Burger King and Franchisees brawl over $1 Double Cheeseburger Promo

Burger King franchisees sued the burger restaurant chain this week over its $1 double cheeseburger promotion, saying they lose money on the sandwich deal and the company can't set maximum menu prices. The National Franchise Association, which is a group that represents over 80 percent of Burger King's U.S. franchise owners, said the $1 Double Cheeseburger promotion forces restaurant owners to sell the quarter-pound burger at a 10-cent loss at the minimum.

Too expensive to promote

Costs vary according to location, but the $1 double cheeseburger costs franchisees at least $1.10 typically, said Dan Fitzpatrick, a Burger King franchisee from South Bend, Ind. who is a spokesman for the association. The actual food costs about 55 cents for the meat, bun, cheese and toppings. The balance of the cost is for expenses such as rent, royalties and worker wages.

After the company tested the $1 deal in markets across the country, the discounted burger went national last month, in spite of the fact that franchise owners, which run 90 percent of the company's 12,000 locations, rejected the product twice before when offered, because of the expense.

A spokeswoman for Burger King, the nation's No. 2 hamburger chain, said the Miami-based company believes the litigation is "without merit," particularly after an earlier appeals court ruling this year showing the company had a right to require franchise owners to participate in its value menu promotions.

Restaurants looking to boost business

Restaurants in general, and particularly fast-food chains, have been slashing menu prices because of the poor economy. McDonald’s the nations #1 Burger chain has been aggressively promoting it’s $1 “Value Menu” for some time.

Restaurant executives at both fast-food and casual dining chains are hoping the deep discounts and combo deals will bring in diners who are spending less when they eat out, and lots have just been staying home altogether.

When the $1 double cheeseburger was announced this fall, analysts felt it could increase visits to Burger King by as much as 20 percent. The lawsuit was filed Tuesday in U.S. District Court in Southern Florida.

Continuous Retail Improvement through the Holidays

This was the feature article in the Nov 3, 2009 Issue of Condevco's "Meter" Newsletter.

As we begin to get ready for the holiday season, hope springs eternal, or it should. It’s time to look at what we can do to make these holidays happy, for our customers, Associates and our businesses bottom lines.

As we have been discussing, this hasn’t been a banner years for business in general. In our specific business, gasoline prices are rising again, and there is always the possibility of a price spike shocking customers into not spending inside the store, like in the summer of 2008.

As of Friday October 30th Retail gasoline was at its highest average price in over a year. (See the article below) Using the “Sports quote of 2004” according to USA Today, which has become ubiquitous and irritating in ALL phases of conversation by now in 2009; “It is what it is” Gasoline Prices are what they are… But that doesn’t mean you need to let that affect how you get ready for and operate through the holidays inside your store and on your store site. In other words, the things you CAN control.

Wikipedia defines Continuous Improvement Process (CIP, or CI) is a management process whereby delivery (customer valued) processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility. In other words, “It is what it is, but it doesn’t have to be!”

With the holidays approaching and the big retailers having been in full holiday mode for weeks, it’s time to look at where your stores are now, and make the decision to continually improve the retail offering (the infamous “Value Proposition”) straight through to January.

That means keeping any seasonal decorations repaired and cleaned and looking fresh, perhaps a store mini-reset halfway through the season with some new items, and getting your customer service associates to “Buy In” to the fact that the next eight weeks can be the best eight weeks of the year.

Should you start selling Blu-ray players or flat screen TV’s? Probably not, but making sure you have the holiday-themed candy and drinks in the foreground is good. This is an excellent time for new uniforms, painting the curbs, and making sure those nozzles and hoses are clean and working well.

This is a chance to really make a positive impression on your customers. It doesn’t cost much to make a big difference in how “Jolly” your customer’s perception of your stores is.

This is a great time of year for ice sales and fill-in party supplies. ATM’s and Money orders are big services.

Let Darcee and Ron, the team from Condevco help you on the way to Continuous Retail Improvement (Click To Inquire)

Halloween 2009- Scary news on Retail gas prices

Scary! Retail Gas Prices Hit Highest Level This Year


Retail gasoline prices continued higher Friday to a new peak for the year, forcing consumers to dig deeper into their stretched budgets to pay for fuel.

Natural Gas and Gasoline Higher
Natural gas prices have also been moving up, and have now climbed 16 percent in the past two months — just in time for the winter home heating season to kick in.
Supplies of oil and gas are plentiful, so that’s not why the prices are climbing. Storage points for natural gas are so packed that producers are running out of places to put it. Crude Oil stocks are also well above average levels.

Gasoline prices are now up 17 straight days according to AAA. That is the highest national price average since Oct. 26, 2008. Prices are averaging 5.9 cents higher from a week ago and 14.8 cents from a year ago. The average retail price for gas was $1.686 a gallon last December. Today's price adds about $50 a month on to the monthly gas cost for the gasoline customer compared with then.

Iffy Economic news
This comes at a time when unemployment is at a 26-year high, and consumer confidence is low. The stock market reacted badly to the consumer confidence numbers released on Friday, driving the Dow down almost 250 points on Friday.

Oil prices skyrocketed in July 2008, to $147 a barrel. That helped to put the economy into recession. Economists are worried that high oil prices will put a halt to the budding economic recovery.

Crude Oil and Dollar Trade
The current reason for the increase in pump prices is because crude oil prices have been rising, from $65 a barrel as recently as August to $82 last week. Oil settled Friday afternoon at $77 a barrel.

A year ago, gasoline prices were heading down as the recession kicked in and the implications of the global financial crisis became better understood. Demand for oil and gasoline went down with the economic contraction.

Crude Oil is moving generally higher because there are signs that the economy is improving. The weaker dollar US Dollar is also a large contributing factor, since crude oil’s worldwide price is determined in US Dollars, a less valuable currency leads to higher prices for oil. The US Commerce Dept. said that the U.S. economy grew at a 3.5 percent annual pace in the third quarter on Thursday, the best growth percentage in two years, breaking four consecutive quarters of declines.

Inventory levels of gasoline, heating oil and diesel fuel remain well above normal levels.

As the dollar rose on Friday, crude oil fell sharply. There was also the dour consumer spending report, and doubts about consumer confidence going into the holiday season.

There’s some scary Halloween news!

Stocks Dive as Consumer Spending Worries Mount

Stocks plunged Friday, erasing all of the previous day's big gains, as a drop in consumer spending made investors nervous the recovery momentum can’t be sustained.

Major stock indexes tumbled more than 2 percent in afternoon trading, including the Dow Jones industrials, which gave back all of Thursday's 200-point gain, and dropped an addition 50 points. Big decliners were banks, energy and materials companies. As stocks fell, investors moved to safer assets like the dollar and Treasury bonds. The decline in stocks came after a rally yesterday, based on a 3.5% GDP growth number.

Personal Spending Falls
Investors sold stocks after the Labor Department said personal spending fell 0.5 percent in September. This number was about where the forecasts said it would be, but it was the largest drop in the last three quarters and followed a 1.3 percent jump in August that was led by the government's “Cash for Clunkers” car rebate program, which was very popular.

The report casts doubt on the economy's recovery, which many economists fear has been primarily inflated by government stimulus programs. With no bounce in consumer spending, which makes up a major part of the U.S. economy, investors are worrying the recovery can’t last.

The Dow fell 249.85 points to 9,712.73, led by news of a drop in the mood of consumers. The Reuters/University of Michigan consumer sentiment index fell to 70.6 in October from 73.5 in September.

The Labor Department also reported Friday that personal income, which will drive a recovery by consumer spending, was flat in September compared with the previous month, although this was in line with expectations. A lack of income growth is due, in part, to ongoing high unemployment rates, also a major worry for the market.

Financials Decline
Financial stocks were among the day's biggest decliners. Shares of CIT Group Inc. dropped nearly 15 percent after the commercial lender said Carl Icahn, a major investor in the firm, agreed to support its restructuring plan and provide it with a $1 billion line of credit. CIT Shares dropped 14 cents to 81 cents.

Energy and basic materials producers also fell sharply as the dollar gained ground against other major currencies. On the New York Mercantile Exchange, gold prices slipped about $9 to $1,037 an ounce, and oil prices tumbled $2.85/BBL to $77.02.
Bond prices rallied as stocks fell. The yield on the benchmark 10-year Treasury note fell to 3.42 percent from 3.50 percent late Thursday.

Stocks have has a rough week, but finished the month slightly up from September’s close. Without stronger evidence that the labor market is improving, consumers are not going to feel comfortable about spending. Indications are investors will have trouble extending the market's massive rally into a ninth month. With this week's declines, the S&P 500 index is still up roughly 55 percent since hitting a 12-year low in early March.

Major Economic News Due this Coming Week
Analysts say trading is likely to remain volatile this coming week. There is a large quantity of major economic news coming this week. Two that will be closely watched are sales reports from major retailers and the Labor Department's October employment report — arguably the month's most important piece of economic data. The Fed will also convene for a two-day policy meeting beginning Tuesday.

There were eight losers for every winner on the New York Stock Exchange, where volume came to 791.6 million shares, compared with 852.5 million at the same time a day earlier. Overseas, the averages were mixed, with Japan's Nikkei stock average rising, while European markets in Britain, France and Germany fell.

You Need Customers (and Profits) to Have a Business

Our 1 year Anniversary – The first “Meter” newsletter was published on October 6, 2008, so the one you’re reading now is Volume 2, Issue 1. We’re proud of the fact that we’ve received positive feedback and that you care enough to write us back with comments. We thank everyone for their interest and time. We’ll continue to adjust the format as we move forward.
Darcee and Ron

(This article was the feature in Volume 2 Issue 1 of Condevco's Meter Newsletter)

“You Need Customers (and Profits) to Have a Business”

Well, that seems like a pretty simple statement, doesn’t it? Whether you call it marketing, Sales, Advertising or Promotion, it all comes down to one thing. Getting people to become your customer (purchase from you), and getting them to come in more than once; in other words, customer loyalty and repetitive purchasing. How?

Just cutting price isn’t a competitive strategy

In terms of Convenience Retailing, that means putting customers inside the store. Hopefully they shop there more than one time. In terms of our jobber friends, that means adding dealers to your network, and making sure they want to renew at the end of the Fuel Supply Agreement. In terms of a Refiner/Marketer, that means adding and retaining jobbers, and on and on. But just getting customers by cutting price becomes a losing proposition in the long run, so there’s more to being a good competitor than being low priced.

A simple idea, but a complicated thing to do successfully. Here as we start our second year at the “Meter” we’ve talked about Customer service, we’ve spoken about respecting your customer, and in our two most commented on stories, we’ve spoken about Sprucing up your store and the Value Proposition to your customer. (The Articles are all included in this blog).

In the final analysis, it’s all about getting customers to keep your business going, and retaining them for the long run, whether you’re a multinational refiner or a single store operator. What is the customer looking for? And how do you become the person or business that fulfills that customer need?

Revenue alone isn’t an answer

Just pushing revenue through price cutting and aggressive promotion is NOT the answer to C-Store success. You need to keep margin preservation as a goal when you set your promotional calendar, otherwise, you’re trading dollars for no gain.

In the blog story on Burger King’s new restaurant design, (Article directly below) we discuss the fact that BK hasn’t been a heavy promoter of the “value menu” items, They have them, but BK has always competed on taste -“flame-broiled” and service-“Have it your way” as a primary message, with competitive pricing as a secondary factor. Just driving revenue for revenue’s sake is a feel-good tactic, but in the long run, doesn’t do you any good.

The Future

The NACS (National Association of Convenience Stores) show kicks off in Las Vegas today, where the merchandise and trends for the next year get rolled out. Oil prices are climbing again, and while we’re being told the economy is in recovery, it just isn’t feeling that way to most of us. It’s important to grow top-line revenues, but not at the expense of profit.

A more sophisticated foodservice offering and an emphasis on fresh items is the way to steadily grow revenues in a convenience setting now. Differentiate yourself from the pack in a smart and profitable way, and customers will keep your registers ringing. NPN had a nice article on Loyalty being more than just a Fuel Brand (Click to read) It’s time to think about how to make your business grow in a structured and profitable way. Id like to finish it off with the comment that standing pat is really dropping behind, because everyone else is trying to move ahead!

At Condevco, our business is helping convenience retailers and jobbers grow their business. We develop manuals and administer programs with your staff and provide analysis and input to allow your efforts to become targeted and productive. Contact us TODAY for more information on how we can help your business increase profitability.

New Burger King Restaurant Design Continues Competitive Differentiation

Article Headline / Source Burger King's New Restaurant Design (http://adage.com/globalnews/article/?article_id=139526)
Question With Burger King's (BKC) current sales trend weak and high stakes earnings call coming up at month's end, is the newly announced Burger King restaurant design viable? Is it likely to attain investment payback? Can the franchisees fund it with the tight credit conditions now underway?

This was originally done for Gerson Lehrman Group's News

1) Burger King isn't a big "Value Menu" player

2) Tries to differentiate itself through flavor and selection

3) Unit allows for more upscale uses that QSR's are taking on in recession

The new Burger King restaurant design makes sense and addresses the fact that the fast food “niche” is growing and handling more tasks for differing groups of consumers.

BK hasn’t really played hard in value price arena, so a “weak” sales trend may actually bode well for the bottom line. If they are selling more “standard price” menu items as a percentage than their competitors, is that really weakness?

The new 2020 design is a more upscale look, also showing a commitment to full price items and a different marketing sensibility. The “Whopper Bar” concept and the hi-tech Coca-Cola fountain introduction, if only for tests, shows burger King is looking at other places than a .99 price point to grow sales volumes moving forward. They have always competed on flavor as a prime driver to their marketing campaigns, this is a variant on quality differentiation.

Whether the franchisees can fund the new design build out in times of tight credit is probably the same answer it would be in good times: the strong franchisees can, the marginal ones can’t. You have to think that investment payback may be marginally longer to due to the increased cost of the unit’s build-out, but will the design alone increase sales? Probably not.

In terms of how QSR’s/fast food are being used differently by the consumer during the economic turndown, this could be a winner. Having a nicer, more pleasing looking unit to host fast business lunches or take the family out, instead of an Applebee’s or a TGI Fridays, since budgets are bit tight, cannot be bad.

Cutting Cost Shouldn’t Mean Cutting Service

Newsflash: Business Has Been Tough

Business has been tough for 12 to 18 months in the convenience store business. While Wall Street imploded just over a year ago, gasoline retailers and distributors had been riding a wild rise in supply cost caused by record high crude oil prices in July of 2008, only to followed by a very rapid drop in prices as the rest of the economy “fell off a cliff” to quote a pundit, reducing demand overnight. Volatility of supply costs pushed a lot of jobbers to the brink, and some went over the edge with the rest of the economy.

So, while our stores and chains were ahead of the curve in starting to feel the pain, we were right there with everyone else as consumer confidence shrank, and maintaining business became very, very tough. When the top-line revenues aren’t growing, but actually shrinking, but the expenses aren’t going down, the obvious place to look to get more benefit from the operation is to cut cost.

Cutting Cost Leads to Better Results

And, everybody looked to cut as much as they could and still stay in business as a viable competitor. Both stories underneath this, on Walgreens and Starbucks, are about cutting cost to keep the profits growing. Howard Schultz, the founder and CEO of Starbucks, was on CNBC this afternoon to tout the national rollout of the “Via” instant coffee product; but what he talked about the most was the cost cutting initiatives within the firm allowing them to keep profits near the levels that were expected. Walgreen Corp also attributed better than anticipated results to cutting cost.

“Abandoned Cart Syndrome”

That being said, about a week ago I read an interesting article on the supermarket sector, where they have been aggressive at reducing cost, as they compete in a very tight margin industry. There is more and more of what they are calling “Abandoned Cart Syndrome” where a customer who came in and shopped the store just leaves the full cart and walks out when they see the lines at the checkouts, lengthened by reduced labor allocations. So the question posed was, when does cutting cost become cutting service? And when does that impact your business negatively in the long run? Does that customer come back?

Well, in the case of a Convenience Store, we might not have abandoned carts, but we very well could have cut cost to the point that we have abandoned sites. Customers who came in, and you were out of stock on the need, or they had to wait in line 3-4 minutes to buy a single item. Take a good hard look as you pare those costs, and make sure it’s not service that’s suffering.