Are Discounts and Freebies Doing Franchise Owners More Harm Than Good?
Posted by: Nick Leiber on August 04 This is a post by guest blogger Don Sniegowski, the founding editor of the daily franchise news site BlueMauMau. McDonald’s just wrapped up its weeks-long campaign of offering free mocha on Mondays as an introduction to its new line of high value coffee at low prices. One of the largest franchise chains in the world, it used the free Mocha Monday strategy to help pull market share away from competitors Dunkin’ Donuts, Starbucks, and other chains. But what do these price wars mean to the average franchise owner-operator? Franchisors typically take as their royalty a fixed percentage from a franchise’s top-line revenues—whether or not the franchisee is making a profit. It is franchise owners who take the brunt of the burden of lowered profits, or often, losses, for discounted products. Franchise owners can become quite upset when they are faced with one discount after another. One Quiznos franchisee anonymously complained that he had not received a sin
