Burger King: More Ultra Low Promotions Underway

Restaurants will be struggling like never before to generate positive comparable sales this quarter. Moderate weather last winter drove above norm sales and traffic then and the publicly traded restaurants are now up against those numbers. Burger King (BKW) is especially vulnerable to investor sentiment with its IPO this year, its rebuilding underway and new menu items introduced this summer, that did generate some sales uplifts.

Concurrent with its 55th corporate anniversary, a “buy one get one (BOGO) Whopper deal for 55 cents is underway this weekend. Franchisees just last week “voted” to extend it another weekend, December 13-17. Franchisees got the heavy sell and pressure to do it. Web reports are that some franchisees aren’t honoring the BOGO offer.

 This is an ultra low price point, the dream of marketing agencies everywhere who dream about low prices, and to take the cheap way out for their clients. This is a Burger King franchisee profit issue in that the additional Whopper has a backdoor cost of app. $.80, so the gross profit loss at first look is roughly about 25 cents per BOGO burger sold.

 Will they make it up on volume? We’ll see. This is a classical economic price/supply/demand test. A big issue is product mix, whether tradeups can occur and how many additional customers that come in. Loss leader tactics aren’t “wrong” per se but the effectiveness depends. In store, we saw the new digital menu boards prominently featuring the $.55 offer, which doesn’t seem quite right to maximize tradeups. 

 I was expert for the BK franchisees in 2010 regarding the infamous $1 double cheese burger (DCB) legal action. For the record, the fully loaded cost then was about $1.17, and franchisees lost about 17 cents per DCB item then. The action settled, the court did not have the opportunity to rule on the main issues. The BKW marketing approach is different now: not $1 double cheeseburger for months on end with no other new news, but selected weekends.

 But there was considerable Burger King discussion then that the Whopper should be not be discounted, it was their legacy flagship product. Perhaps not now. What does the research say?

 This is another reminder that publicly traded restaurants, particularly those with no or few company operated units (Burger King is selling stores worldwide and will soon be near  zero company stores) will forever and forever tempted to do low priced offers.. The investment community rewards comparable sales; franchisee profits aren’t reported or much often discussed.

 Franchisors still need skin the game. Different parties, different motivations for sure.





Discounting the Whopper

Actually the Whopper had been discounted before. In the fall of 2002 McDonald's launched the Dollar Menu with the Big 'n Tasty on the menu (with much resistance from McDonald's franchisees). Burger King countered with the Whopper on their 99ó menu. This madness ended in March of 2003.

MCD loath to dictate prices

This may have changed, but MCD executives believed that they could not dictate price, under the law. This, from the worlds leading chain restaurant operator. That is not to say there wouldn't be some arm twisting at the local marketing co-op level......

Burger King set's the table for Success

Brand messaging is an invitation to experience, enjoy and edify the brand and its products. Discounting is not the issue with this “Flagship Product” promotion. The focus is to drive product sampling inviting new customers to experience the "Flagship Product" and remind current and legacy Burger King Fans of what they like about the brand. This promotion will edify legacy emotions / desire for the Burger King Brand. For the legacy Burger Kings consumers it is a reward.

The Franchisee has the opportunity to connect and reconnect with brand loyalist and newbie’s. Suggestive selling, upselling and bundling other products with this offering are highly likely given the nature of the offer. If success leaves clues Burger Kings franchisee’s will see an uptick in Q1 2013 of Whopper sales in large part because of this particular offer.

Burger King Marketing Agency on line

Sounds like this is the Burger King marketing agency talking !

Burger King

I seem to remember the company and franchisees worked out a plan in 2011 so this wouldn't happen again...

Buger King sets the table for Franchisor's Success

Your comment reads as if it is straight out of the spin room of the franchisor or agency handling their ads. Before a franchisor rates an ad campaign as successful, they should evaluate the following:
increase/decrease in sales, guest counts, retention of new guests, effect on labor and food %, overall effect on franchisee's profitability. My franchisor has been doing the same "easy fix" discounting strategy for the last several years to no avail. Unfortunately, they are discounting an item that makes up 60% of our product mix.... Very difficult to "up sell " enough to make up in the margin decreases. Also, extremely difficut to swallow when you know they are benefiting on all fronts - not only increased royalties, but also, by the increase in goods sold that they require franchisees to buy from them. Unfortunately for my franchisor and BurgerKing, you can not have a successful partnersip at the expense of one partner...........................