from APT's Restaurant Practice

When news broke this week about the passage of Obama’s health care reform legislation, the news was especially relevant to McDonald’s, Burger King, and every other large-scale restaurant chain in the nation. The new federal law requires restaurant companies with 20 or more sites to disclose calorie information on their food products, as well as information about how many calories one should eat daily for a healthy diet.

The law calls to mind a recent New York Times article about the science behind menu optimization. “There is constant tinkering going on right now with menus and menu pricing,” said Sheryl E. Kimes, a professor of hospitality management at the Cornell School of Hotel Administration. “A lot of creative things are going on because the restaurants are trying to hold on for dear life to make sure they get through this.”

According to the New York Times, restaurants “are hoping that some magic combination of prices, adjectives, fonts, type sizes, ink colors and placement on the page can coax diners into spending a little more money.” Of course, the only true way to determine what works and what doesn’t is to test menu changes in live market conditions. Given that menu labeling is now required by federal law, testing is going to be more important than ever for restaurant companies.

Too Much of a Good Thing

March 19th, 2010 | Posted by Jonathan Marek in Restaurants | Restaurants - (Comments Off on Too Much of a Good Thing)

There’s nothing quite as frustrating as a good idea that turns out to be too “good.” Case in point: Sonic was lauded for launching a traffic-driving “happy hour” promotion in 2009. While the promotion was successful in driving traffic, recent analysis indicates that it also exacerbated a downward mix shift by cannibalizing higher margin checks. The incremental traffic and extra add-ons were insufficient to make up for the surrendered margins. What is a decision-maker to do? In an environment where every company is aggressively defending share, can promotions attract new guests and be profitable? In a nutshell, yes. By carefully examining historic transactions, better understanding likely trade-ups and trade-downs, and quickly testing promotions in a subset of markets, executives can avoid these types of surprises.