Posted by Chris O'Sullivan
Feeding your family is becoming cheaper thanks to the fact that many restaurants, especially fast food chains, have been lowering prices on many popular menu items. However, while these prices may be leaving your wallet fat, they are having an adverse effect on many businesses. In an industry full or price wars, profit margins are dipping lower and lower for many industry leaders.
Restaurants such as McDonalds and Subway having been offering discounted menu items in an attempt to attract customers looking for a quick calorie boost. Unfortunately, it is the franchisee's who have to bear the burden of covering the cost associated with these attractive deals. When you factor in overhead costs that include franchise royalties fees as well as the cost of labor, many franchise owners are barely breaking even on.
The double cheeseburger at McDonalds has been offered for a discounted price of $1 for many years now at a profit of 6 cents per burger sold. Essentially this menu item has become something used only to lure customers into the store in hopes that they will purchase more items. At Subway, the "5 Dollar Footlong" promotion has brought down profits to an average of $1.20 per sandwich. Clearly Subway is banking on the notion that many customers will also purchase a drink and chips with their sandwich.
The trend of lowering prices in order to attract more customers has taken over the fast food industry. With so many restaurants trying to offer the lowest prices, it has been a viscous cycle in which many industry leaders are now scratching for profits.
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