Uncertain economic times and Restaurant garage sales.The drought, Gas prices, Immigration and food production = sharp increase in food prices. While prices continue to rise, gas is heading towards 4.00 per gallon, food costs are going through the roof!
Anyone who is in the business, or goes to the grocery store is aware of rapidly increasing prices. Why are restaurants not raising their prices? Simple. There is a “down and dirty” method of pricing a lunch menu called the “Big Mac” Theory. If that sandwich fries and a drink cost 6.00, many individual restaurant owners try to price their lunch menu around that price since the average person expects to spend that amount or less on their lunch.
The problem with any menu pricing is that it is very difficult to increase prices across the board on a menu. Customers WILL notice this, and many will complain, and threaten to not come back. This is mind boggling to the business owner. How do the “big guys’ do it? They do not raise prices, they “introduce new products” (heard about all of the new “smaller portion” menus?) This is not because people want smaller portions, these portions are amounts that we should be eating anyway! This is about re-structuring a menu so an item can be re-introduced with a higher profit margin. This technique works well when you have research and development and a great marketing staff. How many restaurant owners here in Atlanta have these tools available to them? How many restaurant owners have the time to restructure the successful menu that has served them well for so long?
In my restaurant in Charlotte NC, I changed the structure of offering side dishes. I dropped the price of the item 25 cents, with less expensive options (at the time that was a salad, before lettuce went thru the roof!) and you could add the sides for one dollar. Thus an average increase of 75 cents on the item. This is an average. Some people just got the main item with no sides, however they were happy with the “new” value. Others did choose the sides, because fries for 1.00 more was a lot less than other restaurants were charging. There was now a new perception of “value” rather than having to deal with explaining why I increased the price of everything by 75 cents or 1 dollar. Customers are happy, I am happy with a slight increase in the items profit margin, and we can remain in a state of “ business as usual”.
Many restaurant owners who are not able to reorganize their menu pricing are finding themselves at the end of the road. Some are selling their business, others are closing their business and selling their equipment at “restaurant garage sales”. Everyone knows that used equipment is worth pennies on the dollar.
Many people seek our advice, since an operating restaurant has a value. Once you darken the doors of a restaurant, the value is negligible. No matter how difficult, keep the doors open and we find someone with a new concept to bring life to the business the restaurant owner spent so much time and energy to create!
Doug Marranci
404-892-4999
www.atlantarex.com
Atlanta Restaurant Exchange
1708 Peachtree St NW Ste 110
Atlanta GA 30309
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