It’s difficult to concisely summarize last week’s WFF Conference in Las Vegas, but I’ll try. Suffice it to say that as usual, the event was a shot in the arm for attendees, who learned, relearned, and connected with old and new industry peers while benefiting from the insight of leaders and visionaries attending.

Keynote Speakers

 
 
 
 

Photo: L. Kerr

Gladys Knight – as an entertainer and restaurateur, the superstar’s story hit on the theme of work-life balance, a frequent WFF topic. How heartening to know that Ms. Knight understands this issue, having grappled with it while on the road with the Pips. In addition to her nontraditional working mom experience, she supported two children in starting restaurant and bakery businesses, both financially and morally, and she dreams of using her family’s farm to teach youngsters about food and life lessons. For me, Ms. Knight’s life lessons hit home more than did the notion of her as a colleague – but I’ll try to get over that mental hump! Her advice: don’t be afraid to stand tall and take on the responsibility of being a leader. And rest assured, Gladys can still belt out a song – she treated us to a performance of “Need to Be” after speaking.

Keith Ferrazzi of Ferrazzi Greenlight spoke on building and sustaining relationships that garner success. His firm’s research shows that your key relationships – lifeline relationships in his lingo – are predictive of your ability to build business relationships. Not surprisingly, the necessary relationship ingredients he mentioned included intimacy, generosity, vulnerability, and caring. His counsel: to get people to care about you, just care about them. I find I can often apply WFF speaker advice to both work and personal relationships, and this case is no different. To overcome the intimidation of networking, Ferrazzi suggests a simple approach of asking you can help others rather than the reverse.

Gloria Santona, EVP and General Secretary of McDonald’s Corporation, inspired us with her experiences as a young Hispanic woman embarking on her legal career when this was far from a common career option. She noted that the current ratio of women to men in the workforce is much higher than it is in boardrooms, a fact that shapes much of the WFF mission. As she recounted her experiences at McDonald’s, I couldn’t help but think that if all companies provided such opportunities for inclusion, our workplaces would be incredible. Santona defines success as creating opportunities for people of different backgrounds, which was a good backdrop for the Top-to-Top Summit. Additional advice: Focus your career on what’s most important to you; treat failure as a developmental opportunity, develop the leader in you; and you can’t do it alone.

Top-to-Top Summit Highlights

Dr. Saj-Nicole Joni spoke on leadership, using the example of Edward Liddy and AIG bonus controversy. Participant wisdom: Liddy’s desire to do right by AIG employees should have been a backseat to the company’s bankruptcy, the taxpayer bailout, and public outcry that would clearly follow. Moreover, the lack of a diverse group of advisors hurt.

Joni then moderated an executive panel including the following members and their advice on leadership:

P. Liewand, M. Rich, D. Madsen, D. Sweeney

Photo: L. Kerr

Paul Leinwand, VP Global Consumer, Media and Digital Practice for Booz & Co.: Find ways to enable people to take risks.

Mindy Rich, Vice Chairman Rich Products, Inc.: Don’t be afraid to find the confidence to take risks ourselves.

Drew Madsen, President and COO, Darden Restaurants: Encourage everyone to think about leading people, not just businesses. The difference between good and great is often getting the effort from the front line in this special business.

Dawn Sweeney, President & CEO, National Restaurant Association: Strike the balance necessary in fighting battles, as in the case of the recent health care lobbying efforts.

Changing of the WFF Guard

WFF leadership continues to evolve, and a high point this year was Fritzi Woods’ debut as WFF President and CEO. Having listened to Fritzi on many a WFF panel, I know this is as extremely good news for the organization and its members. Here’s to your stewardship, Fritzi – I look forward to it. Furthermore, outgoing Interim President Linda Pharr really gets to leave now, having done an extra tour of duty – which interfered with her retirement, no less – as the WFF worked to fill a management void. How generous of Linda.

We welcomed incoming WFF Chair Maureen Hurley, a consistent image of leadership during my WFF membership. She, as well as outgoing chair Mary O’ Broin, inspired us by sharing their stories, lessons, and goals, both past and future. Congratulations best wishes, ladies.

Fritzi took the opportunity for an informal panel discussion with the following heavy hitters who are always so giving of their time and advice:

Lorna Donatone, COO & Education Market President, Sodexo/WFF Treasurer: Raise your hand – don’t sit back and assume others know your goals and capabilities.

Carin Stutz, SVP, Strategic Operations & COO, Global Business Development, Brinker International/WFF Secretary: take the high road. Add value to a conversation and don’t bring it down – imagine being in others’ shoes when you don’t agree with them.

Maureen Hurley, EVP & Chief Administrative Officer, Rich Products Corporation/WFF Chair: Have confidence in yourself, quit thinking you might be “found out” and set your mind to your goals.

The announcement that Brinker International has donated office space in its Dallas headquarters to the WFF was great news. This gift was due to the generosity of ever-supportive Carin Stutz and Doug Brooks, Chairman and CEO of Brinker.

WFF Awards

There has been much industry coverage of these award recipients. What stands out to me is the extent of their accomplishments, humility, and generosity – it’s truly awe-inspiring. Congratulations to Mindy Rich, Vice-Chairman, Rich Products; Joyce Mazero, Partner, Haynes and Boone; Cindy Novak, President, Communication Leadership Network; Doug Barber, EVP and COO, Cracker Barrel Old Country Store; and Sarah Palisi Chapin, CEO, Hail Merry Snacks. Congratulations to Kraft Foodservice, recipient of the one award that goes to a company rather than an individual, with Tom Sampson, President North American Foodservice, accepting.

While it was a new setting, recognizing some new leaders, the 2010 WFF leadership conference was true to form in continuing to offer top-notch programming and educational opportunities, while fostering new and old connections among industry peers. This year’s tone was one of inspiration and hope to prepare us for the more prosperous times to come for the industry. Won’t those be a welcome change!

 
 
Every March and August, I make a slew of restaurant reservations and invite my fellow foodies out to revel in a good meal – or a few – in honor of Restaurant Week. They know they can rely on me to remind them of the festivities, and I know there are two camps among my friends: the joiners and the abstainers. The former see the event as a bargain, a way to expand their restaurant horizons. The latter don’t see the bargain because to them, the occasion is more than just a $33.10 three-course meal once they add in wine, tip, and more food than they want or need. 

Restaurant Week started years ago as a way for restaurants to increase business during down weeks by offering three-course prix fixe lunches and dinners at special prices. At one point, the price was based on the year; I remember dinners costing $20.02 in 2002, though inflation has made this relationship less direct lately, so dinner prices are now in the $30.00 range. With Boston’s heavy student population, spring break is one factor in timing, and summer vacations and the last slow weeks before the back-to-school drive the August timing. At least that’s what I read when I first started enjoying restaurant week.

As an industry professional, I see both the bargain price allure and the overdoing it argument, but my desire to support the industry while eating good food wins out. Taking myself out of the equation, here are the two differing views courtesy of two members of my dining circle.

Foodie on a Budget

One peer I spoke to is a devoted student and lover of food who is in the midst of a career transition and not working full-time. While finances are a factor in her decision, she says that even when she was employed full time, Restaurant Week did not entice her. “I never do it. One or twice I’ve gone, but I just do not do it. To me it doesn’t seem like such a bargain; it feels like it’s a great way to lure you in and I spend more than I usually do for dinner. I don’t order three courses usually, so I just find it gets to be too much.”

This friend has done the math of adding in wine and the tip, which brings her tab to well over $33.00. She admits that it would be a good way to get to dine at out-of-reach restaurants. “I regret that I don’t think of it for those really pricey restaurants – that would be worth it. But at most of them, I could get away with not spending $60.00 by the time I am done. My perception is it’s a little bit of a rip off – at least for me. And I’m usually broke so I am the queen of meeting for apps and a glass of wine! I could enjoy any of these restaurants anyway – I still wouldn’t go out and spend that much.”

Dining Enthusiast

At the other end of the spectrum is the appreciative diner, who recognizes the bargain and is grateful for the opportunity. “I think it’s a great way to try out a restaurant you normally wouldn’t have thought of.”  This restaurant week, she went to Toscano, one of her local favorites on Boston’s Beacon Hill. “They always do a good job and especially in this economy it’s a great way to go out to dinner.” Her meal:  a smoked salmon crostini appetizer, a scallop, leek and spinach entree, and a white chocolate blueberry tart for dessert.

“We had dinner, and split a bottle of wine that was $30.00 so it was cheap, like $60.00 each. With tip it was $63.00 and I overtipped.” This diner is a former server at a high-end restaurant, and is conscious about tipping servers for good service, and based on regular prices when meals are on special. “If you live in Boston and you go to a restaurant of this caliber, that’s cheap. It was a great meal and the server was fantastic. If I were waiting tables it’d be amateur night” and again, this woman knows about difficult customers.  Based on Toscano’s regular prices, her appetizer and dinner would normally come to $47.00. Assuming a conservative dessert price of $9.00 as no menu listing is available, the pricetag would total $56.00 vs. the $33.10 she paid.

Restaurant Week Math

Savvy consumer that I am, I know there are restaurants that are not a bargain for this auspicious week (hint – if you order salad, pasta and a dessert during Restaurant Week, you are not getting a large discount). However, so far this restaurant week, my meals have fallen into the bargain category.

On Monday night I visited Olives restaurant, where there were more selections on the restaurant week menu than the regular menu. I ordered Lobster Bisque, Crispy Confit Duck, and a Chocolate Tart. Based on their normal prices a three course meal would range from $48.50 for the lowest-priced menu items, to $59.45 for the highest.

On Tuesday, I had lunch at Caliterra in downtown Boston, and the meal was less for all three courses than it would have been for just one entrée on the regular menu. I ordered Lobster Bisque (yes, again), Scallops, and Chocolate Truffle Cake (yes, more chocolate, too). Caliterra’s seafood entrées are regularly $26.00 to $28.00, and the three-course lunch was $20.10. If I had ordered an appetizer for $12.00, my bill for two courses would be $40.00, and with dessert, closer to the $50.00 mark. 

While it can be tough for our wallets and waistlines to accommodate eating like this as a rule, Restaurant Week provides several reasons for those looking for excuses to celebrate.

Can we talk about pricing?

February 25, 2010

At this year’s NRA Show, I will be giving an educational session on pricing, which will cover strategies for a successful pricing process, lessons learned during my tenure in restaurant pricing, and tips for anyone who has anything to do with managing pricing. But why limit the fun to NRA Show attendees? This blog is another forum where I’ll share some advice in hopes of helping any operators who would appreciate some guidance. The first lesson I’ll impart: my take on talking about pricing in the restaurant environment.

I have found that the issue of what we can talk about is one of the most uncomfortable for my restaurant colleagues, often resulting in a see no evil, hear no evil, speak no evil mindset. So I’ll share my experience with this in hopes of creating a comfort zone. The bottom line: you CAN talk about pricing, as long as you do it in a legal way. Is that clear as mud?

I have often heard my marketing, finance, and operations compatriots declare “we can’t talk about pricing” and change the subject. My usual response to this is “yes, we can talk about pricing, we just can’t price fix,” and then provide a bit of context. 

Every company should consult its legal team to develop and share (ad nauseum) a clear policy regarding the communication of pricing information. I am not a lawyer, nor do I play one on tv, so my layperson’s advice is just that. I repeat: consult your attorney after you read this.

Simply put, price fixing involves intentional or unintentional collusion among competitors that harms consumers and favors the colluding parties. The terms and behaviors that antitrust law covers can be ambiguous, especially in franchised environments, where franchisees can be viewed as competitors and could therefore be colluding without knowing it. There are also implications for the franchisor-franchisee dynamic. This is more clear-cut: franchisees, not franchisors, are responsible for making pricing decisions, so franchisors are limited to recommending prices to franchisees. It’s that simple: a franchisor dictating menu prices to a franchisee constitutes price-fixing. Company-owned restaurants therefore have it easier from a price recommendation/compliance standpoint, though they are not immune to potentially collusive situations. There are finer points about what’s allowable, such as whether or not franchisors can dictate maximum prices to franchisees. This is often covered in the actual contract between a franchisee and franchisor, and has arisen as a key point in the recent Burger King $1 Double Cheeseburger controversy, as Ron Ruggless has written in Nation’s Restaurant News.

Anyone who has dabbled in pricing knows that price fixing is illegal, and the way many companies have avoided breaking the law is by avoiding any discussion of price whatsoever, hence tactics such as having certain parties leave the room during pricing conversations so as not to participate (the corporate equivalent of covering one’s ears and singing).

Some examples of discussions that do not constitute price-fixing might help:

  • Making a price recommendation is not price fixing
  • Explaining the rationale behind price recommendations is not price fixing
    • Analyzing profit at a specific price point is part of the rationale
    • So are projecting sales and traffic
  • Evaluating a promotion in terms of how it impacted customer counts, sales, and guest perceptions is yet another type of analysis

It’s ironic that in an environment where the goal is a consistent customer experience, a discussion of consistency in pricing would be illegal. But we can’t change that, so we just work within the rules. If you believe that the franchisee is a key customer of the franchisor, it should follow that the franchisor should support its customer. This means providing business analysis, promotional programs, and training/tools, to franchisees. So don’t be afraid to talk about pricing, just understand exactly how to talk about it. This is perfectly appropriate – just ask your lawyer.

My mother will be disappointed to learn this, but I once told a valentine not to buy me flowers on Valentine’s Day, and if he must, not to buy me roses. Despite Mom’s best efforts, my practical nature sometimes gets the better of me. I know roses cost more around February 14th, and I just can’t tolerate the price hike.  

Last week, reading articles and advertisements for Valentine’s Day meals, I was of course was glad to see restaurants projecting positive sales. But I couldn’t ignore the economics of it, and wondered how others view the business of Valentine’s Day dinners. And if you’re reading this, you probably know that I conducted some well-timed research to find out what people think à la the rip-off factor. To everyone who responded to the survey, thank you, and here is the skinny.

I surveyed colleagues and friends via Facebook, Twitter, and emails asking them to respond and recruit others. So while it’s not a random sample, it’s relevant for my purposes. It ran from Thursday night, February 12 until the morning of February 14th, when I had reached 100 responses – 103, actually.  I have to say, I enjoyed learning about others’ views of the occasion via the non-price-related questions, but as a pricing nerd, I care most about the views on costs and value. So without further ado:

  • 40% of respondents believe prices are more expensive on Valentine’s Day than other nights of the year
  • 33% believe prices are similar to those on other nights
  • 20% don’t know or aren’t sure
  • 4% think prices are discounted on this night
  • 5% responded “other,” noting specials and pairings that are available, with no note as to expense

Big aha: more people think dining out on Valentine’s Day is similarly-priced or cheaper than other nights than think it’s more expensive. Restaurateurs, I am happy to be the bearer of good news.

Is Valentine’s Day a special occasion worth the splurge? Is it a hassle to go out for Valentine’s Day? Respondents rated these affirmative statements on a 6-point scale where 1 means strongly agree and 6 means strongly disagree:

  • For both statements, the average score was 2.9
  • No answers were given for either statement in the disagree range of 4 to 6

So people value this occasion and are willing to put up with the crowds, pressure, opportunity to be exploited, and mandatory fun (their words, not mine) because they appreciate the time with their loved one, adult conversation, dessert and lack of dirty dishes (as reported in open ended questions). Again, operators, rejoice!

One Restaurant’s Point of View

To understand the restaurant perspective, I spoke with Byron Lepine, Manager at Kingston Station, a downtown Boston lunch favorite of mine. I had received an email with their V-day specials – a $50 3-course prix fixe menu, $70 with wine pairings. Byron sounded like the host with the most as he described the restaurant’s philosophy. “We want to make sure guests have a memorable evening and go home feeling good about it.” He waxed poetic about the planning and regretted not repeating last year’s late-night anti-V-day party for singles this year.

Lepine knew his menu inside and out, explaining that both customer favorites and special items were among the selections. When he mentioned that one of the items was a $26 entree, I was quick to ask how $24 for a first course and dessert meant a value, and he quickly recited the value and economics behind their meals. He clearly does his homework. “What you pay for an entree doesn’t reflect the food cost. We have a terrible [cost] on skirt steak and should probably charge $35 or $40,” though it’s less. “We eat the cost.” He used the example of the Valentine’s Day special prime rib, a $36 entree, along with two $9 courses, for the $50 package. While I don’t consider a couple of dollars a bargain, his points about the fair market price are well-taken. And those of us in the biz know that not all items’ profitability is created equal.

Side note: I reviewed the restaurant’s typical prices for items on the Valentine’s Day menu, and using these to calculate V-day value is a bit less favorable than using Lepine’s reference points of what the restaurant “should charge.” My calculations do not, however, include the factors he mentioned, like fresh flowers and special atmosphere, as well as the difficulty of handling many more tables in a night. And as we say, value is not just price. And as we also say, the laws of supply and demand hold true, so as demand goes through the roof on Valentine’s Day, it’s fair that prices do, too. So while the wise consumer in me has a narrower view around the pricing, the businesswoman in me says Kingston Station is conducting smart business.

I also asked Byron about the wine pairing, thinking that the extra $20 would not be such a bargain, but when he told me it was a glass of wine with each of the 3 courses, I knew that was a good deal. He estimated $9 price tags for the wines selected. I don’t know about you, but I often see them for more than this. Indeed, many wines on Kingston’s menu are $8 and $9 a glass. So I like that math. And while Kingston’s menu suggested the wine for each course, the restaurant would not hold guests to the recommendation, adding to the value quotient. This left me with a good feeling about Kingston’s wish to spread the good feeling.

A Diner Weighs In

My optimism was tempered when I learned that the warm glow of a Valentine’s value was sadly lacking by a friend who visited a suburban Boston restaurant on this auspicious occasion. Her summation: “Last night’s dinner was the biggest f-*^ing rip-off, it was ridiculous.”

The culprit? Prix fixe menus. This restaurant, like Kingston Station, required guests seated at tables to order the prix fixe dinner, which is how restaurants increase their checks on this night o’ couples. However, my friend noticed that the restaurant allowed those at the bar to order à la carte, which ended up being less money for the same meal served as a “special.” Her dinner deal was a $75 ticket, and she calculated that ordering the selections separately “didn’t even come close to $75.”  Her reaction: “I think I now will officially spend both New Year’s Eve and Valentine’s Day dinner at home. I loved spending the evening with my guy, and the food was good, but it was ridiculous how it was priced.”

So what can I conclude from these various sources of data? If you’re in the camp that wants to splurge, or you don’t mind the hassle, or you can finish 3 courses and 3 glasses of wine, the deals may feel better. If you are restaurant catering to a house full of two-tops, you have to earn your money and manage the crowds, but luckily their price/value perceptions are in your favor.

And if you’re me, you get to take surveys and observe it all in the name of work!

A Few More Survey Findings:

  • 47% of respondents prefer to go out, while 34% prefer an evening at home; 15% want to treat it like any other night
  • Fine dining is the winner for those who want to go out, preferred by 41%, while independent restaurants claim 35% of respondents
  • Respondents who prefer a night at home overwhelmingly want to make a special meal, with 66% opting for this choice; the next most popular option: takeout at 10%
  • 60% of respondents were women, 35% men, and 5% did not indicate their gender.

 

Photo: L Kerr

Anyone paying attention to Facebook, Twitter, Superbowl ads and newspapers knew all about Denny’s Grand Slam giveaway this week. Can you read one more article on it? For me, this had the makings of a field day, getting to watch from the sidelines and not having to work the event (as a veteran of Baskin-Robbins’ Free Scoop Day and the Scooper Bowl, I know the madness these events cause among deal-happy consumers). 

With the Burger King $1 Double Cheeseburger controversy still smoking, I saw this as the anti-BK promo, with Denny’s not just reducing the price, but giving a substantial item away to millions. I couldn’t wait to talk to customers, get their take on what this means to their loyalty and frequency, and start quantifying results.  

Arriving at Denny’s in Lawrence, MA (a working class town featured in Tuesday’s Boston Globe for its near bankruptcy and the mayor’s double dipping salary controversy) I braced myself for the lines, the crowds, and the excitement, and I got surprise #1. There were no customers spilling out of the restaurant – something I had expected based on last year’s PR reels, which featured out-of-work customers shedding tears of gratitude for the gift of a meal out. “Doesn’t anyone want a free meal or two or three in Massachusetts?” I wondered. 

Outside, I first ran into Lenny, who assured me it was packed inside and indulged me in a few questions though he was supposed to be at work. His reaction to the giveaway and the impact it has on his future visits: “I like it. If people do something like this, it does draft you to come back more often.” In Lenny’s case, that’s about once a month, at a cost of $6 per trip for him. 

Then I met Dee, a Denny’s regular who said “I’m so there” when she saw Superbowl ads. “I’m always here,” Dee told me, estimating $20 to $30 each week for breakfast for two. What will she do going forward? She’ll continue the habit, which she calls a treat for herself. 

Lenny was right – when I got inside, the lobby was full of patiently waiting guests. But Dana and Amanda, a husband and wife on their way out, were not guests – they were off-duty crewmembers who explained to incredulous customers why they were not putting in their names: they are ineligible for the giveaway. They were scheduled to work that night, and Dana was especially happy not to be in the kitchen, since “It’s crazy. But it’s good for business.” 

I heard the manager taking customer names, quoting a 30 minute wait, and offering rainchecks to anyone who could not or did not want to wait. Surprise #2 – great contingency planning which actually reduced the the burden on Denny’s in the moment. . . you are smart, Denny’s. 

Customers were happy, and even surprised – Al and Mady, who “just wanted French Toast,” and had no idea about the giveaway, said they would still buy the French Toast, but might take the Grand Slam also. While they didn’t come for the promotion, Al thought it was “awesome. I know Denny’s is always doing nice things.” The pair, who “just started on a Denny’s Binge” come once a week and spend $20 to $25, which they think is “not bad.” 

Surprise #3: Store managers were willing and happy to speak with me. I wouldn’t have dared commit the cardinal sin of bothering them had it been chaotic, but GM Keith Tinker and Assistant Manager Morgan Livingston, manning the hostess stand, were cool, calm and collected. They said the event was going much more smoothly than last year, attributing this to good planning, strong corporate support, and more customer patience this year. “We really crewed up,” Livingston said. “I thought it was overkill, but it’s not – it’s going well.” 

At one point, an official-looking man came in, said something to the managers, and proceeded to walk through the store. Figuring he was part of a Denny’s or franchisee management team, I returned to observer mode. Later I asked Keith about him, and he said the man was either a principal or truant officer, doing rounds to find any AWOL students. Laugh #1

When the coast was clear, I spoke with Keith about his view of the giveaway. “This works because we’re a franchisee – working together with corporate – they give us everything we need to do it right and it shows.” What does the store get out of this investment? “Happy customers who will repeat, and a lot of buzz. Everyone is so positive and the buzz will last a month. There is so much goodwill. It’s about what we can do to give it to [customers], not what we can do to not give it to them. It’s worth every penny.” 

Surprise #4 – have I ever heard a franchisee talk like that about corporate? Very rarely. 

So for now, business case, schmusiness case –  instead of crunching numbers, I’ll let Keith’s analysis speak for itself.

Confessions of a Pricing Nerd

After jumping into my first article without much of an introduction, I thought I’d step back and offer a bit more of one at this point, so you know just who is writing this blog.

When people ask me what I do for work, I usually say “I advise restaurants on pricing.” Many are surprised that there is such a job, given this unique niche. I know some people hear this and think, “Wow, what a cool job. I can’t believe she actually gets paid to do that.” Maybe it’s more my fantasy than theirs, come to think of it. They, or I, might envision me sitting next to Todd English, with a nice glass of wine, surrounded by plates and plates of delicious food, ready to taste it and proffer the magical numbers, if we must put a price on these creations. I love letting people sit with this fairytale vision for a bit.

Then I break it to them.

“Doesn’t that sound glamorous?” I ask, before telling them the truth. “It’s actually a lot of competitive research and analysis,” and I explain what the company does and that, in fact, world-renowned chefs do not rely on me to anoint their menus with my golden touch. I go so far as to admit that I have done my fair share of covert research in any number of restaurant chains, and that I am swimming in data most of the time. Sure, there are occasional perks, like having met Emeril Legasse (the NRA MEG conference I attended held a dinner at one of his restaurants – I was in the right place at the right time).

No, my job is not glamorous.

But I love it – and I think it’s perfect for me. Early in my career, I thought my jobs were fine, but not the ultimate place for me. I kept wondering what the perfect job for me was. And through the good fortune of a winding path through several companies and functional areas, I landed in the right place based on my skills and interests. And of course the big leap of faith to leave a secure job and start this company I call Intellaprice. But it’s not just my interests or abilities, it’s my weird mind that lends itself to what I do.

So it’s confession time. I have a head for numbers, among other things. I find prices fascinating and memorable. Yesterday I went to Trader Joe’s and bought my usual block of feta cheese (a much better bargain than the crumbled stuff, if you didn’t know). I was not pleased to note that the price is now $2.99, up from $2.79 just last week. I told myself it’s okay, it’s only $.20. And actually, the grilled balsamic chicken I like is down $.40 from $5.69. So net net, I am ahead of the game. I guess those commodities markets are a changin’. Trader Joe, if you are reading this, I still haven’t forgotten what you did with your pistachio prices and portions in the past year.

Which brings me to another point. It’s not just about price, but also portion. Bumble Bee and peers: do you think I haven’t noticed that what used to be a 7 oz. portion went from 6.5 to 6 to 5 oz.? All without changing the actual can size. Please cease and desist from this sneaky practice before I call a mutiny. And does anyone else notice the weight on what we used to call a one-pound bag of M&Ms these days? It’s a travesty.

If you don’t think all of the above information is odd to store in one’s brain, then I’ll also tell you that I am a Nielsen Homescan member. If you don’t know what that is, it’s like being a Nielsen TV family, only for groceries. They invited me years ago and nerd that I am, I was excited. It’s sometimes a pain to scan in my groceries and other purchases, but I know they collect valuable data this way. Not geeky enough? Well then, do you know any people who, like me, stand in McDonald’s and do the math on the value meal when the cashier tries to upsell them when they order a quarter pounder and fries? I don’t drink soda, so I’m not gonna take it unless it’s a real bargain. Simple as that. The calculations go on and on for me. Restaurant week: not always a bargain, but always fun.

So the facts and figures that are in my mind are a bit bizarre to other people. I can cite prices of some restaurants’ items spontaneously, and have been known to accurately guess what a dinner bill is with a margin of error of just a few dollars (that’s only a few percent on a $100 bill – not bad, eh?). While these aren’t vital skills, they do come in handy and mix well with the more challenging aspects of my job. And since this actually puts bread on my table, I could do a lot worse. Especially since another thing I really enjoy is good food, whether it’s from my kitchen or Todd English’s.

What a perfect job, huh?

photo: roboppy, flickr

The conflict between Burger King and its franchisees over the $1 Double Cheeseburger is as hot as the restaurants’ flamebroilers. I’m glad I was neither one of the corporate folks selling in this program, nor one of the franchisees who feel it’s being forced upon them. Having worked on corporate marketing and finance teams earlier in my career, I know the drill well. And I’m not surprised to see this age-old, stereotypical thinking and behavior playing out yet again.

It’s classic. Franchisees tend to view corporate as a bunch of eggheads who are out of touch with actual customer behavior, ignorant of franchisee costs and life in the trenches. They resent that royalties are based on sales rather than profit – the top line vs. the bottom line. Meanwhile, corporate employees tend to see franchisees as reactive and unwilling to invest in marketing that will grow their businesses.

Whether the stereotypes contain a grain of truth or not, the reality is that better data and thorough analysis could snuff this inferno.

The debate has centered on the issue of the $1 price point for a double cheeseburger, yet the program’s true impact hinges on much more. Regardless of whether franchisees lose or gain money at $1, the success of the program should be based on detailed analysis of sales and customer behavior. Is traffic increased over the long haul? Are higher-margin items being sold in greater quantity along with the double cheeseburgers? Are customers refusing to purchase items once they return to their regular prices? What are the short- and long-term gains of the program? Do those gains outweigh the cash lost in price-cutting?

Ron Ruggless covered this topic in the November 30 issue of Nation’s Restaurant News, “BK suit highlights franchisee friction.” Franchisee Dan Fitzpatrick states “You could conservatively indicate that it costs us between $1.10 and $1.15 per double cheeseburger that we sell with all of our fixed and variable costs being covered.” Fitzpatrick’s accounting is curious.

The cost of serving a double cheeseburger should reflect the meat, cheese, condiments, bun, wrapper, and even a napkin. Items such as labor, utilities, and insurance are fixed costs, and won’t change unless a promotion requires hiring additional staff. If the lights are already on, the flamebroilers are fired up, and the crew is at work, I say you account for these costs at the end of the month and year to accurately assess your costs and profits. It’s unlikely that Burger King locations are adding staff due to an item’s placement on the $1 menu.

I’m not saying that a complete profit picture — including utilities and the rest — is unimportant. It’s critical. It’s just not fair or logical to add them until the program is over. Once we know the quantity of each item sold, fixed costs can be allocated accurately.

I don’t know the exact cost of a double cheeseburger – based on Ruggless’ reference points for everyday pricing between $1.89 and $2.39, I’d venture to say that it’s closer to $1.00 than $.50, so placing the item on the $1 menu indeed yields a low margin. Even so, the point of the promotion is to boost overall sales and profit. Both franchisee and franchisor must look beyond the stereotypes and judge a discount program holistically.

It’s a lot to ask that franchisees and franchisors work together harmoniously, but it’s worth keeping in mind the following: franchisees should understand that their goals and the franchisor’s are more often than not the same – increased profitability for both, based on maximizing store revenue and therefore, profit. Franchisors should attempt to walk in the franchisees’ shoes and seek to understand true item and store profitability — including proving their understanding of the long-term impact of cutting prices on customer behavior. If this happened more often, perhaps the need for lawsuits would be minimized.