Foodie Biz
  • Home
  • About
  • Blog
  • Consulting
  • Contact

Foodie Biz Blog

Easy to Please, Hard to Impress

When Increasing Customer Spend isn’t a Good Thing

5/26/2016

0 Comments

 
Picture
Revenue per customer is among the top key metrics restaurants use to gauge success. Generally, the more money each customer spends, the more the restaurant will profit. Restaurants employ dozens of techniques to bring up this ‘average check,’ from upsell and cross-sell to menu engineering and creative pricing strategies. Some restaurants choose to increase their revenue streams, such as adding new menu categories or introducing drink pairings.
 
Regardless of the path you choose to elevate customer spend, it is imperative to know your limits. A fine line exists between increasing your average check and making your customers feel ‘nickeled and dimed.’ Naturally, no set boundary exists, but the key is to know your target customer and observe their behavior as you change things around. This game is all about balancing supply and demand, so increased revenue should outweigh any dropoff in volume you might see.
 
Let’s take a look at some new trends, as well as longstanding debates around restaurant offerings. Think about how your customers would react in these scenarios:
 
Valet Charges
Most nice restaurants will offer valet service, but the question comes with whether to charge for that service in addition to the driver’s expected tip. Some might think that’s a quick $9/customer and as much as a few thousand dollars on a busy night. It’s also easy to assume that if someone’s prepared to spend $400 on a meal that the valet charge is nothing. From a consumer psychology perspective, however, the act [or even the thought] of paying on two separate occasions—once for the bill and once for the valet—can alienate even your most wealthy clientele.
 
If your average party spends $400, it only takes a half-dozen groups going elsewhere over a rudimentary valet charge to take the idea into the red. If you get enough traffic to fill your restaurant anyway, then so be it, but be sure to monitor your sales to see if charging for valet has any significant effects.
 
Everything a la Carte
More and more places are treating sides as an additional revenue stream rather than including them with their respective entrees. High-end eateries can get away with this pretty easily, given the large price disparity between entrees [say, a $42 steak] and sides [$9 mashed potatoes]. Casual eateries, on the other hand, will almost always include sides with their entrees. It’s the places in between that have the most trouble deciding.
 
As a general rule, if your add-ons are more than a third of the a la carte item cost, you’re charging too much. If customers are paying $12 for a burger and another $6 for fries, they’ll likely look at the fries like half an entrée rather than a side. When this is the case, you’ll get a lot of customers who will 1) choose not to order any fries at all, 2) never return to your restaurant, and 3) tell all of their friends about feeling nickeled-and-dimed.
 
If you’re worried about keeping your margins, then take another look at your menu mix. Very few sides should cost that much to produce compared to entrees. If you’re not profiting off an item, change the recipe or take it off the menu.
 
Cocktail Sizes and Prices
A lot of new restaurants are getting caught up in the drink scene, offering a wide range of craft beers, fine wines and specialty cocktails. As is the case with sides, here it comes back to relativity. Some restaurants go so far as to price cocktails almost on par with their entrees. Keep the one-third rule in mind.
 
Another trend is serving cocktails in increasingly smaller, yet visually appealing, glasses. You may win the battle by striking conversation among tables in the moment, but you will lose the war when people walk away realizing they paid for three drinks but only got the equivalent of two.
 
Know Your Customer
As always, it’s about knowing what your target customer wants and what they will ultimately put up with. Increasing average spend is a healthy goal for any restaurant, and expanding revenue streams is a great way to raise the bottom line. Just be sure to observe the effects of both. If dropoff exceeds new profit or if your core demographic begins to shift in a way you don’t like, take corrective action and promote the heck out of it immediately. It’s always better to keep your loyalists happy than to drive them away over a few extra dollars.

0 Comments



Leave a Reply.

    Picture

    Author

    Benjamin Brown is a seasoned restaurant writer and hospitality consultant, serving up SoCal's hottest food news and reviews.

    Categories

    All
    American
    Anaheim
    Beer
    Beverly Hills
    Biz
    Biz Tips
    Brunch
    Celebrity Chef
    Cocktails
    Comfort Food
    Consulting
    Downtown
    Economical
    Food Festival
    Glendale
    Hollywood
    Huntington Beach
    Irvine
    Italian
    Japanese
    Koreatown
    Las Vegas
    Long Beach
    Marina Del Rey
    Mexican
    Middle Eastern
    Newport Beach
    Pasadena
    Peruvian
    Pizza
    Rancho Santa Margarita
    San Diego
    Santa Clarita
    Santa Monica
    Seafood
    Small Plates
    South Bay
    Steakhouse
    Studio City
    Thai
    Venice
    Ventura
    Westlake Village
    Westood
    Wine
    Woodland Hills
    Yorba Linda

    Archives

    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    September 2020
    April 2020
    March 2020
    February 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016

    Instagram

    @Foodie_Biz

    Picture
Home
About
Blog
Consulting Tips
Contact
Legal
Foodie Biz provides restaurant news and reviews for the food community, as well as consulting advice for restaurant owners and other hospitality professionals.
Contact Foodie Biz for media opportunities and freelance consulting projects.

Contact Foodie Biz

Picture
  • Home
  • About
  • Blog
  • Consulting
  • Contact