LITTLE CAESARS: What Franchisees Make on a $5 Pizza
November 17, 2009
Question: Can Little Caesar’s franchise owners really make money on a five-dollar pizza?
Answer: Not much.
SmartMoney.com surveyed franchisees from different franchise chains regarding the cost to them of some current and recent promotions. The Smart Money article points out that franchisees generally bear the brunt of a promotions’s cost, including the food, labor, rent and utilities, among other things.
Here’s the Little Caesars HOT-N-READY pizza promotion, which report a $.90 profit per $5 pizza:
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 [sic]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.
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