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The Customer's Perception Of Value Should Always Come First
By Thomas J. Haas

For years I have been impressed with the "New York Type" upscale steakhouse business, and have attempted to assess why it is that from New York to Chicago to LA to Dallas to Houston to Disney World (Shula's) to even Jackson, Mississippi (Char), steakhouses seem to be slammed every night.

During a recent trip to Chicago, we had dinner at Gibson's down town. The bar was thirty deep and the line for dinner extended outside the restaurant. The food was great, despite the crowd and the fact that it was 9:30pm. Rumor has it that that location does $25 million+, and the other airport location is north of $15 million.

My conclusion is that thick sirloins, chops, and grilled fish of prominent proportions seem to make the value equation easier for the customers to comprehend. Steak, lobster, shrimp, along with prime rib, are American symbols of the best in eating, which along with good spirits creates a true bonanza for this category of establishments, which is why Charlie Palmer, David Burke, Rose bud, Wolfgang Puck, etc. have all jumped onto the band wagon.

The steakhouses also make side dishes a part of the normal ordering process - who doesn't order cottage fries, onion rings, mushrooms, etc.? What other restaurant group could make spinach (creamed or otherwise) a major menu item? While the rest of the industry was looking at side dishes as a give away, the "New York Steakhouse Group" was turning this forgotten category into a profit center.

It is amazing how the 6 pound lobster got into the picture when a 1 pound lobster was considered an extravagance until the original Palm changed all that.

Let's visit the original Palm in New York in the 60's or early 70's. Let's begin with the bar - order a scotch on the rocks and The Palm poured a real drink. Lifting a rocks glass filled to the brim was a delicate task, which introduced you to an experience that said, Wow! What a great way to begin your meal.

Let's compare this to many ultra conservative restaurants, where small glasses are filled to the brim with ice with the spirit poking its poor, pour head, attempting to melt quickly without hopefully inflaming the trust of the consumer who is being charged $10.00 plus.

The bottom line is that the consumer has excellent vision as well as taste, and knows a good steak when it is presented, a good drink when it is poured, and a wine list which allows the customer to peruse and experiment at various price points, remembering that wine appreciation is much more prevalent today resulting in recognition of value versus abusive pricing.

Customers know good steakhouses are not cheap, but obviously they consider them good value and a fun experience. Restaurateurs overly concerned with value to their bottom line many times forget the customers value formula comes first.

Arnie Morton said it best years ago when he discussed the importance of his check average versus food or beverage cost. Obviously, he watched his costs, but in the mid seventies, if you had a $50.00 check average you certainly had the latitude and to sell the customer a good drink, a great steak accompanied by all the goodies at an a 'la carte price.

All restaurateurs can learn from the steak concepts to remember the best formula of all. "Base your price on value not cost", and remember, to get those fannies into seats you need to cook and pour for customer satisfaction first, then your success will follow.

Thomas J. Haas is President of Thomas J. Haas & Associates, Inc. Mr. Haas is a food service industry consultant specializing in strategic marketing, and is a leading analyst in the industry. Mr. Haas can be contacted regarding consulting and public speaking engagements by e-mail at haaspitality@aol.com.




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