As external inflationary pressures continue to impact the restaurant industry, operators have to get creative to balance customer needs with keeping costs down. Dallas-based Korean fried chicken restaurant, Bonchon, has the added challenge of sourcing many of its ingredients from overseas markets, which caused the chain’s commodity costs to balloon during the pandemic. But like so many restaurants, Bonchon had to get creative to deal with these external macroeconomic factors.
“We went from paying about $120 in 2020 for a pallet of our sauce that we ship from South Korea, to upwards of $1,700 for that same pallet in 2022,” Bonchon CEO Flynn Dekker said. “We’ve had to figure out how to weather that storm and not pass along all of that cost increase to our franchise partners. We had to get creative in finding substitutes for some products to eliminate as much international shipping as possible.”
Bonchon ended up moving production of ingredients like the chain’s signature sauce to the United States to cut down on costs. The chain not only had to deal with the astronomical costs of shipping products from overseas but chicken wings —Bonchon’s signature dish — were one of the worst inflationary cost casualties last year. As a result, the Korean chicken chain has had to get innovative in how they promote menu items and add new dishes.
“While chicken is at the core of our menu and of course chicken prices have hit record highs in the past year, we have the ability to focus on other items like noodles or rice dishes that cost less,” Dekker said. “Currently, we're promoting an item called the Crunchy Chicken Bowl, which is at a good entry cost for price-conscious customers and lets us cross-utilize existing ingredients.”
It may come as no surprise that Bonchon has had to take two price increases of 3-3.5% each over the past year for a total of 7% menu price increases. Dekker said that raising menu prices is both a science and an art, because you want to be able to offset commodity costs but not turn off customers, who are looking for a quality casual-dining experience that won’t break the bank.
“We really look at a broad subsection of the market and ask, ‘what are consumers out there willing to pay?’” Dekker said. “We look at what other larger brands are doing in terms of price increases, and we want to keep ourselves somewhere in the middle. We can’t go too low because commodity costs are high but we don’t want to go too high because we want to provide the best quality product at an affordable price point.”
Despite the changes Bonchon has made to cut back on costs and attention to customer needs, Dekker said that they are still seeing a slowdown in consumer spending, much like the entire retail industry. Despite this softening of customer spending, Bonchon’s sales are in the black by about 9% year-over-year. Even with a possible recession on the horizon, the one thing you won’t see Bonchon do? Couponing or sales. Instead, the company hopes to always promote fair prices.
“I’m all about value, not discounts,” Dekker said.
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