Talk to some people and they'll tell you, "You've got to give something to get something." Others, on the other hand, will remind you, "There's no such thing as a free lunch."
Those two approaches boil down the current conflict between McDonald's and a number of its franchisees.
McDonald's has sought to drive trial and eventual purchase for new menu items such as its Southern Style chicken sandwiches by offering giveaways. The chain has also pushed its dollar menu and promotional discounts on products at a time when many consumers are feeling pinched and eating out less frequently than in the past.
Franchisees, however, finding themselves dealing with higher operating costs are not all that happy with McDonald's pushing products that offer low to no margins. Franchise owners are responsible for costs associated with promotional offers.
"There is no question the tension is greater now than it has been in some time," Ed Bailey, a franchisee who owns 60 McDonald's restaurants in northern Texas, told Crain's Chicago Business.
Mr. Bailey, who said he favors sampling programs, estimates that it cost the average McDonald's about $600 to give away the new chicken sandwiches. He said that while sales for his restaurants were up about seven percent last year, that higher operating costs resulted in "relatively flat" profits.
The average cash flow per McDonald's was down about seven percent (about $5,000) during the first quarter, according to a company memo obtained by Crain's.
Discussion Question: Where do you come down in the dispute between McDonald's and its franchisees over giveaways and discounted product promotions? Do you believe these types of promotions are the proper approach for fast feeders in the current economic climate?