Menu Pricing

[Episure]

This is a spin off to the 6$ Bhel puri topic and in deference to mongo_jones justified plaint that the thread has assumed a different colour. Let me then paint it Red.... or is it Black?

What's the big fuss about?

A restaurant is a private enterprise, if it can withstand market driven dynamics, charge 6 $ for a Bhel puri and operate at optimum capacity, then it has every right to do so.

Customers don't come to the rescue of a restaurant when crowds have deserted it.

If customers feel that the menu is overpriced, they will move on to some other restaurant.

Now my question is:

Nobody can predict market dynamics, you have to react as they occur. There are two simplistic options available to a new restaurant operator:

1] Start with a higher price and if necessary lower it.

2] Start with a lower price and then ramp it up.

The pros and cons to both are quite complex and not as obvious as they seem.

Any Views?

[herbacidal]

first,

it's always easier to establish yourself upmarket and move down.

it's a helluva lot harder to do the reverse.

but that may be different than what you're talking about.

i'm talking about starting at the high end/luxury/upscale part and moving down to the mainstream, economy end.

you may be talking about purely on the basis of prices, w/o reference to what portion of the market, and raising/lowering prices while selling to the same customers.

if this is what you're talking about, there's other problems here that can be pursued when i'm not about to go to bed.

[mongo_jones]

how about starting at a reasonable price and sticking with it?

of course, this raises the question of what a reasonable price is--is it merely determined by total monetary units charged? or is it based on some relationship between price and quantity/quality?

[Episure]

first,

it's always easier to establish yourself upmarket and move down.

it's a helluva lot harder to do the reverse.

but that may be different than what you're talking about.

i'm talking about starting at the high end/luxury/upscale part and moving down to the mainstream, economy end.

you may be talking about purely on the basis of prices, w/o reference to what portion of the market, and raising/lowering prices while selling to the same customers.

if this is what you're talking about, there's other problems here that can be pursued when i'm not about to go to bed. 

I completely agree with you about starting high profile and then moving into mainstream, though there have been exceptions.

But right now since we have Suvir's restaurant as a live example, I'm referring to the variable of Price with respect to effecting a change in no. of covers/billing, and how will diners react to the change. No doubt some will be offended in the process but the objective here is to fill up the restaurant.

[Episure]

how about starting at a reasonable price and sticking with it?

of course, this raises the question of what a reasonable price is--is it merely determined by total monetary units charged? or is it based on some relationship between price and quantity/quality?

In the larger perspective of Seller/Buyer economics, reasonable would mean what the market can bear. The restaurant's target segment, I mean.

[herbacidal]

first,

it's always easier to establish yourself upmarket and move down.

it's a helluva lot harder to do the reverse.

but that may be different than what you're talking about.

i'm talking about starting at the high end/luxury/upscale part and moving down to the mainstream, economy end.

you may be talking about purely on the basis of prices, w/o reference to what portion of the market, and raising/lowering prices while selling to the same customers.

if this is what you're talking about, there's other problems here that can be pursued when i'm not about to go to bed.

I completely agree with you about starting high profile and then moving into mainstream, though there have been exceptions.

But right now since we have Suvir's restaurant as a live example, I'm referring to the variable of Price with respect to effecting a change in no. of covers/billing, and how will diners react to the change. No doubt some will be offended in the process but the objective here is to fill up the restaurant.

i'd need to know more about the specific market. i have ideas based on New York and Philadelphia, and some more based on China and Hong Kong. Plus readings about other markets. But wouldn't really suggest anything without knowing more about the local market.

[wesza]

first,

it's always easier to establish yourself upmarket and move down.

it's a helluva lot harder to do the reverse.

but that may be different than what you're talking about.

i'm talking about starting at the high end/luxury/upscale part and moving down to the mainstream, economy end.

you may be talking about purely on the basis of prices, w/o reference to what portion of the market, and raising/lowering prices while selling to the same customers.

if this is what you're talking about, there's other problems here that can be pursued when i'm not about to go to bed.  

I completely agree with you about starting high profile and then moving into mainstream, though there have been exceptions.

But right now since we have Suvir's restaurant as a live example, I'm referring to the variable of Price with respect to effecting a change in no. of covers/billing, and how will diners react to the change. No doubt some will be offended in the process but the objective here is to fill up the restaurant.

i'd need to know more about the specific market. i have ideas based on New York and Philadelphia, and some more based on China and Hong Kong. Plus readings about other markets. But wouldn't really suggest anything without knowing more about the local market.

I have been enjoying these 2 interlinked threads. I would like to give credit to the author of the report linked to evolution of, "Indian Hotel Coffee Shops". from the Hindustani Newspaper it was extremely well done.

My personal experience in this situation is that my firm was involved in various aspects, especially all the internation chain operations. Our initial overwhelming experience with a 24 hour Coffee shop, operation was located in the "Hong Kong Hilton", it was unique due to the fact that it was located next door,at street level to the only .Public Parking Structure in Hong Kongs Central District. When it opened it was the only 24 hour, sit down Euro/American style restaurant in the entire Colony. From opening day the gross volume of sales was 5/10 times the most optomistic projections. This was in a small, overcrowded in reality nothing more then a second thought of under utilized space intended to accomodate hotel guests for simple snacks. The interior looked like the most mundane american diner,coffee shop Blah at it's best. The food in my opinion, except for a few items. "SUCKED". But when something isn't broken, doing better then any rational explanation all that can be done is to expedite whats right and let it keep going. Iy actually was so busy that it continued for years.

This project was a 'Dale Kellar', design that was a last minute add on. It wasn't done with the care, or budget considerations with the rest of this property where everything else was more esthitically appealing. This was evidenced with the more respest provided to projests thru out Asia and India in the future.

My rational for all moderate coffee shop, diner operations has always been and still continues on the premise that begin with your general customers [especially the locals] Nursery Type Foods, definately including 'Street Foods".

Somehow I pushed a button or something with my one fingered typing method and to contine have utilized the edit function.

Where often Management differed from utilization of our concepts was in the methods of application of the Street Foods and Nursery Foods Concepts.

We always aspired for the absolute best preperation of the REAL THING. Taking into consideration that the overall kitchen capabilities, higher pay for employees, superior ingredients we anticipated renditions of the items served to be at least as good or better then most. Well this didn't happen, to much of management felt Nursery Food, ment their personal preferences. Since most were imported from locations all over the World, either by price or rarely by experience or competency this was often a mess. In the aspect of Street Foods, we had to deal with the Noveau self importance of Locally employed management who often were inclinded to put their nose high up in the air as if they were to important or sophistacated to be ever at the level of some one who even would consider Street Food. These 'BIG NOSED", types are the main reason for the majority of screw ups, nothings changed.

Now returning to the 'TOPIC". Why charge so much for inexpensive typical ethinic foods?

I'm the first one to profit on the concepts that I couldn't get the Management initally to follow. I opened a Restaurant in Hong Kong, that charged for that market outrageous prices for some items, that seemed to be very cheap. But we made then all exactly as our intended customers anticipated they should taste, that with only 72 seats we averated 300/400 lunches daily on the second floor of a commercial building. It's still in business after 38 years. How it operates now i've no idea, since I sold my interest in 1972. But it's still going.

Continue to serve dishes that you've enjoyed at home. But always attempt to prepare them at your best correctly and delicious. Don't ever adapt Street Foods, or most dishes into what you think the market reflects. If you do so then clearly state on your menu that this dish is made especially for your special customs, but you'd be DELIGHTED to prepare it authentically. The World is getting smaller, customers travel or try to travel thru their stomachs. Realize this and cater to them. Never take any customer for granted. The only good customer is one who returns. Never look down upon anyone, it backfires.

Most important. Remember YOU run your Restaurant. NEVER let it run you.

As a previous poster stated you may sometimes pay a high amount for some part of your menus dishes: IE: buy Lobster for $20.00 have to sell for $30.00. Yes that can happen, that why you need to balance your food costs by having items that you charge higher for but cost less. Remember it doesn't take much skill or experience to cook and finish the Lobster, plus it a $10.00 mark up. Your $6.00 item that only cost you in food cost may only cost you 1.25. BUT remember that the skill, effort, ablity to please by this dish are a profit you've earned.

I'll be glad to reply to any questions that have come, due to my posting. Irwin

Edited October 6, 2003 by wesza (log)

[Episure]

Irwin,

Your reply here and your posts elsewhere on this site reveal that you are an old war horse from the F & B service battleground.

A few questions:

" From opening day the gross volume of sales was 5/10 times the most optimistic projections.:

How do you calculate an optimistic projection? What are the factors that you take into account?

What's a Dale Keller design? I googled for it and did'nt find any answers.

What is Nursery Foods? Comfort foods perhaps?

What's the name of your sold restaurant that's still going on after 38 years?

I would like to eat there the next time I'm in HK. You can PM this to me if you like.

" Continue to serve dishes that you've enjoyed at home. But always attempt to prepare them at your best correctly and delicious. Don't ever adapt Street Foods, or most dishes into what you think the market reflects. If you do so then clearly state on your menu that this dish is made especially for your special customs, but you'd be DELIGHTED to prepare it authentically. The World is getting smaller, customers travel or try to travel thru their stomachs. Realize this and cater to them. Never take any customer for granted. The only good customer is one who returns. Never look down upon anyone, it backfires."

Never has a truer word been spoken yet as we speak there are many establishments especially the chains that cannot adhere to this wisdom.

[Episure]

I just wanted to bring this topic on the first page as I feel it deserves participation by the restaurant pros on this forum.