Independent vs Corporate Restaurant Priorities

Where menu prices are really determined

This morning I read an article regarding the rising costs of food and how restaurants will respond.  In the article former server Charles Ferruzza finds a pair of local restaurant owners who say they will refuse to raise prices to compensate for the increase in costs.  The owners discuss absorbing the costs themselves or reducing portion sizes to keep prices constant.  While I am certain no owner was eager to have an article written about their pending price hike, there is another side to this story.  The difference in priorities between an independent owner and corporate shareholders is something that explains a great deal about the restaurant industry.

Independent restaurant owners directly profit from the money spent at their restaurants.  They have the autonomy to determine what is best for their restaurants long term.  Maintaining profitability in the long term is more important than immediate profits.  They determine how much of the profit they take as income and how much is reinvested into the restaurant.  If they are convinced that foregoing short term profits is better for the long term profitability of the restaurant, they can proceed in that manner.  This in reality is the owner offering to subsidize the guest’s meal to keep them returning.   For the individual owner of a profitable restaurant, this short term hit can be seen as a long term investment in the restaurant.

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Aspirational Dining in a Recession

Aspirational Dining in a Recession

(Note: In the previous post I defined the growing market segment of “aspirational dining” restaurants.  This is valuable background to this post and merits a read.)

What sets the “aspirational dining” market segment apart was their creation of the perception that their food cost more because it was worth more.  This perception is what made people aspire to dine in their restaurants.  During the salad days of the last decade these restaurants thrived on people’s desire to dine at a restaurant that would create a sense of jealousy amongst their peers.  Having dinner and being seen at these restaurants was a sign of status and achievement.  This all changed when the economy took a turn.

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Aspirational Dining Defined

Aspirational Dining

I am a Mac guy.  This means only the occasional interruption for updates from Microsoft.  These are most often for Word for Macs.  Yet in none of these updates have they added to my spell check dictionary words like “Barack Obama, Al Qaeda, or Facebook.”  If they do implement this change they can use this as my “Windows 27 was designed by me” testimonial. When they do develop this technology they should also add the word “aspirational” to my spell check.

The phrase “aspirational” has been used to describe many things you might find endorsed by Martha Stewart.  It is used to describe the desires of people to own, do, and consume things they view as entitlements of the rich.  Anything from a new luxury car to really expensive cheese can be labeled as “aspirational.”  They are the things we want even if we know they are not truly in our price range.  These are the adult versions of that cool bike you thought would bring you a lifetime of happiness as a kid.

Read the full post at The Manager’s Office