Discounting the Price of your Meal is a Bad Idea.

The retail food landscape is continually evolving. Consumers have grown accustom to Ready-2-Eat and Heat-N-Eat fresh prepared food.  Today you can find Ready-2-Eat and Heat-N-Eat fresh prepared food within every sector of the restaurant industry including Quick Service, Limited Service and Full Service.  Most important virtually all restaurants offer their food via Take-Out, Delivery, Drive Thru, or Take-Away.

Convenience Stores, Grocery Stores and Chain Drug Stores all have taken notice of the success that restaurants are having with fresh meals for Take-Out.  Concurrently Chain Drug Stores, Grocery Stores and Convenience Stores have developed and continue developing “restaurant quality” ready-2-eat and heat-N-eat fresh prepared meals and meal components. In most cases these are “new” offerings for these companies are creating new avenues of distribution for ready-2-eat and heat-N-eat fresh prepared food.

Many legacy restaurant chains have utilized discounting to try to stem the tide of customer migration. This is simply put a bad idea. My friend Jeffrey Summers analyzed the numbers on discounting and here is what he found: 

If your regular gross margins are 30% and you…

…give a discount of 5% you have to increase top line sales by 14% to generate the same gross profit.

…give a discount of 10% you have to increase top line sales by 35% to generate the same gross profit.

…give a discount of 15% you have to increase top line sales by 70% to generate the same gross profit.

…give a discount of 20% you have to increase top line sales by 140% to generate the same gross profit.

…give a discount of 25% you have to increase top line sales by 360% to generate the same gross profit.

Either creating Limited Time Offers or new menu items as an entity with identity is a much better way to go.  Restaurants need to expand branded retail items in-order to maintain consumer relevance. New points of distribution have empowered choice for consumers.  A brand is an invitation. Is your brand compelling?

Invite Foodservice Solutions® to complete a grocerant program assessment, grocerant scorecard, brand, product placement or for positioning assistance.  Since 1991 www.FoodserviceSolutions.us  of Tacoma, WA has been the global leader in the Grocerant niche. Contact: Steve@FoodserviceSolutions.us or 253-759-7869  Linkedin.com/in/grocerant or twitter.com/grocerant.