Tag Archives: Fast Casual

SURPRISE! Raising Wages = Higher Prices.

Chipotle just raised its prices in San Francisco 14%, exactly the same % as the raise in wages with the new minimum wage in the city. A popular chain like Chipotle has the option to do this, while most Mom and Pop restaurants and less trendy chains typically cannot raise prices.   They (we) just have to take a 14% hit.

There is no willingness of consumers to pay a little more so their fellow citizens who work in food service can make a living wage. Instead, “the dollar store mentality” rules with most customers. The lowest prices for the fattest burritos and self-throat-cutting “deals” drive sales. Thus, small businesses seem likely to lose out and possibly go out of business under the new inflationary scenario where operating costs rise but prices mostly cannot.

One lesson to be learned from Chipotle is great branding and marketing can help a business weather the storm.  Every business needs to give customers a compelling reason to look beyond the lowest prices.   Great marketing and branding can attract a high number of less price sensitive customers.  Volume plus profit margins equals survival in a time of rising costs!  This is something we are happy to say we’ve been able to help with for more than 40 hospitality locations.  Shoot us a note at A-List Marketing for a free consultation on how to beat rising costs and cheap customers.  It’s the only way to cover the ever rising costs in our businesses!

I liked this “Take Part” article about the Chipotle price hikes, as the writer seems shocked at basic economics.

Have a great day and enjoy every burrito! — TTBG

PS – I just want to add since I saw this – if you don’t tip because the minimum wage went up, you are a cheap ass.  You are not doing it on principle, you are a cheap ass.

http://wp.me/p2g9q8-CS

 

Advertisements