Ltd Service Restaurant CPI Hits New Record

Headline CPI held relatively steady versus last month, but dropped below a psychologically important 5% mark and continued on trend which will bode well for those hoping for a pause in interest rate increases. For Restaurants on the other hand, CPI remains elevated. Full Service Restaurant CPI dropped almost a point versus last month from 8.0 to 7.2%, while Limited Service CPI hit a new all-time CPI record at 8.2%. Food at Home continued to trend lower, which start putting pressure on limited service from two sides if the current trend continues.

I had the pleasure this past week of being on a panel at the Food on Demand conference to discuss multi-channel pricing with a brilliant group of panelists Sherri Kimes, Ashwin Kamlani, Colin Webb . The panel was expertly moderated by Thomas Kaiser . We covered a lot of ground, threw around a fair bit of jargon and I know for certain the panelists could have kept the conversation going another hour with or without the audience. As I synthesized the discussion and my conversations with a number of operators after the panel here are a few thoughts.

Dynamic vs Differential Pricing: “Dynamic Pricing” was a big topic, at the conference and as a current buzzword it’s meaning is becoming blurred. I heard a people using “dynamic pricing” as a synonym for “differential pricing” but they aren’t the same thing. Differential pricing is the practice of having different prices for the same product – this can be done across different locations or over time in the same location (meal period, happy hour, etc). “Dynamic” is systematically making quick changes. Differential pricing has been a part of industry pricing for a very long time in many ways but its implementation has been far from ‘dynamic’ largely due to technological constraints.

Beware of the Buzz: My fellow panelist are pioneers in Dynamic Pricing. Juicer and Sauce have shown that there is a marketplace for rapidly changing price points in channels where digital data is available (delivery & 3rd party). They made it look so easy that it's started to pique the interest of newcomers, specifically the order services & pos companies eager for incremental revenue streams are planning to release their own dynamic pricing modules. Pricing is complex, and stepping into differential pricing with a dynamic pricing system is a big step - not all POS companies and 3PD companies are famed for their educational support on complex topics. But they won’t pass up the chance to try cash in on the buzz. I predict they will like being in the pricing business less once they are in it.

Price Certainty: Most of the pricing models you hear about consider things like ingredient costs, demand momentum, price elasticity of demand, competitor pricing, consumer demographics and behavior patterns. All essential parts of building a smart pricing approach, but one of the hardest things the build into a model is how much value consumers put on price certainty – but especially in uncertain times it drives customer visits. From $1 menus, to 5 for $5 to 2 for $20 all the way up to the Ruth’s Classics in Fine Dining, price certainty plays a bigger role in customer decision making than we may know.    

Thanks again to my fellow panelist, to Tom kaiser and all the Food on Demand staff who put together a stellar conference.