The economic success of one’s
restaurant takes more than just a love for food. Building a restaurant that will not crumble
within months of its grand opening requires the management of many different
things at once, such as how much you are buying, the basics, and paying for the
salaries and general expenses. One important aspect of the economics of a restaurant
industry is battling same store sales, like Chipotle vs. Taco Bell. However, when going head to head with such fierce competition, product differentiation and marketing are two very key components. For example, Chipotle prides itself on its
use of organic vegetables and distaste for animals treated with hormones. They feel that costumers taste the
difference, and therefore see little threat in Taco Bell, as stated in Chung and Jargon's article.
The costs of the restaurant
business are numerous. They go far beyond the wages that are payed to their employees. Gas and electricity are very important aspects,
because much energy (aside from the effort exerted by
employees) is used when running a restaurant business. Unfortunately, the price of this is
only rising. The price of food is also a
big cost, especially depending on where they purchase it from. Buying in bulk can lead to less costs but
poorer quality, while buying from local farms can be more expensive, but better
received by the public because of taste and ethics.
Part of running a
restaurant business is being able to juggle the costs as well as the
revenue. The businesses that make revenue,
however, is highly dependent off of the disposable income from tourists and
citizens. Nowadays, because minimum wage
is so high and energy prices are soaring, many chain restaurants have cut back
on giving away free things, like ketchup packets. How frustrating
it is when you look in the bag after you go to the drivethrough, only to find that you have no ketchup with your fries! Another way business, chain restaurants, and
QSRs alike are trying to stay afloat is to begin serving smaller portions
of food while charging the same price.
America as a whole is
certainly waiting for some sort of economic indicator that the economy is soon
coming out of the recession, but perhaps those in the restaurant industry are waiting
even more patiently. They certainly are feeling the economic impacts.
Chung, Juliet & Jargon, Julie. (2012, October 03) Einhorn’s Latest Target: Chipotle. Retrieved October 03, 2012 from The Wall Street Journal.
Lee, Kyuho & Ha, Inhyuck “Steve.” (2012, March 19) Exploring the Impacts of Key Economic Inusticators and
Economic Recessions in the Restaurant Industry Journal of Hopsitality Marketing
and Management. Retrieved
October, 03 2012
from http://www.tandfonline.com.proxyau.wrlc.org/doi/abs/10.1080/19368623.2011.611752.
Said, Carolyn. (2012, August 22) Economics of running a
restaurant / Tireless Chefs double duty as bean
counters. San Francisco Gate. Retrieved
October 03, 2012 from http://www.sfgate.com/bayarea/article/Economics-of-running-a-restaurant-Tireless2731527.php
When reading this post, I realized that I was never completely aware of all the costs a restaurant has to take into account. Not only does a restaurant have to create a successful marketing strategy that sets itself apart from others, but it also has to bring in enough revenue in order to pay for the soaring food prices.
ReplyDeleteI find it interesting how Chipotle and Taco Bell serve little threat to one another because of their product differentiation. Chipotle sets itself apart from Taco Bell by serving healthier, organic foods. I believe that even though the product prices may be more expensive for Chipotle, a larger consumer base may be attracted.
I found it very interesting how companies are attempting to cut back on cost by cutting out on the smaller things, such as the ketchup packs. My question is that do you believe that in the long run, customers will prefer these cutbacks since it will keep the overall price of the meals constant?
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