Boston’s water main break was fascinating from many perspectives. It was first and foremost a lesson in emergency management and maintaining public safety. Second, from my own vantage point as a restaurant pricing advisor, the implications for restaurants, schools, and hospitals were noteworthy. Lastly, the retail and pricing angle – in which I include the consumer dynamic – was possibly the most interesting, so I’ll focus on this. As for the first two, suffice it to say that this was a well-handled situation, quickly resolved via strong teamwork and expectation management. The institutions affected weathered this as best they could, some adapting better than others and keeping this in perspective – clearly, this incident pales in comparison to so many other disasters past and current. And I find the retail/consumer/pricing aspect intriguing. 

As the emergency neared an end, the price gouging buzz began. News stories early on showed people clamoring for bottled water, some of whom had purchased $150 worth. Wow, someone transported and stored that much bottled water for a situation that was only expected to last days? I went to stores and never encountered a depleted stock. I saw almost-empty shelves, signs limiting purchases to 2 per customer, and some stores with no limit. I saw pallets of water displayed in aisles, and at grocery stores and CVS, sale prices were being honored. I couldn’t help but think of Lloyd Bridges in “Airplane” as I thought, “they picked a terrible week to put water on sale.”

Note that not only did we have running water, but we also had hot water. We could shower (we were advised to sponge-bathe kids lest they ingest water), flush toilets, and even fight fires if necessary. I’ve been on vacations with less favorable conditions. All we could not do was drink, cook, or wash dishes with the untreated water in our pipes, hence the need for bottled or boiled water. Yet people hoarded supplies anyway. Emergency supplies were available from the National Guard in some areas, though it was difficult to know where the problems were. I figured somewhere, somebody was probably without water, or worse yet, did not know about the situation and would ingest it, but heard no such stories.

I imagined beverage manufacturers would be thrilled with the surge in demand for soft drinks, sports drinks, and all other potables. As public officials continued to communicate status and work to resolve the problem, it seemed that around me, things were calm and life went on. It was only via news reports that I heard the stories of panic – no surprise there.

The price gouging reports showed a receipt from the Somerville Market Basket with a $23.76 charge for a 24-pack of water, which had reportedly been sale-priced at $3.99. So instead of a $.16 per bottle cost, the store charged $.99 per bottle. I couldn’t find other clear examples, nor could I find clear definitions of gouging – the most common words are “exorbitant,” “excessive,” and “unreasonable” – so while most would agree that $.99 vs. $.16 is all of those things, the consumer did have a choice in the matter – buying it was not necessary, and boiling would be a perfectly reasonable substitute.

Many states prohibit price gouging after emergencies by law to protect consumers. Massachusetts’ Division of Consumer Affairs, which governs prices, is somewhat vague. The Division refers to the Massachusetts Consumer Protection law, Massachusetts General Laws Chapter 93A, and its website states that “the law does not list [violations] in any definitive fashion but states that ‘unfair or deceptive practices’ are illegal.” Unfair or deceptive is determined by a judge, as the explanation states. One scenario that the Division lists as illegal is when “A business charges a consumer higher rates than the marked, published or advertised price.” So if Market Basket had indeed posted the 24-pack of water in its sale flyer, seems to me that’s price gouging. Other stores that decided to jack up prices in more moderation, but had no sale flyer, are arguably operating legally.

It’s ironic that in a case like this, consumers need protection. While it’s noble that the government wants to protect us, shouldn’t our common sense rule? As in the case of Spirit Airlines carryon baggage charges (see blog, April 22), aren’t customers able to make these choices themselves? Much has been written about the merits of the free-market system and how it would apply here. As we learned in Econ 101, increasing prices would deter people from unnecessarily buying many weeks’ worth of water, while maintaining supply for those who couldn’t go to the store immediately after the boil water order was issued, only to find the cupboard bare.

Fortunately, life returned to normal rather quickly – in less than three days, we had a safe water supply. We could tend to our normal water consumption routines; restaurants and institutions were back up and running. The only unknown now is who may have gotten sick from consuming untreated water. According to officials, it takes about a week to notice the resulting gastrointestinal issues. As a friend remarked, “If there was a run on water this week, there will be a run on toilet paper next week.” I certainly hope my next post does not pertain to that. So with apologies to Mr. Whipple, for goodness sake, please don’t hoard the Charmin.

A Tale of Two Restaurants

As week two of Restaurant Week nears its end, it’s time for restaurants to weigh in on this event. I spoke with representatives of two of Boston’s finest restaurants, L’Espalier and Salts, on their decisions to participate or not. With several high end favorites participating this year, it was difficult to find restaurants abstaining from the promotion. Lauren Loschiavo, Marketing & Community Relations Manager for L’Espalier and Sel de la Terre, spoke with me, as did Executive Chef/Co-Owner Gabriel Bremer of Salts in Cambridge. While L’Espalier is participating, Salts is not. 

L’Espalier – Driving Customer Trial, Dispelling a Myth

L’Espalier’s Loschiavo enthusiastically supports Restaurant Week, which might surprise some given L’Espalier’s stature among local restaurants. Not only is the restaurant offering specials, but it’s done so for all of March. “We want the Restaurant Week crowd to come in and try us, so we created a menu – it’s fared really well,” Loschiavo said. L’Espalier is offering the $20.10 standard lunch deal and is an “unofficial” dinner participant because its dinner price point is $42.00.

The manager explained that at $33.10, profitability would be an issue, but the $42.00 price point is more palatable for the restaurant. The normal price tag for L’Espalier’s three-course dinner is $82.00, meaning quite a discount during March. “We wanted to offer something”  Loschiavo said.

“We’ve been booked up almost every night of the two weeks,” Loschiavo said. Under normal circumstances for this time of year, without the promotion, “traffic would be down – it would be typical for March, which is one of the slowest months of the year. L’Espalier was never affected by the economy at all. I would assume [traffic] would be down because of March. A lot of people travel in March – it’s an in between month after holidays and before warm weather.”

I asked Loschiavo whether the Restaurant Week crowd is a tough one, knowing that some think this promotion is akin to amateur night. “The good thing about Restaurant Week is that we get people in who aren’t our regular customers so we get them to try us – it’s probably one of the easiest ways to get new people in. In general, it’s hard to get people in to try because they assume it’s too expensive.”

Is that a fair assumption for diners? “I don’t think so – maybe for dinner, but for lunch all the time we run a prix fixe three courses for $24.00 per person – that’s just $4.00 above the Restaurant Week price – they’re still not quite as receptive to it as they should be.”  Loschiavo estimates that 20% of Restaurant Week diners return to L’Espalier after the promotion ends.

So why the lack of reception? “I think it’s driven by name and the perception of L’Espalier being only for special occasions or where you save up to go, or where it’s people with money that come in all the time. That’s one of the hardest things.” Loschiavo explained that the normal lunch menu is a “simpler version of the dinner menu” with a la carte offerings that are not offered during dinner. “We have sandwiches, we have a burger, the lobster BLT is a signature lunch item these days – it’s our twist on regular lunch fare.”

When it comes to working the actual event, Loschiavo says the more, the merrier. “The servers love it because it gives them revenue in what would otherwise be a slow month. . . It’s a great way to reach out to people who haven’t tried us before.” 

Salts: Offering Value Every Week of the Year

Management at Salts restaurant is concerned that participating in Restaurant Week would not provide a true representation of the restaurant’s offering.

Chef Gabriel Bremer says, “When you think about Restaurant Week, what you’re trying to achieve for customers is something kind of special and show a sense of value to entice people. That’s what we really try to do on daily basis – we have a vision of a level of service and a level of food that we try to achieve.”

Bremer emphasized that there is value in Salts everyday menu. “It’s not Restaurant Week, but our tasting menu is 5 courses for $75.00 and we actually give on top of that an amuse, pre-dessert and petit fours after, so it’s 7 courses for $75.00 and that’s what we give on a regular basis.”

In addition, Bremer says, Salts uses the same purveyors as restaurants like Per Se and The French Laundry, and farms its own produce “so we are bringing in the best of the best and trying to give tasting or à la carte menus that are still attainable for people. To do it for any less is impossible.”

Though the restaurant may seem out of reach to some, Bremer is constantly attentive to the idea of value in describing Salts dining experience. “We try to focus on constantly giving the best we can at an obtainable price and always have that sense of value,” he said. “One of our important talks when we were contemplating the restaurant and talking about what it is – we always have a sense of value, a sense of ‘yeah this is really worth it and I’d even pay more.’ “  

Restaurant Week wouldn’t allow the restaurant to remain a true to its offering, according to the Chef. “On a daily basis we try to give the same products in that atmosphere but at an obtainable price,” explained Bremer. “So to take a week or so and try to showcase what we do for any less than that, it really wouldn’t be representative of who we are and I wouldn’t want to go through all the work and have everybody come in and try to put forth something that’s really not an expression of what we do – if people come in and try you they really aren’t trying you.”

When the Chef describes what’s special about Salts, his answer was extremely inviting. “What sets us apart from other restaurants and especially larger restaurants, you’re really walking into our home,” Bremer said. “If I could throw a dinner party every night and actually make a living from it, that’s actually what we do. You’re getting the complete atmosphere as if you’re coming to our home and being honored as our dinner guest.”

Regardless of your dining out budget, and whether you get to try restaurants during Restaurant Week or any other week of the year, it’s nice to know how much thought that these establishments and others put into the offerings.