Math says Denny's free breakfast a good deal for the company, too
Filed under: Food
As Zac Bissonette blogged here earlier, Denny's restaurants announced during yesterday's Superbowl that it will give away free Grand Slam breakfasts to one and all on Tuesday, February 3rd (tomorrow) from 6 a.m. to 2 p.m. How, you might ask, can it afford to do this?I've done some back-of-the-envelope calculations, and the results are surprising. According to the company's Annual report, there are 1,152 Denny's seating an average of 140 people per. If we assume an average of a half-an-hour per diner, then in an eight-hour window the restaurants could serve a maximum of 2,580,480.
1,152 restaurants x
x 140 people seated per restaurant
x 2 diners per hour
x 8 hours =
2,580,480 free Grand Slam breakfasts
A Grand Slam breakfast retails in my area for $5.99, so the maximum retail value of this giveaway would be around $15,457,075. Wow!
However, the cost of the food to prepare a menu item typically runs around 25-30%, so the actual cost for food for this giveaway, at a generous 30%, would be more like $4,637,122.
Now, how many of these diner do you suppose would eat a breakfast without something to drink? My guess is very few. Suppose 2,500,000 ordered coffee, juice or a soft drink. Restaurants typically make around 85% on drink orders, so on an average $2 per drink basis, the company should net around $1,70 per, or $4,250,000 in drink revenue.
If this is the case, the entire promotion cost is now down to around $400,000. The value of the free press surrounding this promotion? Easily worth ten times that.
Certainly, these figures are very incomplete, ignoring the sacrifice of normal sales, the cost of extra staffing and and the cost of managing the promotion. Nonetheless, I believe they are illustrative of how an imaginative company can enhance its image, drive customers to try its product, and get a ton of free advertising by stepping outside the normal marketing channels.
PS- Don't forget to tip according to the menu item's everyday cost. The wait staff has to eat, too. And save a seat for me.
Reader Comments (Page 1 of 1)
2-02-2009 @ 10:57PM
Chris said...
One problem http://blogs.moneycentral.msn.com/smartspending/archive/2009/02/02/let-s-go-out-for-breakfast.aspx they even mention your article but say there are 1560 restaraunts
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2-02-2009 @ 11:50PM
Daniel Durazo said...
The MSN article mentions 770 calories and a whopping 44 grams of fat. I'll pass on the breakfast and maybe delay the heart attack for a while.
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2-03-2009 @ 5:00AM
William said...
You are a pansy ass homo !!!!!!!!!
2-03-2009 @ 6:10AM
'Ol Glenn said...
I once owned a restaurant and food costs typically ran about 40%. One cost you failed to mention. I was never able to find pancake batter that mixed itself and leapt onto the grill unaided. It also needed a little help in turning itself on the grill to cook the other side and then going from grill to plate. Human intervention was also needed collect butter and syrup and to make its way from the kitchen to the diners table. Bacon and sausage and eggs didnt cook themselves either. After the food had been consumed the dishes needed help getting from the diner's table to the dishwasher and none of this human intervention came without cost. If you thought this was not a signifigant part of the total cost you need to spend some time in a restaurant, especially at the end of the month doing the accounting.
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2-03-2009 @ 3:56PM
Nick said...
Good analysis, but I think that you have to give some consideration to costs other than just the food cost. You have controllables such as utility and employee costs (i.e. wages, cost of heating/cooling and preparing the meals). You also have fixed costs such as land and equipment, just to name a few. Even if your premise is that these costs are there anyway, you have to remember that they likely had to overstaff in anticipation of the response. Further, the bills for the other costs are still due and there is no offset of revenues for this day. Some folks have said that it was the busiest day in company history so you can imagine that all of the controllables were through the roof.
I don't doubt that they received an abundance of good will in the advertising arena; however, I imagine that it cost a great deal more than you propose.
Cheers!
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2-08-2009 @ 5:43PM
Dennis said...
The problem with the Denny's promotion is that it is destined to
fail. Not because it is not a brilliant idea, but because of the way
Denny's does business. Denny's mangers get a very modest salary, but they also get big bonuses based on performance. This promotion cut into their bonuses, therefore they are dramatically cutting staff hours to make up the difference.
In the long run the effect of this promotion will be to significantly
lower the quality of service in Denny's restaurants. The only reason to do a promotion like this is to get people who have "written off" Denny's to try it again. These people are likely to tolerate the wait time caused by the promotion, but not on return vists when they have to pay.
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