Do Franchise Businesses get reimbursed for Loyalty Schemes?

Posted by MDen98@reddit | AskUK | View on Reddit | 25 comments

Random shower thought. A lot of franchises like McDonald’s and Subway have loyalty schemes where you can redeem free food.

Does the franchise owner get reimbursed for the free food being given out?

I know it’s highly unlikely. But could you imagine opening your own McDonald’s / Subway. Then for one day, no one spent any money because all your customers that day decided to redeem their points? That business would essentially just have delivered free food for a whole day, or does maccies re-imburse the franchisee?

Anyway, just a random thought. Would be curious to hear from any franchise business owners lol

[-]

OrganizationAny330@reddit

This channel shares a lot of very insightful experiences about franchise ownership: https://youtu.be/trPVQdIk2c4?si=DNza1cEZE3tyjLRi

[-]

reggieko13@reddit

I know in past of lot of subway ones were restricted where they could be used including sometimes just store that issued them so think those will be cost they have to absorb

[-]

GiraffeJunior9384@reddit

The subway near me regularly turns off their app ordering when there's a big deal on - footlong for a fiver or similar. They just show up as offline on the app even though they are listed as participating on the subway website.

[-]

Competitive_Pen7192@reddit

The Bueger King in London Fenchurch Street doesn't accept any vouchers or apps the last time I checked.

So I'm guessing it's down to the individual branch.

[-]

f-class@reddit

It's technically not Burger King, it's a company called SSP. The reason airports and stations don't generally accept vouchers is that, in addition to paying high rents, they also have to pay a decent % of their sales to the railway company managing that station. Freebies etc wipes out their profitability and is why prices are high.

[-]

mcbeef89@reddit

I don't think the one opposite Kings Cross does either

[-]

gligum@reddit

There was a Quiznos that i frequented that had to shut down because corporate put out a ridiculously good coupon, that the store was forced to take, that essentially allowed for it to be copied and used for catering and anything else... So some business essentially ordered like 400 sandwiches or combos with it, and was getting about $3 I think for each one... That particular location essentially closed because they weren't making a profit anymore

[-]

Froggatt34@reddit

To muddy the waters, if you rock up to a McDonald's with a voucher for another brand, like a whopper and fries for £1.99 , McDonald's will offer the equivalent. So in this example a big Mac and fries for £1.99.

Source, ex McDonald's manager (wasn't too long back either and this was the norm for decades)

[-]

defaltCM@reddit

I cant say the same for every business but working in BK, it depends. When we did the free whopper day last year, the corporate burger king would pay the franchises up to a certain amount of whoppers that they did for free, but this also means stores that did above that amount did not get compensation for the extra they gave out. Most app codes or delivery offers are not given back, however usually delivery offers are paid for by the delivery companies to secure certain menu items on their app over the other options to help drive customers to use them over their competitors. Most app offers have a disclaimer that its only valid at participating restaurants, so franchises can quite easily say they dont accept it but from my experience the majority will accept it as overall it does increase footfall and in turn your sales, for my store Most customers redeeming free rewards are also coming in regularly, some almost every day buying food so in those cases the offers make people keep coming back as they can get something free every x visit, whereas if it wasnt offered its debatable whether those customers would come as often. Similarly, offers that just make things cheaper but not free, are usually still more than it costs to make the food, but even free items you should still upsell, ask them if they want cheese, deserts, sides whatever, people can come in with a free item but still end up paying money if you upsell correctly and thats kinda the idea of it really, to get people in the store, hopefully upsell them on their free item, and then they return assuming they like it / want to earn points to keep claiming free things. It's a way to encourage long term sales not short term increase in sales.

[-]

Winston_Carbuncle@reddit

I remember a post about this and an American Subway Franchisee was saying they had to stop accepting a particular voucher as it was costing them money.

No idea what the laws are here, though.

[-]

MrReadilyUnready@reddit

It's not illegal to refuse a voucher, but the brand might choose to drop you as a franchise if you get repeatedly reported to their HQ for it.

[-]

quite_acceptable_man@reddit

I used to work for a franchise kitchen /bathroom showroom and if they were running a 25% off promotion or whatever on particular ranges, they'd would simply reduce the cost price to us by 25%.

[-]

FunGuyUK83@reddit

I managed a vape shop franchise and we didn't get reimbursed for loyalty schemes. It was half the reason why the shop couldn't make any decent profit.

[-]

Urban-legend83@reddit

It’s actually a mix of 'it depends' and 'nobody really wins.' In most big chains like McDonald's, the franchisee (the local owner) usually eats the cost of the ingredients and labor for that 'free' food. The parent corp argues that the loyalty scheme drives more foot traffic, so the owner makes it up when the customer inevitably buys a large meal to go with their 'free' cheeseburger. However, for huge national 'loss-leader' promos (like the Subway Footlong Pass), there's often a central marketing fund that provides a partial rebate to the store owners so they don't go bust during a busy week. It’s a delicate balancing act between the Head Office looking like the hero and the local owner trying to keep the lights on!

[-]

blue_rizla@reddit

LLM voice

[-]

gazchap@reddit

Yeah, the inclusion of the 'Subway Footlong Pass' which (AFAIK) is a purely US-based promotion, would be a really odd choice for a UK human.

[-]

Xaethon@reddit

And the last sentence about ‘Head Office’ and the ‘local owner’ also seems odd for someone to write.

[-]

MDen98@reddit (OP)

That’s really interesting, thank you! There’s a sub way near me and like every couple of weeks on the app theres always some sort of deal saying “free crisps and drink” or “£2 off a footlong. So I imagine these are maybe eaten up by the franchise ?

[-]

Urban-legend83@reddit

Spot on. Those '£2 off' or 'free side' deals are basically the cost of doing business for the local owner. It’s a bit of a love-hate relationship; they hate losing the margin on the crisps, but they love that you chose their Subway instead of the Greggs next door because of the app notification. It's all about the 'LTV' (Lifetime Value) of the customer—if a free bag of crisps keeps you coming back twice a week, the franchise owner eventually wins the long game.

[-]

Beartato4772@reddit

Franchise agreement based.

From what I know, Subway gives a lot of freedom in this respect, which is confusing for the customer not knowing where the hell vouchers are valid.

McDonalds forces them but you've noticed the downside for the franchisee.

[-]

When replying to submission/post please make genuine efforts to answer the question given. Please no jokes, judgements, etc. If a post is marked 'Serious Answers Only' you may receive a ban for violating this rule.
Don't be a dick to each other. If getting heated, just block and move on.
This is a strictly no-politics subreddit!

Please help us by reporting comments that break these rules.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.