DDP Rumor and affect on DVC Member Perceived Value

[Chuck S]

First, to be clear, we have no evidence that profits are lower, only speculation. Right?

Second, none of us know what profit measures Disney uses to evaluate the performance of its restaurants. We have no idea if Disney looks at a profit/dollar spent, profit/customer, profit/table, profit/assets, etc.

Third, as far as I know, we have no clue how internal accounting at Disney deals with the Dining Plan, do we? So how do we know what the profit / dollar spend (assuming Disney looks at such a ratio) compares between DDP and non-DDP customers.

I would be happy to address some of your items...

While we don't know what criteria Disney uses for profit (ratio, per table, per customer) all of those would be lower. They would logically HAVE to be, given the way the DDP works. Again, if the average guest spends $28 on an entrée that cost $4 to prepare, then the DDP comes along and includes gratuity, tax, dessert, appetizer and beverage for that $28, the ratio is down, the gross profit per customer is down (since prep/food costs per customer is up) and the profit per table is down...unless the tables are turning much faster...do you think it takes the same amount of "table time" to consume only an entrée as it does to consume an appetizer, entrée and dessert? Plus, when a cash customer does order appetizer and dessert, profit is increased (especially on dessert items, they are normally the least expensive for prep time and ingredients). The restaurant loses that "increased" profit on the DDP, and must make it up in volume...especially a non-Disney operated restaurant.

The exception may be profit per asset (ie how much return is generated per square foot of space)...but would this offset the increase in operational costs for food prep, including additional supplies, utilities, employees?

Even if it is break-even, why spend MORE to make the same amount? The answer could simply have been, as many suggest, to increase volume and introduce people to the TS restaurants, as well as filling up hotel rooms. But again, the privately operated eateries would not benefit from the added hotel room profits...and they may the ones pushing hard for change.

 

[CarolA]

It was a half bottle too boot ouch it hurt to pay that

Well Like i have said before rumor is rumor and I do not care about not DISNEY resturants..

If I did I would eat at a burger joint !!!!!!


JIM HELP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

Do you understand that we are not talking about Mickey D's? People are currently using the DDP at "non Disney resturants"

This is half of the FULL SERVICE resturants in Epcot, all full service at DTD but Captain Jacks and all of the resturants in AK (Rainforest and Yak N Yeti)

If they drop out where do you plan to eat? Your options just went WAY down. You can eat at the resorts (except CSR, those resturants aren't managed by Disney) and at the remaining park resturants. So if the resturants are FULLY booked now (and they tend to be) and let say most of those folks are on the Dining plan. Take away large numbers of resturants and the ones that do accept the DDP are NOT going to be able to meet demand.

Even with EVERYONE participating last year during "Free Dining" Disney could not meet the demand and had to open "temporary buffets" for folks to use their meal credits.....

(Just out of curioisty where do you eat?)

 

[tjkraz]

It may all go into the Mouse's pocket, but each division needs to show profit.

Bingo.

I've seen this before in large companies. Incentives or promotions are created which are deemed to be "in the greater good." Most times the true benefit of the promotion is not evenly spread over all business units involved.

After a certain period of time, the inequality is forgotten. Higher-ups start pointing to the division that takes the greatest hit (in this case, dining) and wonder why it is floundering. Knee-jerk reactions ensue. Careers start hitting the skids.

Meanwhile the division that received the greatest benefit (resorts in this situation) is universally praised. Overall profitability is up. Business goals are exceeded. Promotions follow.

Just because TWDC is looking good as a whole doesn't mean that people quit looking at the detail.

Now, obviously there's no way of knowing if any of this is happening with the dining plan. Nothing wrong with speculating though, eh?

What we DO know are:

1. Meal profit margins are siginificantly lower under the DDP. We need no more evidence than the widespread reports of the hundreds of dollars people claim to "save" during their trip.

2. The rumor mill certainly indicates that the benefits of the DDP will be cut-back significantly in '08.

Is it as simple as A + B = C? Who knows. I doubt Disney will go into that much detail in their press release. But it sure is fun to speculate, ain't it?

 

[salmoneous]

They would logically HAVE to be, given the way the DDP works.

Just to stop right here, we don't *know* how the plan works from an internal accounting stand point. So how can we possibly know how it does or doesn't affect profit ratios within the restaurants?

Again, if the average guest spends $28 on an entree that cost $4 to prepare, then the DDP comes along and includes gratuity, tax, dessert, appetizer and beverage for that $28,

Here you are making several assumptions. First, that the average guest spends $28. Then you are assuming that the restaurant is credited with $28 bucks from the DDP. We know neither of these things.

But in an even bigger picture, we don't even know there is a customer paying $28 off the dinning plan. It may be a comparison of somebody on the dinning plan vs an empty table.

 

[CarolA]

About a year ago I interviewed with Disney for an accounting job.

I can assure you that not only does each Park have "profit" goals it gets measured down to the "return" from the popcorn cart outside the MK....LOL! Disney has "expectations" of performance from ALL of them and the appropirate management is held accountable!

From an accounting point of view, Disney is recording "revenue" for the RETAIL price of the meal. (That's what on those 'receipts' everyone uses to show how much they "saved") Disney is suppose to be paying the servers 18% (at least at Disney owned resturants) on the retail. So.... your dinner at LeCellier cost $45. Tip was $8.10 So out of your $38.99 Disney has to PAY (Cash outflow) $8.10 to the server and around $2 to the various tax authorities (assuming around a 6.5% sales tax rate) That leaves $28.89 to cover your meal PLUS your snack PLUS your counter service meal. So even if ALL of the money goes to Le Cellier, they have a "write down" of about $17 on the meal. Trust me at some point someone looks at that $17 line item (multiplied a few zillion times) and goes WAIT, why would we give this away. And the problem with this accounting method is that the snack and counterservice meal were "zero" reimbursment (and we KNOW that's not true, it cost Disney SOMETHING to provide them. Even if Disney by some MIRACLE gets the food FREE the staff wants WAGES LOL!)

Someone mentioned the "unused" credits and I think that's probably a "profit" center for Disney. How much, who knows? However, once again those "non Disney owned" resturants aren't seeing that profit!

 

[salmoneous]

1. Meal profit margins are siginificantly lower under the DDP. We need no more evidence than the widespread reports of the hundreds of dollars people claim to "save" during their trip.

Again, hate to be such a pain, we we don't know this at all. We don't even know how Disney measurs profit margins. People claim these $100's in savings because they compare what they paid to Disney vs numbers on a reciet showing that the *didn't* pay.

The amount people claim to save may or may not have anything to do with Disney's profit margins. Assume that, tomorrow, Disney doubled the prices on all their menus. The amount "saved" by folks on the DDP would skyrocket. But I doubt it would change Disney's profit margin for DDP diners.

 

[Sammie]

Disney is not in the business of loosing money. Their stock is up 17%. Last year saw record attendance. What does a $60 dollar meal actually cost Disney. We know that they get their Soft Drink syrup for free but I don't see them giving away free drinks. What other deals do the have in place for food items? One Disney unit may look on paper as if they are loosing money but the other units are making more than enough money to make up for it. As a Cast member told me, "it all comes back to the Mouse".

Just for clarifcation, they do not get their Cokes free, urban rumor.

 

[DBorges]

About a year ago I interviewed with Disney for an accounting job.

I can assure you that not only does each Park have "profit" goals it gets measured down to the "return" from the popcorn cart outside the MK....LOL! Disney has "expectations" of performance from ALL of them and the appropirate management is held accountable!

From an accounting point of view, Disney is recording "revenue" for the RETAIL price of the meal. (That's what on those 'receipts' everyone uses to show how much they "saved") Disney is suppose to be paying the servers 18% (at least at Disney owned resturants) on the retail. So.... your dinner at LeCellier cost $45. Tip was $8.10 So out of your $38.99 Disney has to PAY (Cash outflow) $8.10 to the server and around $2 to the various tax authorities (assuming around a 6.5% sales tax rate) That leaves $28.89 to cover your meal PLUS your snack PLUS your counter service meal. So even if ALL of the money goes to Le Cellier, they have a "write down" of about $17 on the meal. Trust me at some point someone looks at that $17 line item (multiplied a few zillion times) and goes WAIT, why would we give this away. And the problem with this accounting method is that the snack and counterservice meal were "zero" reimbursment (and we KNOW that's not true, it cost Disney SOMETHING to provide them. Even if Disney by some MIRACLE gets the food FREE the staff wants WAGES LOL!)

Someone mentioned the "unused" credits and I think that's probably a "profit" center for Disney. How much, who knows? However, once again those "non Disney owned" resturants aren't seeing that profit!

I interviewed with Disney for an accounting job. LOL

you never ordered food for a major food sevice situation

Disney buys stuff so cheap that it cost them peanuts (accounting term)

the ice cream for a snack cost them .02 cents

so everything they buy is in bulk and a lower cost

So there profits must be big!

You had a nice try but no cigar on this ..

They are making money left and right on ddp

 

[Sammie]

After all it is the "disney dinning plan"

Well actually it is the "Disney dining plan"

 

[Chuck S]

Just to stop right here, we don't *know* how the plan works from an internal accounting stand point. So how can we possibly know how it does or doesn't affect profit ratios within the restaurants?



Here you are making several assumptions. First, that the average guest spends $28. Then you are assuming that the restaurant is credited with $28 bucks from the DDP. We know neither of these things.

But in an even bigger picture, we don't even know there is a customer paying $28 off the dinning plan. It may be a comparison of somebody on the dinning plan vs an empty table.

Let us talk about non-Disney owned restaurants, like Chefs du France at EPCOT.

The average dinner appetizer (including the less expensive soups) is $7.40
Average dinner entree is $24.35
Average non-alcoholic beverage $3.89
Desserts $6.95

For a total pre-tax and pre-gratuity dinner of $42.59

Tax adds $2.77. 15% tip (and it has been reported servers get 18% on the DDP, but I'll say 15% just in case) is $6.39

Bringing our total to $51.75. Even if Disney were to turn the entire $37.99 for the DDP over to Chefs (but remember that then Disney would get no $$ for the snack or Counter Service meal) that would still leave an average balance of $13.76 (or a 27% discount) that the restaurant has to cover. That is a 27% discount PER PATRON if they order an average dinner on the DDP.

If the "average" cash guest does not order a dinner entree, and orders only an appetizer, the table will turn faster, and perhaps the next cash guest will order an entree. Either way, both guests have paid full price, without a 27% discount.

Now, you could argue the point that not every DDP guests orders full meal, and that is true...but certainly from what we've seen discussed on the Restaurant boards indicates that about 80% do so. And the 27% discount is assuming that Disney turns 100% of their gross from the DDP over to the restaurant for that one meal...do you think that is true? I doubt it. If they deduct even $5 for the counter meal and snack, the restaurant then gets $32.99...or a 36% discount. Not many restaurants could survive a 36% drop in menu prices on a regular basis.

And we know that Disney isn't going to "give away" a CS meal and snack from the goodness of their corporate heart.

 

[CarolA]

I
you never ordered food for a major food sevice situation

Disney buys stuff so cheap that it cost them peanuts (accounting term)

the ice cream for a snack cost them .02 cents

so everything they buy is in bulk and a lower cost

So there profits must be big!

You had a nice try but no cigar on this ..

They are making money left and right on ddp

Maybe you should ASK what else I have done before you put your fingers on the keyboards.

I have been involved with purchasing "food" and supplies for a VERY LARGE company. Think LOTS AND LOTS of food. (take a LOT of hospitals and imagine the amount of FOOD they go thru...... LOTS AND LOTS!!!!) We bought in BULK (HUGE BULK!) I do have some idea of what margins you can expect to get. I have audited LOTS of those bills. (You also didn't ask what type of accounting job at Disney did you? hmm...you never know what else I might have learned!)

I am sorry, but... your prices aren't based in reality. The only way your prices work is if they get the goverment suplus program and Disney doesn't qualify. (I purchased from that during my days as a camp administrator on college. Pennies... and some of the best cheese I have EVER HAD! I miss that stuff LOL!)

Contrary to your thoughts vendors don't have to "Give food" to Disney. Since most vendors get no real benefit from being a Disney vendor they have no motivation besides the value of the contract. If the contract gets too cheap , it would not be worth their time to keep it. (Vendors like Coke may use a different model as they do get the "association". Your local meat vendor... nah... I have seen the "vendor' trucks Disney uses. Those guys aren't losing money on these contracts....


DDP as used by the DVC members is NOT profitiable. As used by the average guest when combined with increased room revenue, DME etc. (all of which serve to keep you on site ) it may be. If you review the Annual Report you will notice that Disney CAREFULLY tracks averege spending per guest. (That's not a "guess" on Disney accounting, it's IN the report!) And in spite of the dining plan that has actually crept UP over the past few years. So it may be that Disney finds that while food is a "loss leader" the real truth is that between "cheap meals" and free transport the avg guest buys a LOT more "presents" or spends more on a hotel room.

 

[salmoneous]

Let us talk about non-Disney owned restaurants, like Chefs du France at EPCOT.

As a normal part of business, CdF has their own version of the DDP - a fixed price dinner for $30; a fixed price lunch for $18. Then we have to throw in a few bucks for drink and tip. Assuming Disney gives them something like $25-28 for each meal, my WAG (and that's all any of us have) is that Chefs takes in a could less bucks on average than they get off the plan *for each person that dines there.*

They have to balance that loss against the number of extra bodies that walk through the door due to the plan. During free dining, Chefs will be completely booked up every single day for both lunch and dinner. How busy would they be if it weren't for free dining? How do you balance the bucks the less in revenue they get per person due to the plan, with all the extra revenue they get because of the plan? It is a wash, loss, gain? None of us knows.

And, for all any of us knows, something we haven't even thought about might be the deciding factors. Restaurants make huge profits off alcohol. Do DDP, since they are getting their meals for free, tend to buy more drinks than non-DDP folks? Or, does the DDP bring in the "fanny-pack crowd" (not sure why I picked that term) that doesn't eat in places like Chefs and doesn't spend a lot on alcohol?

In the end, Chefs had a choice to be on the plan or not. After seeing how the plan affected them for 2 years, they choose to be on the plan again. That tells us something.

 

[G8RFAN]

I managed a restaurant during college what seems eons ago. The two things that gave me the most heartache was managing schedules and then managing staff. Notice the common link. We were in a highly seasonal market and staffing for weekends vs staffing for weekdays vs season vs offseason, vs who gets what day off was remarkably complex. The free Dining plan IMHO used to bring people in during the slow times. This helps manage staffing across the board. Ultimately it helps keep employees employed and HR sane. So while margins may be downwardly impacted because of the DDP at various participating locations, the HR impact has to be positive.

EDIT: what you may not see is that maybe there is a savings passed through in another form such as the revenue share that gets passed on to Disney (for those non-Disney operated locations) or some reduction to their fixed overhead charge or rent based on a formula of DDP headcount.

 

[salmoneous]

DDP as used by the DVC members is NOT profitiable.

How do we know that? If it's not profitable, why is it allowed?

 

[JimMIA]

The information from Virgin is not incorrect, as to what affect that will have on the US plan is yet to be revealed. I would say US tour operators will get their info in a couple of weeks.

It is very possible that the plans will be different and while some think that would be a nightmare for servers, it will all be coded in the guest card just as if you were on a Silver or Gold plan where the options were different.

Hmmm. That's interesting.

Not what I would have thought...not my opinion -- but also, coming from Sammie, not something I would disregard.

My personal opinion is nobody cares what would be a nightmare for servers. They deal with all sorts of variations of payment plans for meals anyway, and I don't think they would have any trouble adjusting.

I just think it would be a marketing nightmare in the UK, which is a really important market for Disney. If I were from the UK, and I was coming to WDW for two weeks, and I found out I was getting 25-30% less than American customers paying less...I'd be wearing my Grumpy baseball jersey!

But then, I don't work for Disney, so what do I know.

 

[Chuck S]

As a normal part of business, CdF has their own version of the DDP - a fixed price dinner for $30; a fixed price lunch for $18. Then we have to throw in a few bucks for drink and tip. Assuming Disney gives them something like $25-28 for each meal, my WAG (and that's all any of us have) is that Chefs takes in a could less bucks on average than they get off the plan *for each person that dines there.*.

Actually, exactly not true. The DDP gives diners their choice if any entree, appetizer, dessert & beverage. Compares apples to oranges.

The full price of the individual menu items for the $30 special (including the least expensive appetizer, no beverage, and least expensive meat entree) is $36.85, it does not include tax and tip. An overall discount of just 19%

Using the highest price of each selection with the DDP gives a possible discount of 38.5%, if the restaurant were to get the entire $37.99 from Disney.

The French Menu lunch is a 23.4% discount.

 

[Sammie]

Hmmm. That's interesting.

Not what I would have thought...not my opinion -- but also, coming from Sammie, not something I would disregard.

My personal opinion is nobody cares what would be a nightmare for servers. They deal with all sorts of variations of payment plans for meals anyway, and I don't think they would have any trouble adjusting.

I just think it would be a marketing nightmare in the UK, which is a really important market for Disney. If I were from the UK, and I was coming to WDW for two weeks, and I found out I was getting 25-30% less than American customers paying less...I'd be wearing my Grumpy baseball jersey!

But then, I don't work for Disney, so what do I know.

It would only be a marketing nightmare for UK DISers, the rest will have no idea it is different. And that will be the majority.

I think you will see some changes also in the US plan.

 

[salmoneous]

Actually, exactly not true. The DDP gives diners their choice if any entree, appetizer, dessert & beverage. Compares apples to oranges.

The only point I was trying to make is that Chefs seems happy with $30 and $18 for a entree, appetizer and desert. I don't think they are too unhappy with the $25-28 they get from Disney for a meal. If they were, they wouldn't have been part of the plan.

 

[CarolA]

Yes, but the Chef's de France "plat" is "chicken" not steak. (The higher priced appetizers, deserts and entrees are NOT included in thier discount deal) Plus they get ALL of the $18 or $30. They don't have to take the $18 or $30 and pay a server's tip and taxes.

I think the "non owned" resturants are getting something. Who knows? Maybe it's a "rent reduction" based on DDP diners? That actually makes sense since I BET that part of the "rent" is a "portion of the profits" so perhaps the DDP diners are not included in the "profits" as calucated for the rent? They would really have to get something extra since they don't share in the increased room/ticket/souviner revenue that Disney gets.

 

[tjkraz]

The amount people claim to save may or may not have anything to do with Disney's profit margins. Assume that, tomorrow, Disney doubled the prices on all their menus. The amount "saved" by folks on the DDP would skyrocket. But I doubt it would change Disney's profit margin for DDP diners.

No, but that's not an honest comparison either. The meaningful comparison is pre-DDP (2004 and before) to post-DDP (2005 to present) profitability.

Revenues (dollars coming in) may well have increased with the DDP, assuming that more people are eating in Disney restaurants. But profitability (revenue less expense) has almost certainly gone down as evidenced by the "savings" reported by many.

Disney, as a whole, is probably doing just fine with the DDP in the form of increased resort occupancy and increased nightly room revenue (since rack rates are a necessity for the DDP.) Whether they are willing to let the dining unit continue to suffer as a result is open to debate.