Question

Suzie is the owner of Tran's Good Eats, a downtown restaurant. She has several entree dishes that feature chicken, pork and beef. The pork and beef dishes are priced higher than the chicken dishes, however, they have a lower contribution margin. Recently, the prices of pork and beef have gone up, further lowering the gross margin on those dishes. The owner has thought of increasing the prices on the entrees, but feels that Good Eats will no longer be competitive with the other local restaurants.

Describe some pricing and/or business strategies that Suzy can implement in her restaurant. Explain and provide rationales for the possible strategies.

Answer 1

From the above following assumptions are made :

1. The prices cannot be increased

2. There are competitors offering similar dishes

With above assumptions Suzie has the following as possible options :

1. Reduction in potion size.Even though costs have gone up for beef and pork but selling price cannot be changed hence by reducing the potion offered costs can be cut on these dishes and margin maintained.This way the imp[acts of cost increase can be offset by reduction in potion size.

2. If it is apprehended that there could be a loss of customer on potion reduction then shortage in potion can be filled up with some lesser costly content.This way psychological impact on Customer mind of size reduction shall get eliminated and the this can also be promoted as new variety which can act as a product differentiator.

3. More focus on better performing dish i.e chicken.More varieties can be introduced hence making chicken more dominating.In crease in volumes will lead to higher profits as this is better contributing dish.

4. Another way could be discontinuing the less profitable beef and pork dishes and shofting the full focus on chicken.The outlet could itself be promoted as a specialised chicken centre which could turn out to be of its unique kind in the neighbourhood.