Recession Makes Food Franchisors Demand Too Much From Franchisees

Money | October 8, 2009 at 2:05 am

Recession has made entrepreneurs less human. Of course, when it comes to surviving stormy conditions, generosity is quite a rare thing to find. Restaurant industry is amongst the worst hit by recession. Eating out is optional for many and the first expenditure that you slash while budgeting is eating out. Foodies on the other hand, cut their costs by serving you less quantities, raising charges, stopping complementary serves and such measures that might have made you feel they’ve become inhospitable. Yes, they did. But if you see from their points of view, you’ll notice that they are justified in that because they too suffered the recession just like you.

According to SmartMoney’s Small Business Site report , now, for compensating for their business losses due to bad economy they have increased their demands from their franchisees for boosting up their sales. It is you, the customer they want to bait to make you spend more on eating out. For that they want the franchises to bear up with their advertising costs, come up with new products for you, and keep their restaurants open for longer hours. If this is not enough the franchisors want the franchisees to hand over a large chunk of their profits to them. April May and June sales this year are less than that of last year by about 1 % which is an all-time low in the last three decades. Franchisors are all out to attract customers and they are pressurizing the franchisees to come up with really exquisite menu. Do you think all this is really going to motivate customers to visit restaurants more frequently? I think not! However hard the franchisors might try, it’s not going to customers at present because more people are really engaged in saving rather than spending.

starting up a food business Some franchises are making irrational demands of forcing franchisees of a region to sell items that are not actually in demand in that region. According to Mike Wright, Mc Donald Franchisee of Shalimar, FLa, “When you start selling Bubba a cappuccino, it’s like trying to sell grits to a New Yorker. They forced everyone to put this in their stores regardless of profitability.” But the Mc Donald version is that the franchisees should have confidence about good sales eventually turning up. According to Julie Pottebaum, a McDonald’s spokes representative, “Despite the economy, we are still seeing consistent growth in both our premium and value offerings”.

Premium products and irresistible stuff at irresistible pricing is expected to allure you to eat out at fast food joints. But these tactics really don’t help in increasing profits for the food restaurant and fast food business joints. On the contrary the cost of manufacture of these items might be quite high for the franchisees which are equally hit by the recession.

A menu revamp is not an easy thing for the franchisees. Inventory, equipment and maintenance costs will all add up as overhead. Customers did not stop eating out because of disinteresting menus but because of penury due to bad economy. Even if the franchisees are forced to come up with the best dishes this world has ever seen we might not be comfortable spending on them. Customers are not attracted that way. Can someone drive some sense into these franchisors ?