A New Recipe for Limited-Time Offers
Limited-time licensed food promotions have long been a staple of restaurant chains’ marketing strategies. As competition increases, and as the importance of catching consumers’ attention on social media intensifies, the appetite for these partnerships is growing.
McDonald’s has a 40-year history of tying its Happy Meals to licensed toy giveaways, the first of which was with Mattel’s Barbie and Hot Wheels brands in 1983. But these limited-time offers (LTOs) need to mix things up to continue to connect with consumers.
Krispy Kreme, for example, took advantage of the holidays and an anniversary when it launched a promotion tying its donuts to the 20th anniversary of the release of the film Elf. As part of the promotion, six-packs of Buddy Snow Globe, Festive Lights, and Santa Belly donuts launched on November 24 both online and through Walmart, Kroger, and other stores.
The 25-store Dewey’s Pizza announced it will bring back, for a limited time, a pizza featuring Yukon Gold potatoes and themed around axe-wielding prospector Yukon Cornelius of Rudolph the Red-Nosed Reindeer fame. The TV program will mark the 60th anniversary of its release in 2024 and this promotion not only takes advantage of that anniversary but also revives a previous LTO first launched by Dewey’s Pizza in 2015.
Starbucks, whose red holiday cups are a holiday tradition, shifted to Stanley branded tumblers while The International House of Pancakes (IHOP) added nine items to its menu related to the Warner Bros. Pictures film Wonka, including Perfectly Purple Pancakes and Dreamy Lemonade.
“It’s not new and [it was] almost a function of McDonald’s Happy Meals in the 1990s when every single month they were aligning with another entertainment property for a toy giveaway,” said Stuart Seltzer, President of The Seltzer Licensing Group, which developed a promotion pairing Unilever’s Popsicle brand with Krispy Kreme in 2022. “This is an evolution of that. Many of the brand owners just want the revenue, but there also is a large sector in the industry that wants brand awareness, extensions, and impressions. They want to reach a new target audience, so for a lot of them it isn’t about the revenue.”
For many restaurants, these promotions are a key ingredient in a bid to separate themselves from the competition. It’s also a means for gaining currency on social media, which in some cases is replacing more conventional advertising as a means for brand promotion, industry executives said.
How the deals are structured is almost as varied as the LTOs themselves, but not all resemble the traditional licensing contract with a minimum guarantee, royalties, and terms that last several years. The agreements can be based on a flat fee, a percentage of sales, a barter deal where no cash is exchanged, or some combination. And they typically run for a set period or until supplies run out.
According to Jed Ferdinand, Senior Managing Partner at the Ferdinand IP Law Group, the legal structure of LTOs can also feature terms similar to a typical licensing deal, but often with less money involved in terms of royalties because the scope of the deal is smaller. “It’s a matter of what the scope of the use is and how fair compensation is arrived at. Competition is tougher than ever, and everyone is looking for new ideas,” Ferdinand said.
And while the length of these limited time offers may be significantly less than a traditional licensing agreement, and these partnerships might appear to land on social media platforms with no warning, LTOs are the result of months of development.
And that planning is necessary to make sure the LTOs don’t cost more than they bring in (especially if the primary goal is going viral online). For example, a non-licensed LTO launched by Red Lobster in June—a new version of its famous all-you-can-eat shrimp promotion—resulted in $11 million in losses in Q3. More customers than expected took advantage of the promotion as store traffic rose 4% from the year before.
“It’s all about planning and then they are on to the next promotion,” a licensing agency executive said. “So many of these are planned well in advance and the chains have something every month.”