Crisis management by franchise chains

Franchise chains in different parts of the world have responded to the economic crisis in different ways. McDonald’s has reduced some of its prices in the USA. The introduction of one dollar menus has become a highly successful strategy, bringing an increase in sales of 5-11 percent in various regions. Pizza Inn has halved the franchise fee payable by franchisees in the second year of operation and has also made the first year totally free of charge. KFC is planning to invest GBP 150 million in the UK, hoping that demand for cheap meals will grow. The Vita Juice Bar chain plans to open two new own units in 2009 in Budapest. However, potential franchisees have become more cautious and expansion into Romania and Slovakia has also been suspended. Nevertheless, sales in January were higher than in December which gives them cause for optimism. According to the owners of Costa Coffe which is about to start operations in Hungary, they are waiting to see how recession will effect this segment. At present, they see no reason to revise their plans to became the largest premium category café chain by 2014. They are still focusing on locations with maximum potential, but have adopted a substantially more cost-sensitive strategy for the construction of their units. McDonald’s did not detect any changes in consumer behaviour during Christmas and has not had enough time to arrive at reliable conclusions since then. However, they do not expect guests who have been visiting traditional restaurants on a regular basis in the past to turn to fast food as a result of recession. Although Coffee Heaven has issued shares recently, which provide sufficient capital for operations in the next 2-3 years, its investment strategy is to become far more cautious than in the past and unrealistically high rents will no longer be accepted.