How can restaurants charge more in this economy?

Discussion in 'Food & Cooking' started by french fries, Sep 29, 2013.

  1. french fries

    french fries

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    I don't get it. 

    Ever since the economy collapsed, my business has been down. We have less customers, WAY less customers. Our business makes less money than it used to. In order to adjust, we've had to lower our prices, even though we spend more on advertising. That means way less money coming home than a few years back when it was booming. 

    On the other hand, the restaurants where I eat have increased their prices, sometimes by more than 50%. I used to get my mixed-grill "to go" at the corner lebanese hole in the wall for $11.95 a couple of years ago, now it's $18.95. I used to buy a thali from the Indian restaurant down the street for $13, now it's $21. 

    When I ask the restaurant owners how they can raise prices in a time of crisis, they explain to me that the price of gas increased, and therefore sourcing products for them is more expensive than it used to be. 

    But how can I spend twice when I have half the money? I can't. Result? I no longer go out, I no longer buy food "to go". I'm no longer a customer of the neighborhood restaurants where I used to eat 3 times a week. They have become ridiculously expensive IMO. The other day I wanted to buy a dish at little local hole in the wall: $15 for a plastic box with white rice, boiled veggies and a little bit of beef stew full of huge bones? No, thank you. 
     
  2. vic cardenas

    vic cardenas

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    It's hard to say which restaurants will go out of business with these practices. It hard to say which restaurants will go out of business, like yours, that are keeping their prices more reasonable. You are obviously making much less money now. Are they? Most places will increase their prices in line with their business expenses. If they experience a large drop in business, then they should decrease their prices and hopefully regain their lost business. This is ideal. A place like yours is in a bad position, sorry to say. If a place like theirs is doing just as much business as before, then they are doing just fine. It's all a balancing act. But yeah, $18 for a meal is too much for me!
     
  3. vic cardenas

    vic cardenas

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    At my place, we have increased prices slightly and gradually over the past 5 years. Business is about the same. Profit is always consistent. No complaints about pricing.
     
  4. french fries

    french fries

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    I wish I could say that of my business. That's what I used to say in 2007-2008. But ever since it's gone downhill with no signs of coming back up. :(
    I'm sorry I wasn't clear: my business is NOT in the food industry. In the food industry, my only influence is as a customer. And as a customer who has MUCH less money to spend today than I did in 2007, I don't understand how my vendor can afford to increase their prices. It would be like me increasing my products' prices and explain to the client: it costs me more to eat at the restaurant, so I have to charge you more. (I usually eat lunch at restaurants when I work) but if I did that my business would already be dead by now. 
     
  5. brandon odell

    brandon odell

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    Price increases should happen frequently, in small increments. When a business refuses to raise prices, they put themselves in a bad position because one of two things will inevitably have to happen; 1) They'll go out of business because there isn't enough revenue coming in, or 2) They'll eventually be forced to raise prices to stay in business, usually in a much larger increment which is much more noticeable to customers. The longer you wait to increase prices, the larger the price increases have to be and the more likely people will react negatively.

    Usually, price paranoia is unfounded. Owners always think any price increase is going to chase away customers. Its rarely true unless the prices jump too much over a short period of time. Sometimes NOT raising prices can scare away customers, especially if the food quality is high. Customers know when the cost of food is going up. They see other restaurant's prices going up and grocery store prices going up. They expect any restaurant with good food quality has to raise their price too, sometimes.

    Ultimately, you have to ask why the customers aren't coming through the door. It's really tough for an owner or chef to be objective and honest about their own restaurant. Sometimes its better to get outside help. A fresh pair of eyes with no emotional investment in the business can often spot things you can't when you are too close to it. Another good tool is a survey of customers not in your restaurant. Too often, owners only ask the people coming in how they like the food. Obviously, if they are returning they probably think its fine, and you aren't going to get anything useful from them. You have to ask the people who aren't coming in why they aren't. There might be a stigma about the restaurant, the market may have changed, or marketing efforts may just be ineffective. You can't know until you ask.

    I think "the economy" is not a valid excuse for a restaurant's failure anymore. 6 years after the market crash, a restaurant should have already made the changes necessary to meet the new reality of the marketplace. If the restaurant doesn't change with the market, it's not the market's fault the restaurant isn't making it, it's the restaurant's fault.
     
  6. brandon odell

    brandon odell

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    I didn't realize you didn't have a restaurant. I think the same thing applies for any business though. The market has changed.
     
  7. french fries

    french fries

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    Well that's exactly the opposite of what I'm trying to explain! I am on the other side of the coin here, being the customer. And what I'm saying is that I used to eat at those (lebanese and indian) restaurants about 2 or 3 times a week. Now that they've raised their prices (in small increments over the past few years), I probably eat there twice a year. 

    I realize that if everybody was like me, those restaurants would already be out of business, so maybe there are other industries where the crisis is already over, vs it's still lingering in my industry. Who knows. I know we felt the crisis very late in our industry (not before 2010, 2011), so maybe we'll also have to wait longer for it to pass. 

    Meanwhile, I'll continue eating at home every lunch and dinner. 
     
    Last edited: Sep 30, 2013
  8. Iceman

    Iceman

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    I've always felt that the "price of gas" reasoning was a gutless chicken-scratch excuse used only by looser business-people. Sorry if that offends anyone. I'm just conversationally stating my opinion.
     
  9. brianshaw

    brianshaw

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    These are still tough times for most of us.  Price of EVERYTHING is going up, and salaries aren't following very well.  I really, really understand the sentiments expressed by Brandon.  I think he really understands the situation well.  The "increased price of gas" arguement is old and stale... but the increased price of (insert any other product/service) is a reality.  Sure, it hurts to keep paying more and more.  Most folks have chosen things in which they must reduce their consumption.  As far as restaurants go, I only get offended when the price hikes are drastic or when the quality/quantity goes down.  I'm willing to pay more if the costs have gone up... and I'm still getting a reasonably good value for my money.  I'm also willing to admit that I can't afford everything I want, or even everything I once could afford!
     
  10. foodpump

    foodpump

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    Old and stale?  Tell that to my suppliers.... they don't jack up prices, no, they add a "fuel surcharge" to the invoice.  Face it, prices will always go up, it's part of life.  Gas here is now at $1.35/liter, with more and more people calculating it's cheaper to take a two hour drive over the border to Wash. State and buy gas there,--oh and groceries too.

    My business is a little different, I  run a small cafe (pastries, coffee, and chocolates) and while I haven't increased prices on some items on my menu, I have brought in new items and deleted old items.  More and more I'm leaning to wholesale chocolates for bread and butter, and am now supplying well over a dozen higher end supermarkets with my product.

    One thing I have done though is to raise the bar on Visa purchases.  While many small businesses won't accept Visa or ask a minimum purchase of $10.00, I've now set the bar at $40.  Not only am I getting dinged by Visa for their pound of flesh, but I have to rent the machine, and those (deleted) are thieves--no not thieves, they just don't give a (deleted) about my money.  It's up to me to examine every purchase and see if they have processed it, if I don't catch their mistakes and call it in within 30 days, it's gone.
     
  11. french fries

    french fries

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    I appreciate you all sharing your comments. Still, for me the mystery remains: 

    How can you continue raising your prices when your customers have less money to spend?

    I know that doesn't work in my industry, but maybe the food industry is different. I for one used to spend much more money on restaurants in one year when they were cheaper than today. A few years ago, I had much more money in the bank, and to me spending $7.95 to avoid having to shop and cook was often a no-brainer. Fast forward to today, I have much less money, and making a quick pasta dish vs spending $15 for some stew, and a few boiled veggies over rice is a no-brainer, but the other way around. 
     
  12. brianshaw

    brianshaw

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    Yes, old and stale only because it is only part of the real  story of why prices are escalating.  Sure, my suppliers (not food related business) do the same thing with fuel surcharges but the reality is that it is fuel, and x, and y, and z also that has gone up.  I'm with you in facing hte fact that prices generall are always going up!
     
  13. brianshaw

    brianshaw

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    Here's the uncomfortable truth:  Nobody cares too much about you or me anymore.  If we can't afford what they offer, they have other customers who can.  And if there aren't other customers who can, then they go out of business.

    Most of us are eating at home more than eating out for the very reason/economics that you state.  You are not alone.
     
  14. dillbert

    dillbert Banned

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    French Fries -

    you have answered your own question.  when you had the money, you did things.  outside pressures have made less money available for such purposes and you don't do that anymore.  this simple economic factor applies to everyone except our Federal government which simple applies for a new credit card so as to get a cash advance so as to pay the minimum amount on the old credit cards.

    the theory of "if you can't someone else will" only applies to places like Wall Street with hungry multi-trillionaires.; the ones not yet in jail.

    on Main Street USA, you go out of business - you raise the price of a BLT from $8 to $15, the people who have been coming in for lunch for years will buy their BLT for $15 - once - and promptly never return.

    the streets are littered with out of business food establishments.
     
  15. french fries

    french fries

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    I don't understand the logic. I'm not so much trying to understand things on an emotional level, so it's fine that no one cares, I'm ok with that. Just trying to understand how things work on a mathematical economics level (which I have to confess I know nothing about how economics work). 

    Basically what I don't understand is that on one hand I have to lower my prices to stay in business, but on another hand, as a customer I see other businesses (restaurants) raise their prices. And that doesn't permeate my little brain. It would seem logical to me that everybody would more or less suffer from the economy, and therefore everybody would have to lower their prices a bit to encourage business... basically I would expect everybody else to try to do what I'm doing with my business. But that's not what I'm seeing. 

    Let's say I'm selling buildings, and you're selling cars, and I need a car to sell my buildings, and you need a building to sell your cars. Now the economy goes down and customers become scarce. I have to lower the prices of my buildings so I can continue selling and keep my business afloat. But when I go to your place I notice you've raised the price of your cars? That doesn't compute (at least not in that little brain of mine). Sure, I've stopped buying your cars and I now ride my bike, but I don't understand how

    #1 you can think that raising your prices in this economy would be a good idea 

    #2 you can stay in business while raising your prices 

    What would make sense to me:

    To see restaurants lower their prices just like I do to adapt to the new economy. My $7.95 meal is now $5.95, which means I can continue eating at the restaurant as many times as I used to, which means that the restaurants keep the same amount of clients and therefore can stay in business. Everybody tighten their belts by the same amount. 
     
  16. dillbert

    dillbert Banned

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    >>the economics

    one has to factor in the issue of "disposable income"

    you have certain "fixed" costs / unavoidable expenditures to life - the rent/mortgage, taxes, electricity, water. gasoline in the car, food (but not eating out...)

    if you have a job that requires a 100 mile per day car commute (with no other option) the cost of fuel&tolls&car expense is not disposable income . . . 

    after you account for unavoidable / inescapable "costs" - whatever money is left over is "disposable income"

    a 6,000 mile road trip to Alaska to go salmon fishing is a "disposable" expense i.e. "gasoline" is not strictly "gasoline" in budgetary terms.

    disposable income - i.e. after food & shelter & occupation "costs" - you get to do with that income as you please. 

    stuff it in a retirement account, eat out, vacationing, gambling/other "vices" - take your pick. 

    when "disposable income" goes to near zero, either you stop spending or get evicted.

    as time goes by and your income does not increase, but the non-discretionary costs increase, your disposable income decreases.

    when the disposable income of your customer base is gone, the business has no customers left.

    so if you're dealing with a customer base majority that is not affected by factors influencing "disposable income" - you're golden.

    if not, you could be toast.
     
  17. Iceman

    Iceman

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    OK. Enough "smoke blowing". Let's just call it what it is. ... [COLOR=#green]GREED[/COLOR].


    Bennie the business owner is greedy. No-way No-how is anyone gonna tell Bennie to tighten up his own belt a notch or two. Notta chance. Bennie has gotten too used to the times where everyone had excess $$$ and spent some of it at his place. He's not about to buy a new car 1 class less than he's used to. A new 50-inch TV is not going in his home when he wants nothing less than a 72-inch plasma. Blue-collar working-class lunch-bucket Joe had better pay up to keep Bennie in his preferred style of life. It doesn't matter what Joe has to go through ... as long as Bennie gets what he wants.

    It's all greed. Nothing more ... nothing less.


    It's a really good thing we can't talk politics here because I'm in a really ballistic mood. On top of that ... the Chicago Cubs fired Manager Dale Sveum today. Was his problem being a bad manager? NO. His crime was managing one of the worst bunch of sissy pansy ego-loaded over-paid cry-baby flake-off children in the entirety of MLB.


    Anyway ...
     
  18. brianshaw

    brianshaw

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    Here is how.  There are 10 folks who can't afford to buy a car or dinner at the price that ensures the seller a profitable business.  There are 15 (or more) other folks who can because they have sufficient disposable income (or good credit, or credit extended beyond their means but still getting away  with it).  In some economic areas that logic works just fine.  In mine it certainly does but it sounds like maybe it doesn't in yours.

    Anyone selling a car or dinner at a price below their cost is going out of business.  Anyone who cuts quality to sell a car or dinner at close to their cost is likely to go our of business.  A good business must do two things:  maintain a client base and maintain a profitable status.  There are many ways to get there but lowering cost so folks who don't have sufficient disposable income (see Dilbert's posting if you have not read it already) can partake may not be the right way.

    Perhaps there is greed, and perhaps there is not.  Who is to judge how much profit a seller should be making except for "the market" -- if you think sellers are gouging then vote with your wallet and don't given them your money.
     
    Last edited: Oct 1, 2013
  19. brianshaw

    brianshaw

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    Yes it is a shame.  I'm in a mighty ballistic mood too.  :)
     
  20. french fries

    french fries

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    I'm not getting it, Brian. If a restaurant had 15/25 people able to afford a meal in their restaurant in 2007, then after the economic crisis, there are only 7/25 people left to afford the similarly-priced meal in their restaurant today. Only they've raised the price way over the inflation, so the meal is not similarly priced. so now there are only 3/25 people who can afford eating at that restaurant. I am one of the original 15 who could eat at the restaurant in 2007 but no longer can.