"Free dining" is an example of good marketing. Let's face it- IRL if we see the word "FREE" associated with any product or event, we want to get in on it. "Free" makes us take a look at something we might not have otherwise considered.
As to Disney's FD, here's what's happened over the years and I may have something a little "off"...perhaps someone else can help out here.
First plan- you got free appetizers, a main course including sides, nonalcoholic beverage, dessert and gratuities included. Two snacks included. No QSD or DxDP was offered but you could get all of this basic plan just by staying at a value resort or any other WDW resort by paying rack rate. Value resorts in particular were packed, many with Guests who could not have otherwise afforded a Disney vacation, bringing in new families who will likely want to return.
Second plan/revision- Take away the appetizers and gratuities, IMO removing a lot of the value. Not sure if one of the snacks was removed also or if this was later.
Third plan/revision- add the QSDP and make IT the "free" option for those in a value resort when the promo is offered. Add a refillable mug and two snacks back into the QSDP. Add the DxDP for an upgrade charge and the wine package for an upgrade. DxDP became very costly but included appetizers, two snacks, and refillable mug.
Fourth plan/revision- remove one of the two snacks from the QSDP. Add refillable mugs to all the plans.
Throughout the years- remove lobster from all menus as well as some other higher cost items. Homogenize the menus and increase the prices, esp. at TS and buffets so that people will see a value in "free dining". Initially when the FD plan was rolled out people actually complained about having too much food and feeling like the servers were not attentive as they were going to get their grats anyway. People got what they wanted and their complaints were listened to. Appetizers were removed from the basic plan and one of the snacks. We will never see free gratuities again.
For friends of mine, they wait until they can get free dining to come to WDW. They never comparison shop what a room only discount and paying for food OOP will cost instead. The word "free" gets them every time. This past year they made sure to choose a moderate resort as that included the basic dining they were used to, not comparing choosing a value resort and paying the upgrade costs. So...a value resort family who always stayed in those accommodations and were happy with them has now moved up to paying for a mod. Mission accomplished.
For
DVC members, there is a much better value in our "discount" even though we are using points vs. cash. PP's have noted what the cash price would equal by using a standard value for points vs. cash and we make out pretty well!
Meanwhile we do get restaurant discounts and perks that are not available to non-Members. We do not pay holiday pricing for dining if we choose the
DDP.
So this is my take on the DDP and why it's been offered and how it's worked. IMO it has been very successful for Disney and will probably continue to undergo changes to underscore the bottom line. I don't blame Disney for that- they have to answer to shareholders. I don't blame families for wanting it- there are many threads like this where WE want it too. It's FREE!.