Time to raise prices

[Piper]

Well, we’ve been open for almost 2 1/2 years now and I think it’s time to take our first price increase. I don’t want to, because we’re already pretty expensive… but my food costs are up, my delivery costs are up, labor costs are up, insurance costs are up…

Right now we have 10", 14", 16" at 6.99, 12.99, 14.99 for cheese. Each topping is .75, 1.00, 1.00 respectively. I’m thinking of increasing the topping costs on the 14 and 16 to 1.50 and 1.75. Not sure if I’m going to mess with the specialty pizzas yet.

Does this sound reasonable? I’m really nervous about doing this, but I think it has to be done. On average, we sell about 2.39 toppings per pizza, so this comes out to about a 10% increase across the board on pizza prices. That sounds like a lot… I dunno…

What do you all think?

We’re a “gourmet” shop, pretty much already the most expensive in the city. Part of me doesn’t want to become more expensive and drive down volume, but the other part of me says that customers that are already eating here really don’t care too much about price, and probably won’t even notice.

 

[j_r0kk]

You know, most customers won’t even bat an eye at the prices of additional toppings (as long as they’re not too far off the mark). The thing most lock onto are the base prices. Make your base prices appealing and raise your toppings moderately and you shouldn’t feel any hit at all. My prices are similar:
10" cheese - $6.99
12" cheese - $8.99
14" cheese - $10.99
16" cheese - $13.99

additional toppings:

10" - .85
12" - $1.00
14" - $1.25
16" - $1.50

Also, if your food costs are up, talk to another supplier. There’s a chance you’re paying premium prices for some (or all) of your inventory where you can catch a break from somebody else. Let me tell you, there’s nothing like watching a supplier squirm when he knows you’re looking elsewhere. And if you feel guilty about it because you have a good relationship, just let your present guy know you’ll give him a chance to beat the other guys out. One quick observation about this practice: Usually, when you go to someone else for pricing, they almost ALWAYS beat the prices you’re paying now because they want your business. Hope this helps. -J_r0kk

 

[wa_dave]

Piper

I’m in the same position as you.

Just last week I got around to making each and every pizza and weighing each individual topping we put on them and then working out the cost. It looked OK at the prices we are charging, until …

Then I did the total cost thing with Rent, Wages, Utilities, Insurance etc etc and boy was I blown out of the water !!!

We took over our shop 11 months ago and kept the same prices as the original owner, not thinking it was wise to raise prices immediately. We did do all the due dilligences when buying but there were some major ommissions from the previous owner that have now come to light, and they are not pretty.

Our “total” costs sees our net margin down to around 3 - 6% and some even lower.

We have been wondering how and when we are going to raise prices because if we don’t we won’t stay in business, and in the end of the day there is no way I’m going to make great pizzas for people and go out the door backwards doing so.

We are taking price rises of between 10 - 20% on our current prices with the big lifts on our Jumbo size (18"). These are “bleeding” badly as it looks as if the previous owner did a simple maths equation of 13" (our main selling Large pizza) over the 18" size = 38.5% bigger, rather than using the pie/r/square maths equation for the area difference, which works out at 92% bigger.

The same is across the board with our 4 sizes - 10" small, 13" large, 15" family and 18" jumbo.

We have decided to bite the bullet and do the change, but do it where customers might not notice it as much. We are doing a whole new menu board with some of the stupid names of pizzas going to new names, a diffrent layout of the menu board and grouping of pizza variants, and a whole new designed letter box drop menu (logo, colour, layout etc).

Over the past 11 months we have taken price increase of 5% on rent, 10% + in ingredients, plus all the other associated price increases but have kept our prices the same. NOT A GOOD RECIPE FOR SUCCESS.

We are going to loose some and others will whinge but we feel most will just accept the increases because they like our pizzas ( we are recognised as the best pizzas for miles around us) and we give exceptional good service, great quality and always put the customer first.

We are going to push the quality of our pizzas, the size difference to the chains (their large is 11" whilst ours is 13" = 40% bigger using pie/r/square formula) and also bring in new products not available to other outlets in our vicinity, e.g. Dessert Pizzas and unique Gourmet variants.

It is going to be hard and we are going to suffer in the short term but I am in the industry to make a living (all beit modest) and not to make a good pizza and go broke doing so. I don’t want to be known as the guy who made the best pizzas but went broke doing so, but to be known in ten years time as the best quality pizzas in town at a price to match.

I will probably sell less but make more money and to me that is fine.

It’s going to be tough but it has to be done.

Hope my ramblings help you make the correct decision for you.

Good luck and hope ypu make the best decision FOR YOU and not your customers.

Dave

 

[wa_dave]

j_r0kk:

You know, most customers won’t even bat an eye at the prices of additional toppings (as long as they’re not too far off the mark). The thing most lock onto are the base prices. Make your base prices appealing and raise your toppings moderately and you shouldn’t feel any hit at all. My prices are similar:
10" cheese - $6.99
12" cheese - $8.99
14" cheese - $10.99
16" cheese - $13.99

additional toppings:

10" - .85
12" - $1.00
14" - $1.25
16" - $1.50

Also, if your food costs are up, talk to another supplier. There’s a chance you’re paying premium prices for some (or all) of your inventory where you can catch a break from somebody else. Let me tell you, there’s nothing like watching a supplier squirm when he knows you’re looking elsewhere. And if you feel guilty about it because you have a good relationship, just let your present guy know you’ll give him a chance to beat the other guys out. One quick observation about this practice: Usually, when you go to someone else for pricing, they almost ALWAYS beat the prices you’re paying now because they want your business. Hope this helps. -J_r0kk

In Australia we don’t have the set base as you do in the US as our pizzas are mainly variant based i.e. "Aussie = sauce cheese, Bacon and Tomato; Portofino = Mushrooms, Bacon and Prawns (shrimps) with the sauce base and cheese etc etc.

This makes it different for us to price the way you have laid it out, but I agree with your view on Piper changing his prices.

We also do not have the amount of suppliers you have to play one of against the other so we can just try and pressure them for better prices by eliminating smaller suppliers and making one our major one based on “the more I buy off you the better price you give me principle”.

Our biggest threat at the moment is that most rual areas across Australia are in servere drought and prices are skyrocketing. Vegetables are up 60%, wheat is going up 40% + plus any other goods aligned to rural are going up.

Fuel has come down a bit but it is still up 40% vs last year which is affecting costs across the board, the Govt has just handed down a minimum $27 per week pay rise for low income workers …

Gee it’s great being in the pizza industry

 

[Daddio]

I looked at my books for Sept/05 and Sept/06 and found a disturbing fact. I increased sales to 150% of the previous year but decreased profit by 10%. This was due to an increase of everything but the lease.

2 weeks ago I increased my prices by 10%. I have had maybe 10 complaints about the new prices and several customers that have told me I still don’t charge enough.

I went a full year without a price increase and will never do that again. When I get hit with an increase from my suppliers you can bet I will pass it on.