Don't Get Above Your Raising

Our waiters will be getting two raises soon. One will be a raise in the minimum wage, the other will be the increased tips they'll receive as a result of raised menu prices.

I'm not in this post going to belabor the point that California should have a lower minimum wage for tipped employees (it should), nor talk about switching to a service charge, or service compris system (it would be nice), or moan about a system that to a certain degree, perpetuates a slavery mentality, or demeans those that choose service as a profession (what would happen if the bulk of say, doctors' income came from tips for "performance"). No, the system sucks but I'm not going to be the one to change it.

I do however, need your help. In order to maintain the (slim) profit margin we have we will have to raise prices to cover increased payroll expenses. The increase needs to be at least 3.85%, so I've made a spreadsheet with a variety of percentages. We only do .25 increments on glasses or half glasses of wine and we rarely do .50 increments on food. Obviously, some items will increase by much more than the 3.85% and others may not increase at all.

I have read much about pricing, menu positioning and how those affect diners' decisions. But I'd like your input. Which items at your favorite restaurant would be the most price sensitive? What increases would you notice? What reads better to you $20 or $21 (yes smartass, I know one is a dollar less and hence more attractive, the question is are you going to balk at a $20 item that's priced at $21?)

Any other useful thoughts?

Comments

[meloukhia]

I think that in general I expect restaurant prices to go up along with the rest of the cost of living, and therefore am not unduly upset when I see a slight change in prices on the menu, especially when it's done gradually.

I wouldn't balk at a $20 item that had become $21, but I probably would if it jumped to $25, in other words. Especially if the menu was changing at the same time, thus somewhat obscuring the nature of the change. (e.g. "oooh, there's bladhy blah again!")

I think the prices I notice most are on appetizers and salads, which sometimes appear over priced to my eye.

But then what do I know...I'm a philistine and we all know it.

[haddock]

You're not a philistine, you're a dirty hippie.

[Mensch71]

I agree with meloukhia. Now is the time to update/refresh your menu (perhaps already going to happen with the onset of winter) and change your prices accordingly.

My thought is that if you typically have your entrees in the $15 - $25 range, then an additional $1 - $2 isn't much. It's in the smaller items where I would notice. Also, unless it comes with a guarantee that I'm going to either win the lottery or get lucky, any glass of wine over $10 makes me scream "pretentious".

Best of luck!

[Joy]

$20-$21 is no biggie. I think it smarts more to go from say, $17 to $20 or $15 to $17. Once you hit $20, it doesn't seem gross unless you go up to $23.

Did I just thoroughly confuse you?

[Curious]

And for me it's entirely subjective. $20, for example, seems a bit high for a chicken breast entree in most restaurants. But for an organic, free-range chicken breast prepared to cause my eyes to roll back in my head, I'll fork over a Jackson.

[sam]

i dont think i really notice price increases although i do recognize when I am surprised to have had exceptional food at reasonable prices in a nice place. I think Coco500 is one of those places I currently consider to be exceptional value.

I start proactively thinking more about the cost and whether it will really be worth it when i see main courses at $28 plus.

I prefer an odd number like 21 much more than a round number like 20, which, of course, could just have easily have been left at 19.

[haddock]

Joy: No more confused than I usually am.

Sam: Thanks, that helps.

One of our local vintners was upset with us because we were selling his wine at an affordable price. We just used the pricing formula we use for everyone. But he felt we were "leaving money on the table" by not charging a little more. He could be right. I still want our prices to be fair, but I don't want to leave money on the table.

[onion]

odd numbers always seem better to me than even numbers. i'm not entirely sure why.

i'd also tend to agree that you're better off leaving the aps and such lower. folks generally have a hard enough time with a 12 dollar salad, and you do want them to get aps, mostly because it makes people enjoy their meals more. if you gotta jack anything, jack the red meat. people should be paying more for their red meat anyways, and you know it's still gonna sell. i guess, after that, in my mind, comes fish, but only because it's so damn expensive. i'd rather leave the fish lower, to encourage it's sale (and hence, let me keep it fresh), and jack the steak, to discourage it's sale, and make up for other expensives.

finally, look at some of the little charges. what's a cup of coffee? how 'bout desserts? a .5 on coffee or dessert doesn't bother me nearly so much as a .5 on an entree. again, i'm not sure why.

regardless, good luck. people are always gonna complain about the prices. hopefully they do their complaining on the way in, not on the way out.

[kudzu]

haddock, I really listened to what Shuna has to say. You two are such righteous chefs and I can feel you're on the same wave length.

As a consumer/diner I don't like confronting too-high aps and salads but I can understand higher prices as fish supplies fluctuate and we all watch costs climb when we shop for our own meat (especially when we're out for the good stuff).

You obviously have regulars who will take it in stride; tourists will probably consider your pricing a blessing (especially any of them from the East) and I predict it will shake out well.

How's the crab? Please post info on what's happening at the docks (unless you're busy hunting down beautiful porcini).

[brendan]

Psychologically I think the biggest hurdle for me is anytime a ten's place is breached, and to a lesser extent a multiple of five.

So the jump from $20 to $21 is going to be much less noticeable than the jump from $19 to $20, even though the change is the same — one I'm paying a dollar more, the next I'm suddenly ordering a $20 entrée.

Breaking the $10 barrier on apps is definitely a big one for me as well. In general of course raises are noticed more on lower-priced items. It's natural to think of things in terms of percentages — that's why I don't really care who I buy from when I'm buying a plasma screen TV and the price difference is between $1550 and $1560 (a .6% difference), but I comparison shop when I'm buying something and the difference is between $12 and $22 (a 45% increase).

I think transferring the bulk of your price increases to the luxury items on your menu is probably the strongest strategy. Items that people are used to ordering at many restaurants (like a salad) they are going to have a strong baseline for comparison. The price discrepencies are noticed more when they can say, "But a salad at X costs $5 less!" In contrast, with items that are unique to your restaurant, or are already associated with an upper-tier of consumerism avoid that comparison entirely.

And your wine list is insanely well priced right now. You could easily add a fair amount to any of those without making me bat an eyelash. Especially in this town, I'd say you have a margin of about $3-$6 on the glass you can still play with.

Either way, I'll still be coming in.

[kitchenmage]

I'd pay the extra buck or three without flinching, although I agree with the people who said crossing a "$5" barrier is more noticeable. But what's with places (any place) serving $10(+!) salads? What sort of "special northern California greens" are you using? *evilGrin*

[Pricing]

I try to know what sort of restaurant I am entering re it's price class. If it is a
$4-5 burger joint, then $8 shocks me. If it is a $8-12 joint, then I generally don't consider anything outside that price range. If it is $15-19, then once again, I don't tend to order the $22 steak. Or the $11 burger.
Finally, the three big price classes for a fine dining place: $17-23, $25-35, and $50-up.
For the final one, I expect prix fixe multicourse meals. For the second to last, I expect steak or crabs, or sushi, or something.

Anyway, as long as you stay in your price class, there is relatively little that can convince me to order something I don't want, and nothing to prevent me from ordering what is on my mind. As a result, I suggest that you do this:

Pick a range for lunch and a range for dinner. I won't go to a more expensive place than I intend to and have lower tolerances for lunch. Then, price every entree in the upper middle of that range except for something for the bargain hunters - something delicious that will tempt them to return with their less penny pinching friends.
Don't stress about a dollar here or there, it won't price anyone away from something that already costs $20; so just charge a bit more, as long as you keep within the range.