Recently, a Burger King franchisee – Carrols Restaurant Group – made headlines when they announced that an accidental error in discounting Whopper sandwiches had lost them more than $8 million in profits. You can see the entire article here, and dig into the details.
But this got us thinking.
How can a simple discounting error result in $8 million in lost profits?
What lessons can we take away from this?
In this blog post, we’ll be looking at how this Whopper of a mistake happened to Carrols Restaurant Group – and we’ll also discuss a few insights, lessons and takeaways that we can learn from this unfortunate incident. Join us, won’t you?
Carrols Restaurant Group is one of the largest Burger King franchisees in the country. It operates more than 1,000 locations, out of Burger King’s total of about 7,500. And, over the summer, it combined discounts on Whopper sandwiches, accidentally eating into its profits in a major way.
Here’s how it went down:
Because two different promotional discounts were being combined – when they should not have been – Carrols Restaurant Group lost money. A lot of money. After adjusting for interest, taxes, depreciation, and amortization (EBITDA), the company’s profits were reduced by $7.3 million.
In the quarter that this incident occurred, Carrols Restaurant Group reported a net loss of $6.8 million – 15 cents per share – compared to a net profit of $3.6 million in the same quarter during the previous year.
The mistake was first discovered in late August. Carrols discovered that its store sales only grew by 4.5%, which was lower than Burger King’s overall comps growth of 5%. Carrols usually outpaces the growth of other Burger King franchisees – so they investigated.
The problem was discovered in late August, and the mistake began in early June when the Whopper discount promotion first began. It was quickly resolved – but the damage had already been done. In total, nearly $8 million in profits had been lost due to this “discount double-dip” of the Burger King Whopper sandwich.
So, what can we learn from Burger King and Carrols Restaurant Group? Here are a few takeaways from this situation that we think are important.
In the future, we’re certain that Carrols Restaurant Group will be making quite a few changes to make sure that a similar loss never happens again – and no matter what line of business you’re in, there are lessons you can take away from this situation.
First, that human error is often an inevitability. Second, that employees and managers should be encouraged to think critically and bring up concerns to the relevant authorities. Third, that frequent auditing and analysis of sales are key to identifying discrepancies in cash flow early.
So learn from the mistakes made by Carrols, and use them as an example in your own company – you may not sell Whoppers, but the lessons learned from this $8 million mistake apply to everyone.
So, why are we discussing a retail restaurant on our eCommerce blog? Well, we think that this incident is interesting and can teach us some important lessons that are applicable regardless of industry.
But it also shows one of the best features of Magento. Magento has advanced coupon/discount code features that are designed to make it easy to create your own coupons – and avoid similar “discount stacking” issues. This issue wouldn’t (and couldn’t) happen on Magento!
By using the right eCommerce platform – such as Magento – you can avoid human error that could damage your profitability big-time. So if you’re thinking about switching your eCommerce platform, Magento is a great choice. For more details, reach out to the team at 121eCommerce now.