Menu Case Study 5: “I think we should always end the prices in a ‘nine.’ People think things are less expensive that way. I read about it in an article, once,” said Gerlindy Hoffman, the dining room supervisor.
She, as well as Samuel Ludwig (the executive chef), Reese Davis (the restaurant manager), and David Berger (the food and beverage director) were meeting to discuss the menu prices to be established for the new menu at Stadium Club.
“End in a ‘nine’?” asked Reesie. “What do you mean?” “Well,” replied Gerlindy, “If you sell an item for $5.99 it sounds like it’s less than $6.00.”
“That’s because it is less than $6.00!” said Samuel impatiently.
“I mean it sounds like it’s a lot less than $6.00,” retorted Gerlindy as she raised her voice slightly toward Samuel.
This entire meeting, thought David Berger, had been somewhat tense. Everyone seemed to have different ideas about how to price the new menu that was, at this point, beginning to take shape. He too had an idea of what he thought he wanted, but he always tried to get the input of everyone involved before he made an important decision, and that was why he had called this meeting.
“The way you set menu prices is to find out the food cost percentage you want and then you make sure all the items you price are at that percentage….or lower” said Samuel.
“No way, Sam,” said Reesie. “If that were true, we would have 25 cent sodas. They only cost 5 or 10 cents. Do we want to reduce our prices on the inexpensive items, and raise them sky high on others?”
“Okay,” said Samuel, “What do you suggest?”
“I’m not sure,” said Reesie, “and I don’t know what our best approach is. I do know that guests only complain that prices are too high—never that they are too low! And I can tell you that having so many different prices is confusing for everyone. It’s too bad we can’t just set one price for everything!” The group laughed in agreement as David began to speak.
“Reesie, I think you are on to something, and it fits with an idea I have,” he began. “I think we should keep our price variation to a minimum also. I know if we monitor our sales and costs we can set prices that ensure we generally attain our desired food cost percentage and the total contribution margin we need. I think the most important thing to remember is that our prices will either complement or conflict with our basic theme. Since the new theme is casual, upbeat and fun, I think a price structure that gets guests asking, “Why are your prices like that?” would be really fun also. We will let our guests know that they can relax at Stadium Club and that we are a restaurant in a lodging property that takes food quality and service seriously, but doesn’t take itself too seriously.” For the next ten minutes, David discussed his idea for menu pricing.
“I like it,” said Gerlindy, “It will be different!”
“Just like our new menu,” added Reesie.
“I don’t know,” said Samuel, as David finished, “It sounds a little far out there to me. What do you think the GM will say?” David wasn’t sure what the G.M. would say initially, but he knew the idea would be fun, a bit irreverent and, most of all, traveler friendly. He was sure Joaney Green, the hotel’s G.M., would love it, at least he hoped she would!
Case Study Questions:
- 1.Is David Berger using a sound management tactic when he facilitates a staff meeting relating to how selling prices for menu items should be established? Why or why not? (list at least 2 reasons for your answer)
- 2.Which of the staff members on David Berger’s food and beverage management team should be responsible for pricing the menu items after the basic pricing tactic(s) are determined?
- 3.Assume there are several (or more) items on the menu being planned that are also on the current menu. What, if any, should be the relationship between the selling price
Expert Answer: Menu Case Study 5
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