We’re Bearish on Restaurant Pricing Gimmick

April 08, 2010

Airlines do it. Hotels do it. Why not restaurants and bars?

Airlines do it. Hotels do it. Why not restaurants and bars?

First, we’re talking about pricing to the rate of demand. The more people want something, the more many are willing to pay, such as for roomy seats on non-stop flights and peak-week vacations.

But when it comes to food pricing, we take issue with the concept. We do give the operators of The Exchange Bar & Grill restaurant in New York City points for bravery in trying up-and-down pricing with an audience that lives and breathes stock-price fluctuations every working day. We get that its customers understand the notion; we just don’t think they appreciate it or that it makes much sense today when every penny matters to households, despite any public façade a person might wear.  Unlike stock trades, people need to eat when they’re hungry and drink when they’re thirsty. They can’t wait out the market for a more favorable price.

So, if as Reuters reports, a customer buys a glass of Guinness at $6 (its starting price), or at either end of its trading range ($4 or $8) on the menu ticker that flashes broadly, he or she could be pretty happy, indifferent or pretty annoyed. Why penalize patrons for wanting a popular item? Charge them more, and the Exchange could well sell less as a result. Since item prices shift in 25-cent increments with the rate of purchase, we at The Lempert Report wonder what happens with the tab at a table seated for, say, two hours. Which prices are reflected? 

How does the point-of-sale technology keep up with the pricing changes? How do waiters and waitresses explain pricing differences to any questioning customers—and how much of their time does that waste, and how much stress does it add to their job? Who is ultimately accountable for the accuracy of prices charged and paid?

While a novel idea, we think the fluctuating prices add uncertainty to dining-out transactions that people usually expect to be precise. At a time when patrons increasingly demand that restaurants openly state the prices of their daily specials, the premise of The Exchange simply seems out of step with the conservative spending attitudes today.  With this pricing gimmick, The Exchange doesn’t send a message that it cares enough about the value it delivers to patrons, or that it has the pricing discipline to ensure its own operating margins.