The True Cost of a Value Meal

In the current economic climate, it seems like a no-brainer for quick-service restaurant franchises to court customers with dollar menus and lower prices. But according to a SmartMoney.com article, these deals may be doing franchisees more harm than good.

Normally, special deals on select menu items pay off because customers will buy high-markup add-ons like drinks and fries. Lately, though, penny-pinching consumers are purchasing just the discounted items, leaving franchisees with little profit.

But franchisees still feel obligated to participate in the widely-advertised promotions or risk angering customers. Article author Diana Ransom examines promotions from Baskin-Robbins, Little Caesars, McDonald's, Quiznos and Subway to find out how much franchisees really stand to make--or lose--on them.

Discounted food is one thing. Free food is quite another--as KFC franchisees found out when Oprah Winfrey promoted coupons for free samples of the chain's new grilled chicken. So many people responded that franchises couldn't meet the demand, and the promotion was cancelled after just two days. Though the publicity was obviously mixed, KFC execs are calling the short-lived campaign a net positive for the company, and say sales are up.