Archive

Posts Tagged ‘franchise’

Remember When the Economy Started to Tank? Part 3

07/30/2010 Leave a comment

So if we were to apply the same Cost of Doing Business BS Formula that Cable and Cellular are doing to us to with something more familiar, you will see what I mean about the proper way to bundle things in pricing.

You’re at your favorite fast food drive through and want to order a quick snack for the drive home from work. You’ve been coming to this chain for years, you know what to expect, but you notice that there have been changes made to the menu pricing. You order a cheeseburger and a large drink as usual.

Cheeseburger – Menu Price: $.11

Large Drink – Menu Price: $.09

Wow! Your total even with sales tax will be less than $.25. You pull around and the clerk tells you it’s $2.75. Confused, you pay it and then look at your receipt:

Cheeseburger 2 oz patty and 1 slice of cheese .11
  • Bun
2 slices .15
  • Packaging
Paper costs .06
  • Condiments
Ketchup/Mustard/Pickle .30
Large Drink 32 oz of fountain beverage .09
  • Ice
Water, ice maker usage, electricity .08
  • Packaging
Lg Cup, Lid, Bigger straw .10
Administrative Fees Labor, Waste, & Technology Charges .75
Drive Through Maintenance Surcharge Maintain smoothness of the pavement, cleaning, landscaping .45
Franchise Fee Fees that we have to pay to have this physical location .65
Sales tax .31
Total 2.75

Sure, cellular can argue that it costs a lot of money to build those towers. I researched this and it can be done for $75K-$250K each depending on proximity to an urban area.  Well, it is anticipated that there will be an increase from 175K to 260K cellular towers in the US by the end of 2010 (www.steelintheair.com). A comparison to fast food franchise locations, a total number can’t be found, but McDonald’s alone has around 30K locations. It runs anywhere from $175K to $1.2M just in franchise fees alone across the industry. You have to have that much just to be considered for approval to open one location.

Cellular will also argue that the contract is there to offset the discount of the phone device when you got it. You can buy a new device at full retail (add about $200 or so onto the price you paid with your contract), but the thing is, they don’t discount the plan for you at all for paying for the phone outright. In fact, when I sold phones, there was a $10 extra charge per month for paying full price and not having a contract. This is clearly a ploy to push consumers into signing away two years of their checking accounts.

So in the fast food scenario, it wasn’t disclosed how much the extra fees would be until after you paid. If it were disclosed before you handed over your cash or debit card, you could refuse to pay and leave. You don’t even get this option without financial impact with cellular.

Now, I’m fortunate because I’m a single line on my cell service plan. I think of those of you out there with families, especially ones with teenage children and their phone devices. I know most married couples lately are using Blackberry devices which “require” a data plan just to have the phone end up paying around $120 to $160 a month for the two lines, unlimited voice/text and web access with all the other crap that comes with it.

So when you add together the cost of what I hear is the typical cable/internet/phone bundle which is around $160 and the mid range of what I hear is the average cellular service for families $140, we are talking about $300 a month in my area. This is a car payment on a nice car. This is half of a house payment for some of you. Its 70% of my rent payment. Its also 95% of my vehicle insurance costs for one year.   This would buy my groceries for 3-4 months easily. Over the course of a year, or lets say 2 years when the typical contract is up, you are looking at cellular costs of $3,360.

Who has time to sit and review all of the fees and surcharges that are tacked onto your bills? Cable and Wireless certainly hope that you don’t. We need to start doing this folks.

When the economy started to tank just around the same time that gas prices were climbing, the country stood at a stand still for a moment not knowing what to do. That is when the corporate citizens stepped in to make our lives and the impact on our wallets just a little easier to deal with.

Retail stores began dropping their prices just a little bit. Rebates were beginning to show up more for purchasing items. Several retailers began following President Obama’s stimulus plan in the form of marketing their own stimulus packages. Retailers genuinely appreciated every dollar that you spent with them and began showing more loyalty rewards and programs. They knew the decisions you had to make everytime you drove your car and used gas to shop with them.

Fast food establishments began offering more on their value menus and dropping their combo prices just a bit, or adding more food to them.

Car dealers & manufacturers, knowing where their world was heading, began offering bigger rebates and incentives.  After all, they were stuck with more unsold gas guzzling SUVs than they knew what to do with.

I could go on, but my point is that there were three industries that did not do anything for its consumers. Oil, Cable and Wireless.

As we all remember, oil execs reported record quarterly profits and the executives went home with massive bonus checks. Record profits…how could that be so if the price hikes were blamed on shortages and price per barrel increases in the Mid-East? If their cost of doing business increased because their supply costs increased, then how could they have record profits? How much markup was there on each barrel by the time we put it in our cars? Shouldn’t the markup have stayed the same? This shows me blatant disregard to US economy and to you and me.

For wireless its sort of ironic since its whole concept is based around mobility.  What good is there using a mobile phone if you stay home more often where you have a landline and the internet? I’m sure they made a killing on their Roadside Services add on since fewer people were driving. If anything, their prices stayed the same, they eliminated some lower priced plans, spent a crap load of money arguing over the same 3G coverage map, just changing the name of the carrier at the end of the commercial. We got distracted by the increases and changes by the rumor spreading of the iPhone and what it could do, then saw what it could do when it released, which was followed by various versions under different names with other carriers. Now it became mandatory to have an extra $30 added on to your bill for the data and the other misc reasons they could think of.

This led to an Early Termination Fee increase with one carrier to $350. This happened in Canada as well, and when the increase didn’t impact wireless unit sales, the other carriers followed suit. Now we have our trailblazer here in the US doing the same thing, and guess what folks? The days of $175 or $200 ETF’s are over, because if we don’t show our disgust by keeping our phones a little longer than usual and making an impact on unit sales, the other carriers will follow suit. Your monthly plans keep going up to supposedly support the “new” technology put in the phones. Its one thing that you have to keep a contract when buying these Smart phones, but you also have to keep the add-on data packages for a certain amount of time as well.

The Cable industry with its bundle packaging of cable television, internet and landline phone services also pulled fast ones on us during all of this chaos. They raised prices on digital television, restructured the channel numbering of the channels you were already paying for, causing several of us to have to pay more for their tiered channel lineups just to get back the same channels you were paying a lower price for. You didn’t see a reduction in your monthly plan price as the channels started dropping every month. Now you had to spend more to get them back. This all happened while we were distracted about the coming of mandatory digital broadcasting by the FCC. They even began investigating Cable for the pre switch price hikes they saw.

Bundle pricing sounds like a great deal because each of their services in your bundle is discounted. Bundle discounts mean nothing to me when the discounts and the pre-discount price are controlled by the same entity. Want to impress me? Charge me a fee for a bundle of services from multiple companies…that shows me you have leverage, not when you discount your own price and call it savings. Have you ever actually tried to break out what you are saving on each of the products in that bundle? The average I hear is $160 for a monthly bill for all 3 of the main services. I bet I can do better… Watch:

Keep the cable company for internet and drop down to their lowest speed which is still better than DSL Figure, $40 a month and thats modest. I actually pay $24 for mine at their slowest speed…but I know some of you can’t live without your blazing downloads for your iTunes or Zune. Here’s how my plan breaks out:

Service Provider Estimated Cost
Internet Cable Company $40 month
Cable Channels 200 DISH Network $40 month
Land Line Phone Option 1 Vonage (no extra charges for the additional services like voicemail, caller id, long distance, etc) $25 month
Land Line Option 2 Magic Jack (Caller ID and VoiceMail, long Distance included) $40 to buy the adapter which includes first year 1st year included with equipment

$20 a year after that…yes per year, not per month.

Cellular Service Boost Mobile Blackberry plan, Prepaid (no contract) $60 month
Total for a household of 1 Add another $60 for a married couple with 2 Blackberry phones $165 month with landline option 1

$142 month with Land Line Option 2

I estimated earlier that it was costing around $300 a month to carry cellular, cable, internet and home phone for a married couple, and that would be on a good month. An off month because of cellular overages, maybe a spouse decided to order adult movies (answer for that too, Adam & Eve…they give away their DVDs all the time for spending $17 on their site 🙂 ) maybe around $350. My estimates above may not work for every person reading this or that you know, but we’re talking about $140 a month here. If $140 doesn’t mean anything to you, let me give you my PayPal email address and we can set up a monthly subscription to just send it to me…I know I can use it.

All three of these industries need to wake up and realize just how much of an impact they have had monthly on the family budget for the last 3 years. Its time to pay it back by giving some plan breaks, being more transparent in their operations.

And no Cable, you can’t claim that all the people that are getting services by stealing it cause everyone’s prices to suffer. You give your services to your employees for free. If it hurt that much, you’d charge them too…

Advertisements