from APT's Restaurant Practice
Header

Variable Pricing: How will guests respond?

November 11th, 2014 | Posted by Mckenzie Harper in Restaurants - (Comments Off on Variable Pricing: How will guests respond?)

APT SVP Jonathan Marek discusses the trend of variable menu pricing, and its implications for restaurants.

Common Mistakes in Menu Pricing

July 8th, 2014 | Posted by Casey Corman in Restaurants - (Comments Off on Common Mistakes in Menu Pricing)

Getting pricing strategy right may be the most challenging task for restaurant organizations — wrong decisions can lead to guests trading down to lower-priced items, or lost traffic. Similarly, failing to take price where it’s available can leave millions of dollars of profit on the table. In this video, Jonathan Marek – APT SVP and Restaurant Practice Head – discusses common mistakes restaurants make when setting menu prices, and the need for a robust Test & Learn process.

5 Overlooked Facts of Restaurant Pricing

January 30th, 2014 | Posted by Casey Corman in Restaurants | Restaurants - (Comments Off on 5 Overlooked Facts of Restaurant Pricing)

Nation’s Restaurant News recently published an article by APT SVP Jonathan Marek about the five often overlooked facts about restaurant pricing. Jonathan discusses the following about pricing strategies:

  • “You can’t understand the impact of changing prices without a test versus control analysis.”
  • “Cross-elasticity rules restaurant economics.”
  • “Price elasticity varies by store — a lot.”
  • “If you have a franchised concept, your franchisees are likely testing prices for you.”
  • “Pricing analysis should not be outsourced.”

Here is the link to the full article: http://nrn.com/opinions/5-overlooked-facets-restaurant-menu-pricing

 

Do daily deals make sense?

September 10th, 2013 | Posted by Casey Corman in Restaurants | Restaurants - (Comments Off on Do daily deals make sense?)

We’ve written in the past about the questionable economics of daily deals for restaurants. However, a recent article in QSR Magazine suggests that some operators are still using Groupon and other daily deal sites to encourage new business at some locations. For example, Smashburger recently launched a $6 for $12 deal, meaning that the Denver-based burger chain will receive $3 for the same food that would have normally garnered $12.

Two things about this promotion are worth noting:

  • First, Smashburger is only running this promotion in areas where they have relatively low brand awareness, so it is likely that the chain is driving more incremental visits in those locations than they would have if they launched the promotion chain-wide.
  • Second, Smashburger notes that customers redeeming the deal come in groups and thus have larger overall checks than those customers not redeeming the coupon. While this statistic is seemingly good news, it is difficult to know whether customers redeeming the deal would have had larger checks anyway.

For restaurants with low brand awareness, daily deals have a chance of being profitable by generating incremental trials that may lead to full-priced future visits. But restaurant chain operators need to test these promotions first to understand if redeemed deals are actually generating incremental trips and larger transactions, or if that behavior would have occurred anyway. Fortunately, Smashburger has an opportunity to do such causal analysis since they have only offered the Groupon in some locations.

Optimizing Pricing

June 23rd, 2013 | Posted by Casey Corman in Restaurants - (Comments Off on Optimizing Pricing)

APT President Patrick O’Reilly discusses how restaurants are using in-market testing to optimize pricing by menu item and location.

Should Restaurants Change Prices by the Hour?

September 5th, 2012 | Posted by Casey Corman in Restaurants - (Comments Off on Should Restaurants Change Prices by the Hour?)

Like an empty hotel room or airline seat, a restaurant table without guests is lost revenue. The New York Times recently reported that some restaurants are now introducing variable pricing models to capitalize on changes in demand elasticity by day and by hour. (more…)

How to Keep this Drought from Drying up your Profits

August 8th, 2012 | Posted by Casey Corman in Restaurants | Restaurants | Restaurants - (Comments Off on How to Keep this Drought from Drying up your Profits)

The worst drought in decades has affected 88% of America’s corn crop, sending this staple commodity to an all-time high. The skyrocketing price of corn will have direct impacts across the supply chain, as input costs increase for core menu items from sodas to proteins. Before futures contracts expire and prices increase, restaurant executives have an opportunity to avert a margin crunch. Specifically, executives should consider which of their high-cost menu items should be rationalized or substituted and when/where they can raise prices. (more…)

Quiznos Dropping Value Items: What should you look out for when you change prices?

July 26th, 2012 | Posted by GVanderschueren in Restaurants - (Comments Off on Quiznos Dropping Value Items: What should you look out for when you change prices?)

In a recent strategy shift,  Quiznos has announced that it is dropping its value priced items and focusing its brand on more expensive offerings. This shift towards “tastier foods,” such as prime rib sandwiches, may help to differentiate Quiznos from competitors in the ever-increasing sandwich space, especially as more concepts try to position away from yet another value offer. Still, success will depend on guest response. (more…)

Driving Sales Beyond Dinner

July 23rd, 2012 | Posted by Casey Corman in Restaurants | Restaurants | Restaurants - (Comments Off on Driving Sales Beyond Dinner)

Given the low marginal cost of serving additional guests, driving traffic in various dayparts can have enormous profit potential for restaurants. Many chains are committed to increasing guest visits during their lunch daypart, while QSRs are similarly eager about growing breakfast sales. Restaurant executives clearly understand the opportunity to drive sales through daypart-specific programs, but choosing the most effective strategies is much more challenging. (more…)

Five Key Considerations When Taking Restaurants Private

June 19th, 2012 | Posted by Casey Corman in Restaurants | Restaurants | Restaurants | Restaurants | Restaurants - (Comments Off on Five Key Considerations When Taking Restaurants Private)

A slew of recent restaurant acquisitions is spurring investors to ask two questions: who’s next and what are they worth? As private equity firms consider investing in the remaining publicly-traded restaurant companies, they must consider how different business actions have the opportunity to generate increased free cash flow. For restaurants, future free cash flow hinges on the ability to increase traffic and check size through five key areas: 1) network growth and revitalization, 2) rationalizing media activity, 3) managing the menu, 4) effectively setting prices, and 5) increasing labor and operational efficiency. (more…)