Foodservice 301: Advanced Insights

At this level, operators can begin to maximize prices and profits because they've solidified their market position and gained customer loyalty and trust. Now, they are steering the competition and charging prices based on the value they deliver.

THE ROLE OF FOODSERVICE

Strategy remains important for all levels of operations and advanced operators should be disciplined enough to continuously review their strategy to ensure it remains relevant, and review and tweak pricing and margin parameters based on competitive changes and consumer shopping behavior changes.

In the quest for continuous product improvement, advanced operators should always look for ways to improve products to deliver the best quality experience they can to the consumer.

PRICE & MARGIN STRATEGY

Advanced operators are in the driver's seat when it comes to offering, pricing and margins, though clearly they have to be in line with the competition and relevant to shoppers' budgets. At this level, there is no reason to be the lowest retail price. Operators should extend their retail prices to the highest level possible before they see volume taper off, according to the experts.

This tactic also helps clearly identify how much customers are willing to pay for the offering. By maximizing profit dollars, advanced operators can put that money to good use to support promotions and other programs that create in-store excitement and build customer loyalty.

The focus is to set strategies to maximize profits and product mix. For example, how well are you bundling and selling something else with each cup of coffee a customer buys? How well does your menu and pricing appeal to a wider customer base so you continue to attract new shoppers?

Advanced operators should set more detailed item-level expectations and subcategory margin expectations. And keep in mind that as your quality and programs evolve, so do your costs, which have to be built into your pricing and margin strategy. You are likely using better and more expensive equipment, buying higher quality food products, paying more per labor hour to stay ahead of the competition — all of this should be calculated into your costs, prices and margins.

Proficient operators should also target dayparts, particularly focusing on building the dinner/evening daypart, with loyalty programs and promotions to drive customer purchase frequency. Advanced operators also provide menu options that satisfy all price points, but fewer options at the lower end of the price scale, which is not the core customer. The core customer is focused on high-quality food offered in a convenient format, for which they are willing to pay a premium.

PROMOTION STRATEGY

Savvy operators use multiple methods of promoting their foodservice programs for maximum impact, including coupons, LTOs, bundling, buy-one-get-ones, etc., and advertise and promote themselves in multiple venues — on the Internet, smartphones, billboards, radio, television and social media. They are everywhere customers are.

They don't focus on price promotions as much as value and branding, and they are also masters at upselling customers to more premium offers. The higher retails they command help these operators invest more in marketing and promotions so they can play on a larger competitive platform against restaurants of all types and sizes.

"The key to fighting competitive pricing is to ensure you have your own strategy."

— Paul Pierce (7-Eleven Inc., formerly)

HOT TIPS

  • Continuously review strategy to ensure it remains market relevant, and tweak pricing and margin parameters based
  • on competitive and consumer changes. Always look for ways to
  • mprove products to deliver a better quality experience to the consumer.
  • Extend retail prices to the highest level possible
  • before volume tapers off. Set more detailed item-level and subcategory margin expectations.

Use extra profits for marketing and promotions to keep the brand and quality front and center.

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