When prices move significantly on food, it usually worries restaurant owners. There are times when prices going down OR up can offer you a good opportunity to earn extra revenue though.
Currently, Maine lobster prices are tanking. There has been a glut of Maine lobsters caught this year and prices for lobsters on the East coast have hit a record low. While a restaurant owner might normally think “prices are down, that’s great for me“, it can be a double edged sword. You do not want prices on your already low priced products going down, especially if those products make up a large portion of your sales. While initially you may earn more money from lower recipe costs from those items, eventually your customer is going to want some of those savings passed on to them. When you do decide to drop your prices or offer featured items with these low priced ingredients, what you might experience is a skewing of your product mix to those lower priced items. This can actually canabalize sales of other items that may have a higher food cost percentage, but also likely contribute more gross profit dollars to your bottom line. That means less money in the bank.
Low lobster prices are a different story. When typically high priced food items drop in price, they allow you to lower your prices and skew your sales mix toward those items. Even though those items cost less than they normally do, the lobster is probably still going to be higher priced than your average sale and contribute more gross profit dollars than your average item sold. This represents a huge opportunity to improve both sales and profitability. By offering a lower price on lobster, your guests perceive that they are getting an incredible value so more of them order the lobster. Your average ticket goes up and so does your average gross profit per item sold. Win for you and a win for your customer.
O’Dell Restaurant Consulting offers operations and marketing consulting for independent restaurants. Visit www.bodellconsulting.com for more information.
Great article off Monkeydish.com about hiring veterans, why it’s a good idea and why restaurant chains are doing it…
Restaurant Impossible is visiting a little restaurant in the Kansas City metro named Poco’s. They are there right now, as I type this, remaking Poco’s interior, tearing down the menu and likely putting something in place that is smaller and uses fresher ingredients. I’ve only been to Poco’s one time myself. I had some tacos that were okay, but what stuck out to me was how hungry I was when I left. The serving was very small and they didn’t have the customary bottomless chips and salsa you get at every Mexican restaurant in the area. While Poco’s considers itself more “Latin” than “Mexican”, the menu was more Mexican and customers likely made the comparison to Mexican restaurants. I don’t know if I was just there on an off day, but it doesn’t surprise me that they were a candidate for Robert Irvine’s Restaurant Impossible.
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