Foodie Friday, if you’re not too stuffed from all of the past week’s consumption. I came across an article in The Guardian which pulled back the covers on how some restaurants improve their margins by cutting corners in sneaky ways. What prompted them to write the piece was the travails of The Olive Garden we featured here on the screed a few Fridays ago. Not surprisingly, the myopic practices going on there is just the tip of a much larger set of things restaurants do.
A few examples: restaurants will often serve glasses with a half-inch to an inch of foam on top because leaving that much foam can save them around 20 beers per keg. They will use heavier, high-grade silverware for steaks to give the perception of a higher grade of meat. They will cut back portion sizes and buy smaller plates. If they cut an ounce out of a burger they’ll buy smaller buns (something I think they learned from the package goods folks). Naturally, prices don’t change.
The list goes on but it raises the obvious business point. As I wrote in September, many companies lose their core identity in the chase for revenues which is bad. Hurting the products that got you to this point is worse. Smarter companies do one of several things. If you’re Apple, you maintain higher prices and don’t mistake cost for value. If you’re Honda or Toyota or Nissan, you create separate brands (Acura, Lexus, Infiniti) that allow you to charge for a better product while permitting you to change the “standard” brand however you’d like. No smart brand is sneaky.
What dumb companies do is to cut corners. Successful companies are always looking for creative ways to protect the bottom line without giving the impression that quality is going down with it. Imagine what happens when your current customer base picks up on the smaller burgers or questionable shrimp. Legitimate changes – repositioning menu items to increase sales or example – don’t affect quality. Anything that does may increase your per table margin but you’ll be seating far fewer tables over time – even if you’re not in the restaurant business.