Sunday, June 1, 2008

Surgical scars from cutting costs?

The only thing that could make commodity costs any scarier is having your distributor sales rep show up in a hockey mask. No wonder restaurateurs are going to extremes to bring down their expenses. It should be even less of a surprise that some are now realizing they’ve gone too far.

The Le Madeleine bakery-café chain found that barrier last week, as it acknowledged to its hometown paper, The Dallas Morning News. As officials explained, local customers let the chain know loud and clear that they weren’t going to pay for bread they formerly got for free. The charge came to only 50 cents for two slices of the sourdough bread, and that was levied only if the patron didn’t buy an entrée, soup or salad. What’s more, the shift had been tested in other locations, reportedly with no fallout.

Not so in Dallas, where the chain has been a favorite for two decades. After receiving hundreds of e-mailed complaints, the chain discontinued the cost-cutting measure. “We made a mistake and we adjusted," CEO Mike Shumsky told the News.

A similar public admittance came Sunday from Eric Kozlowski, a co-owner of the Primanti’s restaurants in south Florida. When a moonshot in cheese and flour prices cost the Italian eateries an extra $2,400 a week in food purchases, the company switched to lower-quality flour for its pizzas, Kozlowski told The Miami Herald. Patrons couldn’t discern the change from the menu, but they could certainly taste it, according to Kozlowski. “I was saving money, but I was potentially chasing away some of my customers who are really pizza connoisseurs,” he told the Herald.

He and his partners reportedly switched back to the higher-grade flour and then raised the price of a large pie by $2.

According to the article, sales jumped 10 percent.

Judging the elasticity of consumer tastes may not be that easy. Recent days also brought an acknowledgement from Miller Brewing that consumers are trading down from premium brews to bargain-priced beers, which presumably would also cost restaurants less.

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