Discount promotions are one of the most contentious areas of the franchisor / franchisee relationship. (Especially when it comes to Quiznos)
The reason is simple: Franchisors make money off the gross sales of their franchisees, regardless of franchisee profitability. Some franchisors make additional money marking up ingredients and food products to their franchisees. Public franchisors benefit from higher sales – and stock prices – that are not tied to franchisee profitability.
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.
One of the most contentious examples was the Quiznos Million Sub Giveaway. Here’s the Smart Money finding for Quiznos, which report a $2.25 loss per sandwich:
Promotion: Million Sub Giveaway – The first million people to register for Quiznos’s Q Club received a coupon good for any sandwich. (Certificates for this promotion expired by March 15, 2009.)
What some stores normally charge: $5.29 (one six-inch chicken sandwich)
Promotion Price: Free
Bottom line for restaurant: Loss of roughly $2.25 a sandwich
"The response to Quiznos’s Million Sub Giveaway was tremendous — with all one million free sub certificates requested within three days of the launch," says a Quiznos spokesperson. While Quiznos claims to have reimbursed franchise owners for food and paper costs, which amount to roughly $2.25 for, say, a chicken sandwich, other costs including rent, utilities and labor fell to individual franchisees — leaving some franchisees with an average loss of roughly $2.25 per sandwich, according to a franchisee in Maryland.
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