Have you ever wondered how restaurant chains get the food to look so good on TV? This is the work of a micro-niche of advertising. While you may not know the names of the directors, like your favorite movie, there are five or six major players in this industry that fill the $4 billion in television air time bought by restaurant chains and food conglomerates each year. Fast-food, casual-dining and pizza chains, as well as what are lumped together as “doughnut and coffee restaurants,” spent $300 million more on TV ads in 2010 than they did in 2007, according to Kantar Media, a market research firm. If patterns hold, the numbers will be even larger this year. “Generally speaking, restaurant chains spend about 3 percent of revenue on advertising,” says Michael Gallo, an analyst at C. L. King & Associates. “Because these restaurant systems are large and have density, television is an easy way to reach customers in a cost-effective way.”
1. Assume you own a drive-in Sonic restaurant that grosses about $250,000 per year. Based on this article, how much of this would probably go to television advertising of your food?
2. How did Campbell Soup Company get in trouble with the FTC in the 1970’s regarding food advertisements? Assume that the fine was $500,000. How would you as an accountant for Campbell Soup record the journal entry for this fine?
3. Assume you are a consultant for a restaurant chain. How would you advise them between the difference of enhancement and fakery if they are trying to film a commercial for a $5.99 pizza? What are some of the issues of concern?
4. How have the economics of shooting food changed in recent times?
5. What issue in this article was the most interesting to you?
Segal, David (2011) Grilled Chicken, That Temperamental Star, New York Times, Oct. 8 (Retrievable online at http://www.nytimes.com/2011/10/09/business/in-food-commercials-flying-doughnuts-and-big-budgets.html?hp)
New York Times video. 2011. (Retrievable online at http://video.nytimes.com/video/2011/10/08/business/100000001098327/steamy-scenes-of-pasta.html)