The last couple of years have been especially challenging for hospitality operators. Even if you’re established with solid systems, low waste and a loyal customer base, you’ll likely have seen profits eroded by rising prices for food, wages and all other business costs.
Staying profitable is essential for staying in business. In my experience the best route to profitability is to provide a quality product that matches the depth of your customers’ pockets. The most effective tool to achieve this is pricing. Specifically: buying at the right price and then selling at the right price. Keeping pace with your pricing is essential for staying in business.
The former is pretty straightforward. Find the product that your market wants and get the best price for it from your suppliers. Bargain hard, use more than one supplier for key products and keep an eye on fluctuating costs.
The latter takes a bit of thought and courage your part. You need to be as aggressive with your menu pricing as you can so you can provide a quality product that stands out. In order to do this without alienating your customers ask yourself a few key questions first:
What is your position?
Trying to win in the hospitality game by being ‘just a bit cheaper than the competition’ is the sure path to shrinking bank deposits and hospitality misery. Instead, be bold and stand out as the place to be in your locality.
Who are the people in your neighbourhood?
Are they young families, students, millennials, tradespeople, professional office types, retired, affluent? The concentration of these groups in your area often determines where you should be pitching your product, both price- and quality-wise.
Who is your ideal customer?
We all have the type of customer we think we want and the type we actually need. When we first started out everything was about the hip ‘third wave coffee shop’. We’d get excited when the bearded, Vespa-riding, lumberjack shirt-wearing, flat white-sipper would visit (and hopefully post a favourable review on beanhunter). Sadly, though, his one flat white every two weeks didn’t make much of a contribution to the rent! The people you actually need are the ones happy to exchange their hard earned for something you’ve got that they want.
Ask yourself: who are they? And, importantly: where are they? Spend some time to work out who the big spenders are in your business now.
Remember – people buy for myriad reasons other than price
If price was the determining factor in everybody’s purchasing decisions, we’d all be shopping exclusively at Primark and lunching at McDonalds. It’s clearly not the case. That’s why it is important that you set the agenda for what you’re going to charge for your product that allows you to make a decent profit so you can stay in business.
Once you’ve set your prices hold your line and don’t apologise. Listen to feedback by all accounts, but remember that the price-sensitive keyboard warriors aren’t necessarily the repeat customers you want back!