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THE CONFUSION OVER RESTAURANT VALUE

18 Tuesday Feb 2014

Tags

Restaurant Management, restaurant pricing, Restaurant Value

THE CONFUSION OVER RESTAURANT VALUE

There is a difference between the following two statements: “that was an expensive meal” and “that meal wasn’t worth the money I spent”. The difference lies in the true definition of the term: value. The amount of money that a person spends for a meal becomes most relevant when value is not present. This also is a separate issue from the economic profile of the consumer because within every socio-economic group there is a disparity of restaurant value. Restaurateurs must be cognizant of the socio-economic group that they are focusing on as potential customers and the definition of value that is appropriate to that group.

Value takes into consideration so many different variables that make the whole process of building a successful restaurant. These variables include atmosphere, location, table top appointments, service, wine and food education offered, the talent in the kitchen, the detail of presentations, the source and quality of ingredients used, various forms of entertainment, the reputation of the restaurant, restaurant accolades, and even the other guests who patronize the operation. The amount of money spent by guests must equate to the package of variables offered and the perception that those guests have about the experience.

Quick service restaurants define value in terms of price and speed of service. Most would agree that the meals served here are “worth the money spent” even if many would still say that they are not fond of the experience. It would be rare to hear a person say that a meal in a quick service restaurant was too expensive. It becomes far more complicated when one looks at full-service and especially fine dining restaurant operations. In these situations the restaurateur must spend a considerable amount of time and effort in creating a “dining experience” that warrants the price charged. This is the process of creating a different sense of value.

The process of building value experiences must focus on all of the details that build up to the presentation of the check; this applies to many businesses outside of the restaurant business as well. What is most interesting is that “the experience” includes components within and outside of the provider’s immediate control. The value experience of a vacation at Disney World begins way before the guest actually arrives in Orlando. The Disney experience begins when the guest makes a decision to travel to Florida, the process of booking a flight, drawing money from their account at the bank, booking a hotel room, watching the weather channel for the forecast during their stay, the rental of a car in Orlando, traffic on the highway to the park, parking of the car, etc. Notice that many of these “points of experience” are beyond the control of Disney, yet they impact on the overall guest perception of value. Once the guest arrives at Disney World, he or she is in the hands of the provider and the experience can be controlled, but what about all of those events leading up to the day of contact? This is why companies like Disney look for ways to control those points either through partnerships or acquisitions. It is the same with restaurants that charge a higher tariff for their experience. The restaurant “event” begins with the reservation on the phone or on-line and continues to evolve from that point. Value perception has been well established before the guest even walks up to the host-stand for their table.

At this point the restaurateur must constantly work on ways to maintain or change the perception of value. It is never enough to charge high prices because the operator buys the best raw materials. Somehow the restaurant must relay that information and demonstrate “why” this is important to the experience. It is not enough to charge high prices because the restaurant hires the most talented staff unless the operator demonstrates “why” this has value to the guest. It is not enough to charge more for your wine simply because the operator uses only Riedl glassware unless the reason why this is important is apparent to the guest. Value must always be apparent if it is to have a positive impact on the perceptions of the guest.

If a guest emphasizes how expensive a restaurant experience is or was without qualifying “but it was worth it”, the restaurateur or chef has failed at their job. Guests within a socio-economic group will return time and time again and pay the price that you deem essential, if they perceive that value exists. Value trumps price more often than not. A Mercedes may not be affordable to every socio-economic group, but most would agree that the quality of the automobile is exceptional and after driving or even riding in one, the value experience is apparent. For those who are in the socio-economic group that could afford a Mercedes, the expense is easily justified. This would not be the case if they felt that perceived value was not there. The same rule applies within any and every socio-economic group and the goods that they intend to purchase.

Here lies the kicker: value is universal and the relative quality of a product or service today is the price of admission regardless of the socio-economic group that a business is approaching. Consumers have a much higher expectation of relative value than ever before. Restaurants cannot simply use the age-old adage: “you get what you pay for”. No, everyone wants and expects value whether it is $3.00 for a quick service “value meal” or $100 for a price fix menu at a fine dining establishment.

Define who your targeted socio-economic group is, research their ceiling for pricing, determine how you will create a value experience for that group and then ensure that you can consistently provide it. Price will be well received if you work from this premise.

PLAN BETTER – TRAIN HARDER
Harvest America Ventures, LLC
Restaurant Consulting
http://www.harvestamericaventures.com

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RESTAURANTS MUST CREATE VALUE BEFORE SELLING PRICES

02 Thursday Jan 2014

Tags

Cafe Boulud, restaurant pricing, Restaurant Value, restaurants, Shake Shack

RESTAURANTS MUST CREATE VALUE BEFORE SELLING PRICES

Why should people spend their hard earned money in your restaurant? How many chefs and restaurateurs have ever stopped to seriously ask this question? Build it and they will come may work in “Field of Dreams” but has little merit when contemplating the build out of a restaurant.

It is never wise to assume that just because you can cook others will flock to purchase what you make. There is so much more involved when one is trying to establish a viable business with staying power. Your intent should always be to create a restaurant that will still be earning money 20 years down the road. To do this requires that the chef/entrepreneur have answers to that first question: “why should people spend their hard earned money in your restaurant?”

The answer to the question of the day revolves around the value that you are able to create. Will the meal be worth the money spent? Before you rent or buy a piece of property, before you determine the ambience of the dining room, before you layout your kitchen and purchase any equipment, before the menu is planned, before you hire a single employee and certainly before you establish your pricing structure, this question must be answered.

Interestingly enough, there is little difference between a low priced, quick service restaurant and a fine dining establishment with extensive wine selections when it comes to determining value. Value is not exclusively reflected in how much is charged, it is totally drawn from the perception of worth. Let’s take on two current examples that I find most interesting: Danny Meyer’s Shake Shack and Café Boulud.

For those not familiar with the concept, Danny Meyer – New York City Restaurateur extraordinaire and owner of such landmarks as Gramercy Tavern and the Union Square Café, opened a burger, hot dog, fries and milk shake joint a few years back – probably more on a whim than anything else. The concept was simple: make great burgers, hot dogs, fries and shakes like they use to be and see what happens. This was built in stark contrast to his empire of exceptional fine dining operations in the city so it drew a lot of interest and questions. The result was a to-go concept that was instantly and insanely successful. This was in 2004 – now Shake Shack can be found in 11 locations in NYC, six other states, the District of Columbia and four other countries.

Danny Meyer’s Shake Shack Food Philosophy is simple and to the point:

“Good Ingredients
100% all-natural Angus beef, vegetarian fed, humanely raised and source verified. No hormones or antibiotics – EVER. We pride ourselves on sourcing incredible ingredients from like-minded artisanal producers.”

He goes further to describe what I would refer to as their real “value statement”:

“We stand for something good in everything we do, which also means thoughtful and sustainable design of every Shack, community support through donations and programming, and hand-picked music played in each Shack (because a burger tastes a little better with good tunes).”

In other words: to support Shake Shack is to support your community. This is a bond that allows the restaurant to be a member of the community family and an integral part of each resident’s life. This is a powerful value statement that trumps selling price.

A personal experience with this concept that stands out was a business trip to NYC with a colleague when we decided we had to try out Shake Shack (this was after dinner the previous evening at Café Boulud – quite a change of pace). We arrived at the location on 8th avenue only to find a line about ½ block long. The restaurant was full and they were only letting a few people in at a time to control the crowds. Directly across the street was a McDonald’s that was completely empty. After about 30 minutes we were allowed in and ordered our burgers and fries. The smell was intoxicating (It was reminiscent of burgers on your grill during the month of July), the staff was friendly, the music was spot on for the environment, people were laughing, and the kitchen was full tilt. Our burgers were fresh and sufficiently greasy like they should be, the buns were toasted, the fries were crisp and we stood in a corner (no place to sit) and thoroughly enjoyed the “experience” of Danny’s Shake Shack. Wow!

I have no recollection of the price of that meal, just the “value” received. The previous nights dinner at Café Boulud was extraordinary. Unlike Shake Shack, this was impeccable dining with world class service, a simple but elegant dining room, breathtaking food flavors and presentations and a tour of the kitchen afterwards with Chef Gavin Kaysen that was awe inspiring. Once again, I have no recollection of the price (likely multiple times more expensive than Shake Shack) but only have fond memories of the “experience” still after nearly two years.

Value is not price, but price becomes relevant more and more as the value experience is diminished. Why would people spend their hard earned money in Shake Shack? They would and do because the product, the service, the community involvement, the food philosophy and the name are synonymous with value. Why would people spend their hard earned money at Café Boulud? They would and do because this is an exceptional example of every detail being viewed as important by the owner, the chef and the dining room attendants. In both cases, the experience continues long after the exchange of money for product and service.

Restaurants can create value by looking at those things that are important to consumers and those things that are lacking in the marketplace. It may be product, service, attention to detail, food sourcing, commitment to community, presentation or entertainment. Whatever value statement you make, please ensure that it does not solely focus on price. Without value, price becomes of consummate importance to consumers. With exceptional value, price will be the first thing forgotten. Ask the question and find the answers: “why should people spend their hard earned money in this restaurant”. What is your VALUE STATEMENT?

For more information about Shake Shack, visit their website at:
http://www.shakeshack.com
For more information about Cafe Boulud, visit their website at:
http://www.cafeboulud.com/nyc/

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