.

Victor Cheng
www.victorcheng.com
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