Instead of having customers donate a dollar and giving them a coupon book "worth" $30, why doesn't KFC just donate those $30 themselves (or even half)?
I'm guessing it drives more profits
Edit: I've been corrected in the comments. Happy to be wrong about this so thanks to the correctors.
Charitable donations can be written off on the businesses taxes, so by having customers pay for the donations it means the company gets to double dip. They write it off and the customer reimburses them for it.
Moral of the story: don't donate to corporations. Give it directly to a charity.
This isn't completely true...
https://www.taxpolicycenter.org/taxvox/who-gets-tax-benefit-those-checkout-donations-0
What you're describing just isn't compliant with tax law in any jurisdiction I'm aware of.
Can you explain it to me? I'm just repeating what I've been told and I'm not a financial person.
Edit: nvm, I just read the other responders links.
They just write it off, Jerry!
Corporations: why spend our own money when we can get these chumps to spend it for us?
The idea is to get people used to visiting KFC.
Donate directly to the charity and get Korean Fried Chicken instead.
Or Popeyes.
The thing to keep in mind is that there exist things which have "circumstantial value", meaning that the usefulness of something depends on the beholder's circumstances at some point in time. Such an object can actually have multiple valuations, as compared to goods (which have a single, calculable market value) or sentimental objects ("priceless" to their owner).
To use an easy example, consider a sportsball ticket. Presenting it at the ballfield is redeemable for a seat to watch the game at the time and place written on the ticket. And it can be transferred -- despite Ticketmaster's best efforts -- so someone else could enjoy the same. But if the ticket is unused and the game is over, then the ticket is now worthless. Or if the ticket holder doesn't enjoy watching sportsball, their valuation of the ticket is near nil.
So to start, the coupon book is arguable "worth" $30, $0, or somewhere in between. Not everyone will use every coupon in the book. But if using just one coupon will result in a savings of at least $1, then perhaps the holder would see net-value from that deal. In no circumstance is KFC marking down $30 on their books because they issued coupons that somehow total to $30.
That said, I'm of the opinion that if a donation directly results in me receiving something in return... that's not a donation. It's a sale or transaction dressed in the clothes of charity. Plus, KFC sends coupons in the mail for free anyway.
Not everyone will use every coupon in the book
Most people don't use most of the coupons. And the company bets on that, no matter what the *potential * value of the coupons is.
It's the same with mail-in rebates. The promise of them can drive additional sales, but since 40-60% never get claimed, it's just extra profits at the end of the day.
Coupons often drive sales for items that people usually wouldn't buy themselves, sometimes even to people that normally wouldn't shop there; then once they've tried something they haven't had before, the customer is more likely to purchase that again in the future.
Then there's additional items you add to the order beyond the coupon.
Finally there's some rather insane profit margins on some of those items. Even with the coupon, they're still making profit.
I know that on cake for example they've got a ~50% profit
never bothered to figure out the other stuff
I don't have a useful answer, but I commiserate with you. Last time I went to one the lady in the drive through really REALLY tried to keep pushing that coupon book on me. No. I don't want it. We don't come by here that often. I don't care if it'll save me money now because it won't in the long run.
Honestly, it left a really bad taste in my mouth with how pushy she was after I repeatedly said "no."
In before "they're just writing that off their own taxes" or "they're already going to donate it and you're just reimbursing them".
Most of the ones near me just ask if you want to "round up" or make a static donation amount. I'm guessing the coupon book is nothing more than the coupons they'd send out in the weekly paper. Having received similar coupon books as "welcome aboard" gifts, most of those deals aren't even all that good. Plus, they likely expire, so it puts a time rush on using them and draws in business.
“If everything’s above board that store really just acting like an agent,” said [Laurie Styron, Executive Director, CharityWatch]. “They’re really just taking your money and at some point in the future passing it on to the charity if they’re filing their taxes correctly. It actually doesn’t have any impact on that store’s taxes,” she said.
Coupons often say "Cannot be used with any other offer. One coupon per customer per visit." There's usually still an overall profit on the entire order because people don't buy just the one item covered by the coupon. The business can also deduct the value of the coupon as a charitable donation.
the others have described things well so read them first!
the irs looks at large charitable donations with suspicion because it is easy for a charity to pretend to do good but really just things the donars would do anyway but now they can deduct it. Thus large donars often have to do a match of smalaer donars as the large donation with no small donars suggests only the rich care and so maybe it isn't really charitable.
remember the above is a factor in some cases but shoud be considered only after you exhaust the other reasons to do this and find they are not enough.
The actual value of those coupons is far lower to them, since they aren't really losing the proportion of profits - and yes, it drives more business to them.
not losing profits? some of those coupons are half off, no way their profit margins are that high. but I'm sure that its outweighed by the extra foot traffic or something
Basically, their goal is to get you in the store. the coupon usually only covers part of a meal that people typically buy, so you go in and you end up buying significantly more than you would have, covering the "loss".
Futher, they can then declare the loss as a charitable contribution or something.
Also, they get to take credit for that one dollar donation and inflate their corporate "We Don't Look Like Assholes" numbers.
The profit margins are that high - or its for an item that's likely going to encourage sales of a higher margin item.
The profit margin on Coca Cola for a store like KFC is basically 100%.
Also, do you use all of the coupons? If you do, you can end up spending 2-3x of the coupon value easily if you are careful not to buy anything else.
You using the coupon means that they successfully enticed you to return. And most people will buy things on top of whatever the coupon is good for so they still turn a profit
Their margins are very high on some items compared to the ingredients, their costs are more dominated by other factors like wages and the costs for the location.