Restaurant Ideas? What about a Free-Market Menu?

The world of restaurants is hyper-competitive with a high failure rate for new start-ups.  Although Americans continue to flock to restaurants at staggering rates ( cites 92% of Americans enjoy eating at restaurants), reports that 50% of restaurants have their doors closed after three years of business.

So why do all restaurants look the same?

Generally all restaurants have the same format with slight differences such as some cliché regional décor, a different inspiration for the menu, or a different indifferent hostess.  But the point remains: each and every restaurant is setting itself up for failure by following the same script.  Unfortunately, it is just too difficult to compete with the other surrounding restaurants on taste and subsequently forced to cut pennies on the menu prices in order to stand out.  Would Apple have tried to build big box stores to compete with the established Best Buy?  Would try to take on Target by offering a certain “feel” while shopping?  Would try to build a customer service center like Payless Shoes?  The answer obviously is no.  So why should future restaurants look to compete with Applebee’s or McDonald’s?

I’ve been tossing around ideas to change the status quo for future restaurateurs.  Please enter your own ideas in the comment section below.  There is one idea that seems to have grabbed my attention.  It’s to compete on price.  This doesn't mean to just cut costs and beat the competition with coupons and promos.  Rather, a restaurant could completely alter the current cost structure and base their prices based off supply and demand compared to their inventory.  Let me explain:

America survives on supply and demand.  Let's say that I would like to carve a pumpkin in April to celebrate the 6-month anniversary of Halloween.  That's an issue.  The problem is that I can’t easily buy a pumpkin like I can in October because the pumpkin crop isn’t ready for sale.  Therefore, the supply is super limited and therefore very expensive.  Now let’s take this to our own example with the “supply and demand” restaurant.  The buyer for the restaurant has purchased enough meat to make 50 hamburgers and enough pepperoni to make 50 pizzas for the night.  Both the pizza and hamburger option start at $6.00 per person.  The night begins and a soccer team filled with 6th grade boys comes in very hungry after a match.  Each of the 25 boys orders a hamburger.  The restaurant now has the inventory for 25 hamburgers and 50 pizzas.  Obviously the restaurant now has an incentive to sell off their inventory for pizza instead of hamburgers.  It is much more costly for the restaurant to throw away good product at the end of the night then to sell throughout the night at a discounted price.  By using a formula to calculate the trade-off between sales and leftover inventor, the restaurant could begin to offer the next guests hamburgers at $8.00 per person and pizza at $4.00 per person.  It’s a win-win for both the restaurant and the next guests.  If they want to still order hamburgers, it’s still ok for the restaurant because they are getting paid a premium.  If they now order pizza, then the guests are getting a good deal for dinner.  Once the next guest orders, the inventory will change and the pricing structure for the hamburgers and pizza changes as well.  This inventory-pricing dance will continue on for the rest of the night.

There are definitely some flaws to this pricing strategy, such as a requirement for a simplistic menu, some guests wouldn’t know the prices until they came into the restaurant, guests may pay more for their food than the previous guest, etc.  However, I think it would completely separate the restaurant from the rest of the competition.  The reward would definitely outweigh the risk.  Who wouldn’t be interested to come in and see how a certain menu item is performing?  What chef wouldn’t want to see how the different menu items were performing?  It’s instantaneous feedback.  A guest could come in one night and purchase a dinner for $2.  Or they could follow the crowd and purchase the extremely popular, outperforming menu item.  The process is efficient entertainment driven by the bottom line.  It’s the American way.  Let me know what you think!


Free Market Piza