McDonald's continues to supply interesting franchising disputes. The most recent revolves around the Dollar Menu: though the cost of food is rising, prices on the Dollar Menu remain fixed. McDonald's and its franchisees view this problem through different lenses.
McDonald's receives royalties based on sales and, thus, has an incentive to increase sales, even reduced-margin or, in some instances, negative-margin sales. On the other hand, franchisees profit only when revenues exceed expenses. The problem with the Dollar Menu is that franchisees don't make money selling a Double Cheeseburger for a dollar.
Franchisees can opt out of the Dollar Menu, but they still are required to pay into a collective advertising fund, so all of those ads promoting the Dollar Menu (reportedly $100 million of McDonald's $810 million measured media buy) are wasted on a non-participating franchisee. Or worse, if customers are upset about not being able to purchase food on the Dollar Menu.
McDonald's is experimenting with Double Cheeseburgers for $1.09 in Georgia and Mississippi, but that sort of blows away the notion of a Dollar Menu. For a brief report on the situation, see Marketplace.
This story reminded me of the old McDonald's television commercial stating that you could get a full meal (burger, fries, drink) and still get change back from your dollar. Gas was about $.25/gallon at the time, too. Anyway, I looked for that old ad on You Tube and couldn't find it, but I did stumble across this very early version of Ronald McDonald ... Yikes!
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8345157d569e200e552b2e5ab8833
Links to weblogs that reference The McDonald's Dollar Menu:
1. Posted by Jake on June 5, 2008 @ 21:26 | Permalink
McDonald's tells us to chorus, "we're lovin' it," yet the Dollar Menu scheme does nothing to enhance the experience of eating at Mickey Ds. Most likely the environmental consequences offset the advertising campaign, turning the whole exercise into a negative for the average consumer.
What a shame. When I was growing up, my Dad used to take us to McDonald's every couple of weeks as a treat. Back then, for $0.45, you could get a hamburger, shake, and fries.
No wonder the franchisees believe the Dollar Menu stinks.
2. Posted by Cliff on June 5, 2008 @ 23:26 | Permalink
What, they can't just shrink the burger again - or just nuke them in bigger stacks and keep more under the heat lamp for longer periods of time?
| Sun | Mon | Tue | Wed | Thu | Fri | Sat |
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | |||
| 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| 12 | 13 | 14 | 15 | 16 | 17 | 18 |
| 19 | 20 | 21 | 22 | 23 | 24 | 25 |
| 26 | 27 | 28 | 29 |
