by gdeangel on Thu Aug 14, 2008 2:45 pm
It is outrageous. But, in fact, the problem is that they have the ability to raise the price due to very effective advertising.
In the suburban chain-restaurant land where I live, there is only one restaurant that you cannot get a table at without a 30+ minute wait at dinner time. Ding - it's the Olive Garden.
Other places have raised their prices too, don't get me wrong. But the places that have a slow dinner business can't raise their price, so they are reducing their portions.
Yes costs have risen. The price of pasta has probably doubled, mainly do to demand for feed grain, substitution of corn for wheat, and energy costs (which goes right back in the supply chain all the way to the production of fertilizers and pesticides), not just the gas in the tractor / delivery truck.
But what's ridiculous is that food was so cheap, profits so high, in this type of pasta "chain Italian" business, that now they are reaping money hand over fist. Let me illustrate: Pre-mega inflation. Cost of dish of pasta w/ nice sauce = $2.00. Price = $10. Mark up = $8. Gross Margin = 400%. Here's what has happened. Cost of dish of pasta = $4.00. maintain gross margin @ 400%. Mark up = 16. New price = $20 for pasta.
This is why you have Olive Garden experiencing revenue growth while the rest of the mid-tier chains struggle. The Long Horns and the Lone Stars of the world have not gotten the brand loyalty to be able to raise price... people would just go to the other chain. On the other hand, Olive Garden has won the brand war for Italian Eateries, and thus is cleaning up big time. Places like Carrabas, Maccaroni Grill and Bucca Di Beppo are just can't get the Olive Garden crowds to defect.
On the other hand, the world of non-chain restaurants is pretty bad. You can't find a decent "middle market" non-chain. They can't compete on costs with the "big box" buyers, so dish for dish, you end up paying significantly more, or, on the other hand, getting lower quality. The only exception is a place like New York where access to food distributors is basically unlimited, and the cost of the real estate generally levels the playing field against the "big box chains". (Note - Olive Garden has a restaurant in Times Square of all places.) Elsewhere, its only at the high end where the non-chains pay off.... when the cost of the kitchen talent and "exotic" ingredients (like particularly the freshest sea food) level off the playing field and allow the local guy to deliver at the "fair market" price.
Last edited by
gdeangel on Thu Aug 14, 2008 2:54 pm, edited 1 time in total.
My ever constant two last games seem to have no end in sight!