Restaurant Survival – Beyond the Recession
Unless you are one of the QSR chains with 79¢ to 99¢ “value” menus, your revenue is down or customer counts are down (and maybe both). Many restaurateurs have resorted to heavy discounting and coupons to drive traffic. While I am highly skeptical of this practice for the long term benefit, many restaurants have been forced to compete with the chains who are driving each other’s prices down to the early to mid nineties level. Since this economic downturn is the worst in more than 25 years, no one can point to historic results after recovery and the damage the price slashing has done.
The question is whether the consumer will pay the prices these same restaurants will need to charge to stay in business for the coming years. Most of the large restaurant groups are public companies that are working on shareholders’ and franchisees’ pocketbooks. Management must show some positive numbers or at least no worse than direct competitors. Thus, you have heavy discounting to keep sales high, (at the expense of the franchisee in many cases), just to try to keep shareholders from driving stock prices even lower.
The problem is that independents are following this trend like sheep – let’s hope the trail doesn’t lead over a cliff!
There are other ways to combat the small wallet of the guests. Lower prices are fine, as long as it is not on the exact same menu items you have been selling for years. You are going to have to work with suppliers to find bargains for both you and the consumer – and keep your margins.
Here are a few things we have found to ease the sticker shock on our menus;
- We found an Alaskan white fish that is about $2.50 per pound. While it is not suitable for all applications, we have found ways to use the product for comfort food offerings at a great price (and margin).
- We found a shrimp bargain that allows us to offer the world’s most popular seafood item at a very low price, but maintain our regular high end product.
- There are pork and lamb bargains from many suppliers. Osso bucco, shanks, loins and less known cuts are at their low for years. There are even some pre-cooked items that are excellent center of the plate offerings.
- We even found ribeye loins from one supplier at $2.79 per pound. With day long marination, we were able to serve one pound steak dinner for $16.
In all of these cases, we let the consumer know these were special purchases. We made it clear we were searching for food bargains to help ease the pain of the economy for them. That is creativity and market adaptation that the chains can’t move quickly enough to avail themselves of. Remember, meat processors, wholesalers, fishing fleets, farmers and importers are suffering in this economy equally.
In the long term, what will the consumer remember and for how long? My choice is not to play the coupon and discount game until it becomes a normal part of motivating the customer for many years to come. When this is over, who will need to raise prices to continue the discounting? Hopefully, we aren’t part of that group.
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