A fair share of restaurants bite the dust for lack of profits. Competition keeps them from raising prices much, if at all, while their costs (food, transportation, labor, utilities, taxes, rent) all go up.
So I was curious. How do restaurants do it? I asked the editor of the National Culinary Review magazine if I could write an article on how to build profits. Here are five tips I learned that others may apply, or consumers may observe:
- Meal/price option 1, 2 or 3. Rather than expect one price point to fit all, restaurants are starting to cater to value-oriented customers with a value menu of sorts (think 2 dinners for $20) as well as to the indulgent with upscale items for higher dollars. Wendy’s made the news when it went with three tiers, which has turned out to be disastrous for them. So the jury is out on how customers will ultimately respond when they see cheap and expensive on the same menu.
- Raise drink, appetizer or dessert prices. But keep the entrée price reasonable, since that is what a restaurant is judged on.
- Keep the basics low, but make customers pay for add-ons. “Oh, you want chicken on your salad? That will be $1 extra.” Or, “Wouldn’t you love to dip those fries in chipotle mayonnaise? Perfect. It will only cost you $1.”
- The meal is cheap (but let’s show you the wine list). This works for bars, pubs, wine bars and the like. The goal is, get customers in the door for cheap (or free) pizza, and totally expect that they will drink (and pay) like fish.
- Our delicious alligator is only $30. Offer items that no other restaurant in the area offers, and then customers don’t have anything to compare the price with. They will think $30 is probably reasonable and won’t squawk.
There are probably other ways, but one thing all the restaurateurs I talk to agreed on: you can’t just raise prices across the board. Customers will push back and cross the restaurant off their list. That is a door-closer for sure.
You can read the specifics on the tactics above by reading my “Price for Profits” article on the right under “my articles.” I talked to some amazing experts.
Then tell me what you think.
Jody
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