Value Menus Cost Operators Dearly

AdAge.com:

The ubiquitous under-a-buck value menu that boosted the fast-food industry is hurting some franchisees.

As the economy worsens, the menu that’s become a staple among the industry’s biggest players is being backed by an increasing share of fast feeders’ marketing dollars and gaining popularity with consumers. But as value menus approach 15% of sales for some top chains, the double whammy of high commodity costs and low margins for the value products are walloping operators - to the point where some claim the pricing is driving them out of business.

Luan and Elizabeth Sadik, a brother-and-sister team that once operated 5 Burger King stores in midtown Manhattan, charge that being forced to serve high-cost items at low prices sent 2 of their stores into insolvency.

‘The value menu increases foot traffic,’ said the Sadiks‘ attorney, Oliver Griffin. ‘But [consumers] buy all of the cheap items - and so regularly. Burger King takes its royalties off of the gross sales, so they’re making a profit on the increased foot traffic while the franchisees essentially pay for it.’

Value for some… read on.

Photo Credit: Lisa Fain.