This is part of NRN’s special coverage of the 2011 Multi-Unit Foodservice Operator conference, or MUFSO. The conference is taking place Sept. 25-27 at the Gaylord Texan in Grapevine, Texas. Follow all coverage on NRN’s ‘At the Show’ section, check out NRN blogs, Reporter’s Notebook, and Tweet with us using #MUFSO.
Restaurants are under pressure to raise prices as commodity costs climb, but customers, reluctant to spend in these uncertain economic times, are likely to push back if their favorite menu items get more expensive.
Carl Howard, president and chief executive of Fazoli’s; Randy DeWitt, chief executive of Twin Peaks; and P.F. Chang’s chief executive Lane Cardwell shared their strategies for keeping margins in line without irritating their customers in a MUFSO panel moderated by Scott Taylor, chief operating officer of Baton Rouge, La.-based restaurant operator Last In Concepts.
Dazzle them with specials
Fazoli’s multi-tiered promotion strategy allows the restaurant to include both value items at the low end and samplers at the high end, Howard said.
Currently, the chain offers “family meals” for group dining at a maximum $4 per person, as well as a special $3.99 pricing of pizza-baked pasta. Customers can also upgrade those baked pastas to a “Supremo” — topped with extra meat, onions, peppers and Parmesan cheese — for $1.49.
Howard said about 25 percent of customers take the upsell. “It’s very profitable,” he said.
Fazoli’s also asks focus group participants what they would pay for various menu items. If they show willingness to spend more than the current price of certain items, they know it’s safe to raise prices on those items.
The quick-service Italian chain focuses on per person expenditures and per person profit — or the amount of money each customer spends and the profit Fazoli’s makes on that, Howard said.
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Entertain them with costumes
The casual-dining “breastaurant” Twin Peaks, is known for its cold beer and attractive wait staff.
DeWitt said that it has a full-time research and development chef who tweaks a couple of the chain’s 30 menu items every six months.
Instead of limited-time offers, Twin Peaks offers limited-time costumes.
For instance, the week of Valentine’s Day is slow for the restaurant, 90 percent of whose customers are men who use Twin Peaks to “spend leisure time with their buddies,” DeWitt said.
So Twin Peaks notified its e-mail club that their servers would be “wearing something comfortable this week.”
“It turned into one of our busiest weeks,” DeWitt said.
Other outfit changes occur for big football games, Veterans Day and Christmas, he said.
He also said Twin Peaks was having trouble keeping up with demand for a happy hour special: 99-cent 10-ounce mugs of beer.
The chain also offers 22-ounce mugs, which weren’t selling as well during happy hour until his servers were instructed to ask customers, “Will that be a girl size or a man size?”
“Overnight it solved the throughput problem,” DeWitt said.
Change consumers’ perception
P.F. Chang’s Cardwell said that any time a restaurant changes its menu format, consumers assume prices are rising, so it makes sense to raise them at that time.
But restaurants should also make sure they get credit for what they do well, he said.
“We’re the largest purchasers of flank steak in the country, but we call it beef,” Cardwell said.
Changing menu wording can make a difference, as P.F. Chang’s did during its most recent menu update. It noted that its salmon was from Norway, its pork was a loin cut, its mahi-mahi was line-caught, and it wasn’t just using sea bass, but Chilean sea bass.
Howard of Fazoli’s agreed, noting that its most successful menu price hike was implemented at the same time it enhanced the service program by upgrading to real plates and silverware.
“We also took a 2.5-percent increase in price and the customers accepted it,” Howard said.