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.
“Technomic is forecasting nominal restaurant sales growth of 4% this year, and much of that increase will come from the opening of new locations among the largest chains, with some inflation in menu prices also factoring in.
Brands, especially high-end ones, are putting more restaurants in the pipeline because they are banking on consumers’ optimism and a sense that things are generally getting better. Technomic’s survey of consumers and their expectations for 2015 found that 44% of people agreed with the statement, “My personal finances will improve,” and 27% agreed with the statement, “Our household will be able to spend more when we dine out”—both of which were up 7 percentage points from a year earlier.”
In case you think yelling, swearing, ego and humiliation seen on restaurant “reality” shows has anything to do with how operators succeed in our business, check out how many US restaurants “rescued” by celebri-chef Gordon Ramsey are still open. From the first 5 seasons, out of 59 restaurants only 17 are still open today (28%). The most recent 6th and 7th seasons bring up the average to 38% still open, but it’s likely those seasons are too recent to show the eventual full failure rate.
Of course any consultant can tell you it’s tough to rescue troubled businesses, but that’s not the bigger point to be made here:
Truth is, Reality TV is far from Reality of Success in the Restaurant and Bar Business. They are marketed as showing “experts in action,” but there is not one “rescue” show on TV that properly captures what real operators and consultants do to succeed. Screaming at people is not on the list of keys to success.
Stop yelling, TV Celebrity Consultants, you look like idiots. And even as mindless entertainment it gets boring pretty quickly.
We at A-List Marketing are proud to have offered assistance to more than 100 bars, restaurants and beverage brands from pre-launch through sometimes 10 or more years of success. With very little turnover and nearly 100% success and retention of our services long term. Need help? Reach out, we will be there for you. Not yelling.
I don’t think it’s just the rise of Chipotle type fast casual segment that is killing Darden’s biggest concepts. Today Bloomberg/Businessweek reports Darden “Chief Executive Officer Clarence Otis says it [the Red Lobster sale] will help the company focus on turning around the Olive Garden chain, its largest revenue generator.”
Bloomberg adds at Olive Garden “the chain’s chefs are currently trying to latch on to newer trends in food and experimenting with ingredients such as polenta, capers and olives.” New trends! Olives. At Olive Garden. OK now you know the biggest problem over there, which selling real estate will not solve.
How about building beverage business, the most profitable segment at most establishments? What about atmosphere and music focus and updating? Redefining customer engagement using new tech? New day parts? A sports bar component like Applebees? Challenging ideas but sure beats “hey let’s take a look at olives!”
Or how about taking the world class resources of a giant company like Darden and flipping the entire chain to something new and more contemporary? Darden has been one of the best in the business over decades. I’m sure they could do it with an infusion of new energy, ideas and some new team members. Most of their locations are still in prime areas.
Darden is way better than its current approach of “sell half the empire and tinker with the rest.”
Thanks to Bloomberg/Business week and Lindsey Rupp in New York.
In a study by Google in August of 2012, researchers found that not only will users judge websites as beautiful in less than a second, but also that “visually complex” websites are consistently rated as less beautiful than their simpler counterparts.
So the old school restaurant principle “Keep It Simple Stupid,” has relevance in the online age!
At A-List Marketing, we link proven bar and restaurant best practices over decades with all the latest innovations vital to succeeding today. Please reach out if you’d like to learn about joining our client family, many of whom have included us on their team from pre-opening to 10 year anniversaries and beyond.
I’ve read several rants against food truck regulations in Chicago, DC and other cities, which limit food trucks from selling near buildings containing restaurants.
Writers including this think tank dude and this political pundit apparently think using public streets rent-free to undercut restaurateurs who rehab buildings and pay property taxes is libertarian free enterprise. Somehow I doubt cities or pundits would favor me pulling up in a U-Haul and selling TVs on the street outside a Best Buy, or dropping pallets of fertilizer on the sidewalk in front of Home Depot, intercepting people on their way to those retailers. There’s no difference between that and parking your cupcake truck in front of a local bakery. It would be closer to a level playing field if food trucks paid the equivalent tax burden of a “brick and mortar” business, provided consistent employment for a comparable number of local residents, provided restrooms, cafe seating and the other amenities that restaurants provide. But instead we have numerous start-up sites that say stuff like this: “With lower overhead costs and greater mobility, a food truck can be an exciting opportunity…”
Why would a city want to bet on a fad, making it easier for food trucks to congest already crowded city streets, hurting restaurants that make long term community investments to turn empty storefronts into public attractions? If the neighborhood starts to slide, food trucks can drive away to another city or location; they have no commitment to a neighborhood or community.
By squatting on taxpayer-maintained public streets, food trucks are the farthest thing from a free market case study. They need to be prevented from piggy backing on the entrepreneurs that build healthy city dining districts. The Chicago rules, DC proposals and other regulations are not government favoritism toward established restaurants, but simply a way to level the playing field. If food trucks can survive by bringing food service to unique locations, they are creating value on their own, but not by poaching traffic in existing restaurant districts built by tax paying long term operators.
If food trucks can’t make it without being parasites, they should die off as a short term fad, without taking our vibrant business districts down with them.
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