Daddio:
I am struggling with the same issue. Increased costs both food and labor are making it necessary to rethink how I price my product. Right now I have stooped to the level of the other stores in town using the buy one get one 1/2 price. I am thinking of going to a straight price based on food cost. The part that scares me is the customers here always ask what kind of deal do you give? They have been trained by the chain stores the you get the second pizza for a “DEAL”. The big question is how do I shake this train of thought?
I’m similar to you Daddio.
With the servere drought in Australia for the past 3 - 4 seasons and last period being Australia wide wehave seen smallgoods increase by about 15%, chicken nearly 20%, flour 42% etc. Rent goes up Consumer Pice Index (CPI) + 2% which equates to about 5.5% pa and wages have gone up about 5%.
We took over our store 18 months ago and stayed with the previous menu / pricing, only putting up delivery fees to cover the 40% increase in fuel cost.
We have absorbed all the price increases but now have to increase prices.
We have changed the price grouping of our pizzas and moved some up to the higher level by between $1 - $1.50 for a large while others have gone up only 50 cents. Our previous Gourmet pricing was all over the place and now we have one price point resulting in increases of $1.00 - $2.00.
Unfortunately the previous owner was a jerk and priced his pizzas on the base size of large (13") and then by what the next size was percentage wise ie Family (15") was priced at a flat $5 more where it should have been 32.5% more on an area basis. We are getting killed on Jumbo size (18") where he had the price about $10 more than a large when in reality it should be 94% - roughly $14 extra using the area costing.
If we priced everything on the area amount and the weight of each ingredient as it should be then we would need to put up prices by $2 - $3 per pizza but customers would walk out the store they would fly.
So in the end of the day we are trying to do a price creep by moving some up less and other a bit more by changing to lesser price points. It will be swings and round-a-bouts where we make a little on some and more on others.
I guess one consolation is that we are steadily increasing sales and customers are used to waiting up to 45 minutes for over the counter orders on peak times so we have a strong consumer backing and hopefully they won’t react from price increases.
In the end of the day they happily pay continued increases from the supermarkets who are running wild with price increases just to show more and more profits to the greedy shareholders so they should accept our modest increases. Funny thing is they never complain when their favourite tin product goes up 5% in price and down 20% in size, but if we are a little bit light on a topping or they think they should be getting more pasta than they got then they are on the phone real quick. I guess they see the small guy as fair game but the biggies as untouchable.
As someone else said in another post Maccas have had numerous price increases in the past few months and no-one complains. PH and Domino’s have also put their prices up from $5.95 to $6.95 and still run hot so I have no trepidation in taking ours up.
We were doing a new menu but now are sticking with the current one but just slightly streamlined so any increases are not blaringly obvious.
Sorry about the ramble but it is a touchy topic when we are at the upper price area and are surrounded by PH and Domino’s. Luckily our closest indy competitors are virtually unknown and do very small trade.
Dave
