Restaurant 101: The Price Hike

Even business newspapers must have food critics, I suppose. In order to make it newsy and fitting for his publication, Ryan Sutton, the food critic for Bloomberg News, gives his writing a financial spin. Whatever doesn’t fit in his columns at Bloomberg provides fodder for his blogs The Price Hike, and The Bad Deal.
I appreciate his foot-work, and research; it definitely takes time and discipline. I whole-heartedly applaud his insights on The Bad Deal. I’d love to see a cross-blog examination of the impact bad deals can have on restaurants, sometime in the future.
In his writings on The Price Hike, Sutton suggests one thing at the foundation of his arguments, however, that I find to be absolutely not true:
He assumes that restaurants are all trying to gouge or mislead guests.
In the six years I have managed restaurants, I have never seen this to be the case. Is it possible that there are restaurants that behave this way? Sure. But certainly the uber-chic restaurants that Sutton takes to task are not harboring restaurateurs  who gleefully rub their hands together and laugh about sticking it to their guests.
Many food critics have never worked in a restaurant. Which is fine—you don’t need to work in a restaurant to develop a palate. But when you want to build your career on critiquing restaurant operations? Then the dearth of experience can have an impact. 
 The WSE point-by-point analysis of Mr. Sutton’s “ten rules for better pricing,” after the jump.  
  1. Adopt “Real Cost” Pricing: “Call up The Inn at Little Washington in Virginia and a receptionist will tell you “the price of dinner is $405 per couple after tax & tip but before wine.” 
Personally, I think restaurants would run more efficiently if we did this. From a service perspective, however, some guests really hate it when you bring up pricing over the phone. For every guest that appreciates it, there is another guest that will snap “What? You don’t think I can afford it?”
  1. Include Prices for Online Wine Menus.
The reason that many restaurants don’t publish full wine lists or prices online is because they change so frequently. Almost every week there is a new vintage of a standby bottle, something is on backorder from the vendor, less popular bottles fall off the list to be replaced by something new and exciting. The amount of data entry required to keep an online list accurate would be a full time job for someone. Most restaurants would rather have the information on the website be accurate.  If we can’t keep certain information updated, we tend not to include it. We are always willing to fax or email you a copy of the current wine list, though. 
  1. Increase Prices at Regular Intervals.
For smaller, single owner operations, this can be improbable. Menu prices are arrived at by an algorithm involving the cost of the food, cost of labor, overhead, and then a sliver left over for profit. 
Items also need to be priced in such a way that they actually seem like a value to guests, otherwise they won’t get ordered, and will go to waste in your walk-in refrigerator. Which will cost you more money in the long run. 
Sure, we could charge $50 for the ribeye steak, to ensure that our costs are more than covered, and buffered against future inflation. But who will order that steak when they know they can buy the same ribeye from their local butcher for $18?
And if the cost of the steaks you purchase goes up by $1 pound, do you wait until the pre-determined date to change the menu price and lose that profit in the meantime? When restaurants can make this work, great. But if drought conditions in the Midwest wipe out grain supplies, and drive up the cost of flour, even stalwarts will raise their prices ‘off-schedule.’ 
At such bastions of fine dining as Per Se, the practice of raising prices at regular intervals probably developed more out of operational efficiency than anything else. The goodwill aspect of it is a fringe benefit. It’s also worth noting that Per Se is the sort of restaurant that diners budget trips around, so it makes sense for them to be very mindful of how frequently they raise their prices.
4. Announce Prices During Reservations Process. Again, some guests love this, and just as many people find it repulsive.  Since the rules of etiquette state that the discussion of money is impolite, the only safe way to proceed is to pursue the graceful approach, and only bring up cost when someone asks. 
       
Unless, as mentioned below, you are talking about the market price of menu items and    specials once the diners are seated. Then you are merely reciting additions to the menu, which in no way can be interpreted by anyone as an insinuation that a guest cannot afford the venue. 
5.     Include Prices on Online Food Menus: “I have no idea how much dinner at L’Atelier de Joel Robuchon in Midtown will cost because there are no online prices on the Four Seasons website, on the Robuchon website, on Opentable.com or on Menupages.com” 
There could be several reasons for this. Super high-end places will have items and preparations that change frequently. The seasonal vegetables that are served with the sea-trout can change daily based on what is best at the farmer’s market, the cost of certain items might edge up or down.
If a restaurant is highly conscious of sustainability, the even the fish they have available to use can change weekly, or daily.
If the chef cannot get sustainably caught mahi-mahi, he will change the dish to Hawaiian Ono on the fly. These changes could require an update of the website nearly every day.  And, as Sutton so accurately points out, it is not just the restaurant’s own site that would need to be updated– there are several aggregating  sites that need to be looped in.
Or, it is possible that the chef/owner simply does not wish to make this information easily available to his competitors.
 
But again, most restaurants are happy to fax or email a menu to you if you ask. You don’t even need to mention that cost is your concern– you can tell us you would like a copy for allergy-related information.
  1. Publish Market Prices: “Don’t embarrass me when I have to inquire about the cost publicly at the table and I learn that I can’t afford it.” 
Market prices aren’t on the menu because they really do change frequently. Unless the restaurant is printing menus every day (which has sustainability & cost issues), it is impossible to print this accurately.  In a fine dining restaurant, however, the server should mention the market prices of those items when they recite the daily specials, precisely to save anyone from needing to ask.
  1. Give Advance Notice: “Sure, there are good business reasons not to give advance notice of price hikes (i.e. skewing demand at “sale” prices), but from a consumer perspective, advance notice is PRETTY COOL.”  
This is not always possible. And half your target audience will read the news and think it’s pandering and cheesy.  I’m not saying it’s wrong to do this, I just think that Mr. Sutton is over-estimating it’s impact.
  1. Get Ahead of the Inflation Curve: Food prices will go up for the rest of our lives. We get it. So think like an economist and raise your steaks $15 bucks now and get ahead of the inflation curve, instead of hiking them by $2-$5 every few months…”
This sounds vaguely unethical. Try explaining a policy like this at a table. To a guest.
How could they think that you are doing anything but gouging them? This point seems a little half-baked. 
I have fielded plenty of suggestions from diners over the years. No one has ever complained about prices changing by “$2-$5 dollars every few months.”
  1. No Jigsaw Puzzle Pairing Prices: As I note in my column, would you walk into a restaurant and order a beverage pairing without food? Of course not. That’s why Le Bernardin deserves credit for listing the paired tasting at $330, instead of $190 food and $140 for wine. Other restaurants like Eleven Madison Park, which lists its wine pairings separately (as a $145 supplement to the $195 menu) should adopt Le Bernardin’s more transparent policy.”
This is the spirit of a la carte. Guests can build their own adventure from the menu offerings. They can enjoy the pre-fixe menu with or without the wine pairings. As a critic for a major paper, Mr. Sutton has the luxury of dining at fine establishments on a regular basis.  At least a third of the other diners in the room with him on a given night are here to celebrate the kind of milestones (birthdays, anniversaries, promotions) that they have budgeted for. This night out at a high-end restaurant will last them for 9 months to a year.
Why embarrass those diners by forcing them to ask what the cost of the menu would be without the wine pairings? I also believe that the separate pricing of the food and wine pairing is an attempt to be more transparent.
  1. Build Service Charge Into Prices
This point is only marginally different from the first point about ‘real cost pricing.’ But who wants to a read a list of  9 points when we are so comfortable with lists of 10….?
Operationally and service-wise, though, I support making this change. It is difficult to do, because staff are accustomed to having the opportunity to make more than 15% on each table. Some guests also balk at this because they like the control of voting with their dollar. They don’t want to be forced to pay the equivalent of 18% gratuity if they feel they received 10% service. This is a highly contentious conversation within the hospitality industry, the nuances of which will fill an entire future post on this blog.
But on this one point, Sutton and I agree.
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