I am going to disagree with you here - I firmly believe that Free Dining has cost the Dining Department, and in that respect, they have to make up the money shortfalls. So, they raise prices, and add surcharges. Food prices never used to increase as much as they have the past few years since they introduced Free Dining.
Now, on a grand scale, Free Dining is bringing in more revenue to the theme parks bottom line, but on a smaller scale, it is costing the Dining Department - how can it not? They are actually giving away free product. Paying rack rate for a room has nothing to do with the Dining Department's budget. You have two different divisions sharing a promo, so I am hoping that the Dining Department is billing the resorts, as they are giving away free product in order to run this promo.
It would be interesting to see how Disney rectifies all of the different departments and cross promos that they have running throughout the year.
As a cash guest, I have no doubt that I am funding a revenue shortfall in the Dining Department for Free Dining - how else would they make this up? But, I am probably also supplementing other wastage areas too, like way too many staff working, etc. Disney charges higher prices on the menu, as they have no other choice. People who use the DP, don't pay for their food, they use credits, and people who get Free Dining don't pay for anything, as this package component is given free of charge.
Dining really has gone downhill in the past few years - we've eaten pretty much everywhere, and some of the restaurants have really changed their dishes greatly as of late. We've scratched off many restaurants and are eating in our villa more and more, as paying $26.00 for dry toast is no longer desirable to us.
Tiger