Restaurant Patrons Determine Menu Prices
By George Anderson
A number of restaurants in the U.K. have instituted a new policy that lets patrons decide for themselves how much they will pay for a meal.
These “pay-what-you-like” restaurants, such as those operated by Michael Vasos, the owner of Just Around The Corner, are not only bringing in customers, they’re more profitable than establishments with fixed price menus.
Mr. Vasos said that his traditional restaurants make about a 60 percent profit while Just Around the Corner does between 65 and 70 percent.
As for what inspired Mr. Vasos to try this unconventional approach, he told The Telegraph, “If you give very good service and very good food, people leave a lot in tips. So I thought why not just leave the whole bill to customers and they can pay what they think it’s worth.”
“As long as we gave a good show, I knew it would do well and we’ve been very successful from the beginning,” he added.
The most generous customers to date for Just Around The Corner were four Americans who came in on Christmas Eve, said the owner. They had quite a few bottles of wine, champagne
and ate three-course meals. They paid £600 and asked the waitress if it was enough. In a fixed-price restaurant they would have probably paid around £250. This is why the restaurant
does better as people are more generous,” he said.
Moderator’s Comment: What do you think about the “pay-what-you-like” restaurant concept?
Anyone want to open a cafe with us? –
George Anderson – Moderator
Denise Cerreta’s One World Cafe in Salt Lake City operates on a pay what you like model. Also, this Cafe operates without a menu; you eat whatever they decided to cook that day. It’s popular and successful.
This is a great experiment in consumer behavior that relies heavily on cultural norms. I suspect the reported results are somewhat idiosyncratic – in other words, while the pay what you like method may work well for a few novel establishments, it would be hard to build a large chain business around that principle. Would love to be the focus group moderator who probes customers on how they decided what amount to leave on the table. I imagine the insights might surprise us.
Well, Warren, as you asked…I’d say it has a lot to do with peer pressure which is why the restaurant’s location, menu and clientele have a great deal to do with it. Everyone knows the British are great ones for standing on ceremony – and in queues – and afraid of standing out from the crowd. There is probably a great deal of neck craning during the meal to see what the people at other tables are eating and paying. For sensible restaurateurs who know their customers, there probably isn’t a great deal of risk involved. I would even wager a bet that Mr Vasos’ comparison of his own different venues was just the teensiest bit ingenuous and more on a par with comparing apples and oranges than like for like.
Oh, let’s be radical! Every logical sense I have is that this approach would be suicide in any US market I’ve done business in. So instead of simply beat that drum…..I hope someone actually tries this. How amazing would it be for everyone to be wrong? Didn’t we all decry the lack of true innovation in this very space within the past several weeks? So let’s not dismiss this approach…let’s hope someone has more guts than we do, and puts it to the test.
I’ve experience the “donuts and coffee” phenomenon, and it amazed me. Voluntary contributions exceeded costs without fail. I’ve convinced my local kids athletic league to do the same thing at the food stand. And the same phenomenon occurred. Perhaps the Ph,D.’s out there can tell us why this works in small, social, selected settings, but it won’t work in a commercial environment.
How about a slight twist to this concept? The customer sets the price while ordering …
The customer says, “I’d like the Scallops and Linguini for $18 with $2 of steamed broccoli.” His guest says he’d like the lasagna for $14 and a $1 house salad.
Then the restaurant would fill the portions to the extent they want to satisfy the customer for that price. Restaurants already do this to some extent with Lunch or Senior specials.
I’m with Warren — this only works in certain locals. Living in the metropolitan Detroit area, I can also say it’s difficult to imagine it working too well here.
Treat ’em well and get ’em drinking, and you’ll do okay. I’ve been involved in a lot of charity work over the years, and I know that whenever we have a benefit auction, we “lubricate” everyone first with a couple hours of champagne and goodies. After that, the bidding goes off the charts. One year an event organizer insisted on dispensing with the booze, and our results were disastrous. But I think doing this with a restaurant is risky. That is to say, I might try it in the UK, wouldn’t try it in Manhattan. Perhaps Bernice will chime in here. I do know that when Wal-Mart used this concept as a test in a Neighborhood Market near its Bentonville headquarters, where shoppers buying coffee and donuts just threw money in a jar, with no clerk there, that people as a rule “rounded up” on everything and they made more per unit — with no labor expense. They were amazed. I’m not sure this was continued anywhere, though.
This would be a gamble in neighborhoods with the mid to low tier income families. The quality of the meals and service have to be excellent or superior — not just good — to have a chance with the shoppers pricing the menu.
Hopefully, Mr. Vasos has micro-marketed his menu alternatives to the possible clientele. Hmmmmmmmmmm
I went to a restaurant in Seattle that not only had no prices, it had no menus! The chef came out and sat down at the table with you and got to know you, and after a bit got around to asking what sorts of foods we DON’T eat. He then brought us wine and made one of the best 3-course dinners I’ve ever had. Then, after it was done, came the check and the moment of fear. The “suggested price” on the bill was actually a reasonable price, about half what I feared it would be. It was such a good price and the food and service were so good that we paid the suggested price in full, plus we tipped generously.