Friday, October 24, 2008

Eating cheaper may cost more

This story tells us that restaurants are having trouble getting customers to come out and eat.
This story tells us that restaurants may have to raise their prices because wholesale food prices are rising.
So, taken in combination, what do these articles tell us? If you have a favorite restaurant, go eat there soon. It may not be there long.
Here's the formula, for those of you who are arithmetically inclined: Higher prices+fewer customers=even fewer customers=even higher prices=yet fewer customers=a going out of business sale on used kitchen supplies.
Or, these stories may indicate we may have to get used to paying more for some menu items, especially things with beef in them, while other items are offered to entice us to buy the beef.
This is kind of an interesting companion to the above stories. It offers another option.
The story tells us that the owners of Bennigan's restaurant chain, in trying to emerge from bankruptcy, are returning to emphasizing appetizers and drinks, which they did years ago.
This may be a model for some restaurants in the next few years. Here are the key paragraphs:

Holsinger said Bennigan's was one of the most dominant casual dining brands in the early 1990s with 30 to 40 percent of its business coming from beer, wine and liquor sales. Those products typically sell for significantly more than they cost, helping a company boost its margins. Bennigan's was also well known for its appetizers and sandwiches.
But as the decade came to a close, that dominance eroded. The chain, he said, racked up large amounts of debt by expanding too quickly and tarnished its bar and grill image by adding pricier, lower-quality entrees to its menu to compete with other sit-down chains.


To sum up: the answer to the restaurant industry's conundrum may be really simple — beer. Either sell it to restore your profit margin or, if your eatery goes out of business, use it to drink yourself into a stupor.

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