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TIME TOO RAISE PRICES!!!

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This should probably be in the off-topic section but I wanted it read by most if possible. Kind of a rant but more reality. I am sick and tired of going out and having dinner cost $60+ for my wife and I and our 3 year old. It seems to not matter where we go or what type of food…other than PIZZA! I do not have a problem paying for a decent meal…but the crap that everyone is serving now is getting really bad. I know this is hard to do…but I truly think all indies should raise their prices and make money! I think people will pay an acceptable price for a great pizza. Why does it cost me $60+ for an app and two entrees and a kids meal…with sodas and a milk too drink? Why must all the food suck? I know the big guys are killing everyone with $5 $10 $12…etc pricing… and it is hard to sometimes tell a customer… sorry… our pizza is $20 and worth every bite… but I think as an industry we all need too. Food prices are hurting… fuel is only going one way… Your regular customers will pay the extra because they know what they get for their dollar. If you make a good pie…and it’s not just a big guy knock off… the people will keep coming back. It is worth it too them to pay an extra couple of dollars to get a great meal… YOUR PIZZA! Everything is so damn expensive that you second guess yourselves about raising prices…but the truth is that pizza is a deal in the big scheme of things. I know this is easier said than done…but it is time that pizza indies catch up to the price levels and profits that the rest of the world enjoys. :!:
 
I agree with this post. I take my wife and 2 daughters to Mcdonalds for lunch and spend $25. I see people all the time spending 20, 30 even 40 dollars at fast food restaraunts without even thinking twice about the cost, yet reasonably priced pizza sends people screaming! I watched a guy buy a bucket of chicken from kfc and his total came to $36. He didn’t think twice about it, didnt comment on the price nothing. Almost anytime someone orders two extra large works pizzas from me and I tell them that $36 total they look like I just socked them in the gut.
 
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Exactly! They have been brainwashed by $5 dollar pizza and sub commercials. It is total BS and needs to stop now! Explain that one too me…$5 large pizza compared to $5 footlong sub? Really? :shock:
 
Just the other day I had a customer bemoaning the current price of pizza. There is a Dairy Queen less than 100 feet from my front door so I suggested that he try and feed his family there. He replied “Are you kidding? It would cost a small fortune to feed them there and the food is not as good.”

I am in the process of a total business model change. I will no longer offer a second pizza discount and the prices will reflect the true cost of making the pizza. There will be some prices that go up and there will be some that go down. When customers call and ask what kind of deals I have they will be offered a meal combination that reflects an honest cost of goods. In short I am finished with discounts.

Since there is a cost to deliver the pizza this cost will also be reflected in the delivery orders. I am not out to price gouge but I am also not a charity. I need to make a living and have staff that also have to be paid.
 
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I raised my prices three weeks ago and have had hardly any complaints. I increased my second pizza prices by $2 and most of my side items $1, which is not a drastic increase, but take that increase across 300 tickets and it sure helps. This week I had my best sales week in two years, with zero advertising. I think sometimes we do not give our loyal customers enough credit they buy gas and produce and realize that we can not keep the same price forever.
 
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Tonight is a Public Holiday here and we have to pay double time and a half wages. Consequently we have a 10% Public Holiday surcharge to help offset this. I worked tonights shift (my usual day off) to try and save on wages. I was the front counter person. Each order taken I told them of the 10% surcharge when telling them the price and the majority replied “no problem”. Not one person complained or made an adverse comment. One guy bought correct money for normal menu cost when he came to pick up his order and said he would bring the balance directly back even though I said drop it in next time. He came back in 10 minutes to pay the extra $3.
People are conditioned to higher prices and willingly pay. They know they are getting a great deal with indie pizzas so a little more is no concern.
We should do like Mike said and raise our prices. Maccas and Burger King seeme to have increased prices every time you go there, little by little increases and no-one flinches.

Dave
 
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I am happy to see the response this is getting. Like I told Daddio in a PM… yes it is always hard to take a risk at raising prices… but everyone is in this too make money and hopefully someday retire. Yeah…I know that’s a dream! So lets say you go from a $15 large to a $20 large pizza. Lets also say you lose 25% of your customers doing this. In return…you now have 75% of people retained and are making double your profit magin on a quarter less expenditure. So you end up with lower expenses and a 50% increase in net profit overall. I also believe that you will get back 10-15% of those that left for a period because of the increase…and so long as you are selling great pies… you should always be bringing in new customers. Yes although this is all just a guess as far as where the numbers might fall… I truly think they would not be far off. Pizza needs to come back as a dining experience and not just be thrown into the fast/junk food catagory that it seems to have fallen into. :!:
 
Hi Guys:

I recognize your problem.

I do not operate a pizza shop but when discussing a new shop with a client and the question of pricing comes up I say " Buy the best ingredients prepare you product with great care, that should give you an excellent product. Then calculate your cost of product and operations then add what you need to be profitable. Ignore what the competition is charging they are probably not operating from the same cost bases.

I don’t know if all our clients follow that formula but I do know we almost never have a client fail.

George Mills
 
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George hit it there. Stop buying quality products to make great pizza and then pricing your pies not based on your actual cost and profit margins…but on what the other guy is doing. As a business you will not survive…or at least survive at the profitability level you want or need too be at. Every business is unique to their own local and what the market will support for them. Even though you will have the one’s that always complain about costs… the customers that want quality will pay for it. They do everywhere else…why should you give yours away for nothing. I think the big guys will eventually either have to raise prices significantly or go under. All operating costs are going up and even with new dough formulas and better ingredients… they will always make mass produced crap. They can not offer high quality because they do not have the structure to do it. Maybe they get close…but in the end it will be the indies that bring quality pizza back to the dinner table. :!:
 
Just a word about daddio’s comments on BOGO. I heard a lot about this at the Pizza Expo - stop discounting. I understand the philosophy and agree with it. But its not as easy as just eliminating discounting. It has to be a comprehensive strategy that is focused on the bottom line rather than just cost of food. This is maybe the most revealing thing I learned while in Vegas.

Adding value can increase your check average and thus your gross profits even though your cost as a percentage goes up. To daddio’s post, it may or may not be a good idea to eliminate the 2nd pizza discount. The question is am I a) giving a discount to everyone who buys a second pizza OR b) am I upselling to those who would otherwise buy only one. If the answer is a, I agree we get rid of those offers. But if it’s b, look at this:
1 Pizza
Pizza food cost = $3.00
Sale price = $12
Contribution = $9

2 Pizzas BOGO 1/2 off
Pizza Food Cost = $6.00
Sale Price = $18
Contribution = 12

That’s a 33% increase in your contribution (there may be some additional labor in pie #2 depending on your operation, etc). But you get the point.

I just need to figure out how I’m going to determine if the BOGO is selling MORE pizzas or just discounting the ones I’d otherwise be selling…

Patrick
www.nextdoorpizza.com
 
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I think folks that need 2 pizzas will buy 2 pizzas anyway…So if you discount the 2nd one too much, you are giving away some profit the 2nd pizza…

Also, I think some folks that just want 1 pizza will be bothered by a deep discount on the 2nd pizza…I am a 1 pizza person (fat, bald & do not need 2)…When I pick up pizza it is not at the place that has some sort of deal on the 2nd pizza…I am not a big fan of volume prices for anything I buy…
 
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Even with our delivery charge of $2.50 (raised it .30 today) our actual cost for delivery is about $1.50 higher than that. I have no problem offering a break on a second pie to be delivered with the first. I am also happier giving a deal on an order that totals $30 than one that totals $15.

We offer NO coupons valid on 12 inch pizzas at all. Our best offers are all on either multiple purchase orders or named combo orders (16" named combos on our menu all price above $20)

While I agree that discounting gets out of hand, I also think it will be some time (i.e. never) that it goes out of this market completely. My thought is to get away from price comparison based discounts and focus on good product, fair prices and sensible offers.
 
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Im actually proof reading our new menu for spelling mistakes at the moment and we’ve just increased all our prices. The way i see it is all my overheads have increased and im offering a quality pizza made from fresh ingredients in a very clean store so i dont feel bad about it. If anyone has a problem with paying for quality then maybe they should be eating cheap frozen pizza instead. In regard to the offers we’ve just launched a buy one get on free offer on 7", 9" and 12" pizzas on wednesday only. We’ve called it wicked wednesday which i think is a pretty cool name and quite easy to market.
 
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I was talking with a client that raised prices about an average of 15% 6 months ago…He decided he needed to beef up his marketing and for the same time period he has spent about 11% of previous years sales (versus his typical 5%)…As a result of the increased marketing and increased prices and maybe some competitors that got lazy his sales are up over 40%…

I did not get into his bottom line except that he said it is way up…With the increased sales, his marketing is now about 7.8% of current sales…
 
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I think everyone is on the same page here. Steve, I agree discounts will never go away since they are burned into the world’s minds that pizza has coupons. Now, lets look into this a little further. Take one of the bigger indie chains… Lou Malnatis. $20 for a sausage deep dish that is 14" and really feeds 4. $5 a person. Second pizza…well that’s $20 also. 30 locations and each a multi-million dollar sales location. Why do people pay for it. Well it’s great pizza. Do they overcharge? No! Do they charge what they should? Yes! The general public knows what level of quality they are getting every time at every location. I know that ordering from anyone of the 30 locals will get me the same great pizza every time I want it. I know that if I take a frozen t&b with me out the door… it won’t be as great as the one I just ate there… but will be 95% of it and 1000 times better than any other t&b I have ever had. I think discounts and coupons will always be around…but I don’t think they have to be present at all indie pizza shops. Yes you will lose the coupon junkies that have to have that best deal or else they bounce…well let them bounce. Build your business structure around great products at fair prices and keep both sides of the equation happy and thriving.
 
Building customer knowledge is all well and good when you have time to do it. I get to talk to my local customers all year long… but tourists are another story. They are sitting in the hotel or condo trying to decide who to order from. Giving them an offer is a crucial last straw in the decision process.

As long as I can get my coupon “cost” back down to less than 15% I will be happy. During the boom for us in 06-08 we ran about 13% (includes donations the way we track things). For 2009 & 2010 it rose up to 20-21% as the cat fight around here got tougher. In recent months we are finding that we can back off somewhat and are now tracking about 18-19%.

With an average order in the $25 range after coupons, if I can drop that coupon cost by 5 points, I effectively get a $1.25 price increase which will cover a lot of the change in food costs.
 
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Steve you are in a unique situation. Being a tourist town with off seasons…it must be hard to decide how hard to market discounts. It would be easy if you could just get the locals too pay higher prices year round. Coupons for vacationers only! I know… pinch me! :shock:
 
Mike, you are not far off the mark. The way you do it is by choosing WHERE you put the offer. Clearly direct mail hits only locals since they are the only ones getting mail. Some publications tend very much toward visitors such as in-room guides. WHEN you promote is another thing that works… off season deals are crucial since it is not just pizza stores doing deals at that time of year, pretty much every restaurant in town has off season specials. The idea is that it is better to keep cash running through the till and keep staff employed.

You can make no money at all on low volume and then have to hire and train new people at the end of the off season or you can make no money at all on higher volume but keep your stong crew on board. Easy choice when all is said and done.

So… deeper discounts in off season when it is mostly locals. Put the offers in the mail or in the paper and lesser offers in high season also in the paper or in long shelf life publications like phone books, in room guides, town maps etc

The question is can I go down in offer value as a way of increasing prices or will I loose too much?
 
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It’s a hard balance of things. I live in a college town, so I like the few of us that live/work in seasonal areas for whatever the reason…it is a bigger game. I had a thought…and this is specific to areas like ours. Raise prices and send out slightly better deals for the locals? You make good relationships with the hotels and such…and that will keep the vacationers coming in…and the locals will not feel such a hit by the higher prices. You also have a step up on all the other pizza in town. Your clothing shop. I am sure you cross advertise to a point…and if I remember correctly…you cater to the mid-higher end of the clothing spectrum. This also helps…as higher priced and more importantly…higher quality pizza is what they want and will pay for it. Bottom line…every town is so different that a lot of marketing and setting your prices and discounts is really trial and error.

I think to touch base on my original comment… and we all understand that discounting will always be there… but as an industry the indies need to start building product value more than value pricing. It will be a long battle I am sure, but it needs to start sooner than later. :idea:

One afterthought… I agree with keeping your trained staff on year-round. Training is always expensive and a royal pain in the ass! It may cost you what seems like a lot to keep them around…but in the long run you will have a more functional staff that in return makes higher profits in the end. I think way too many employers overlook this and only see as far as the next pay period and not the big picture.
 
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