If you look at a random person's wallet you most likely will find a few loyalty cards (chances are you'll find loads more in a woman's purse, but please don't get me started on this). I have a Club card from Tesco and a club card from the Coop. Does it mean I make my decision on where to shop based on club card points? Would I travel farther afield to get a bigger discount? Why do ASDA don't operate a club card scheme? Personally, and I don't think I am in the minority here, I just use the club card based on where I go and not the other way around. I go to Tesco because they are close to where I live and convenient. If there was a Sainsbury's closer to me I would use that instead. On the other hand I tend to use the same barber, the same Indian restaurant and the same farm shop, because I like them. None of them used to offer a loyalty card but the farm shop just started last month which made me think about this topic.
In my opinion you should only offer loyalty cards if you sell a product that is: 1. hard to differentiate 2. readily available in close proximity to you 3. cheap For example this is the case with coffees. Can you really tell the difference between a Starbucks and a Caffe Nero? Probably not, but you may be keen to get your free coffee using your loyalty card. On the other hand my local farm shop offers excellent produce, it's family run and the customer service is very good - if nothing else you get a smile and a chat every time you go. I could certainly drive to another farm shop or maybe use the butcher close to my restaurant, but I have now built a relationship with them so I am loyal. That's why I was a bit surprised when they started offering a loyalty card. Now every time you spend more than £10 you get a stamp, and after 10 stamps you get £5 off. That's more of less 5% off. Will that increase customer retention and loyalty? Will it bring in more customers? That's very hard to say. But I assume that a lot customers would have used the shop anyway and this loyalty card is just a whole in their pockets. This is not the sort of shop where you go to save a fiver. You should aim at creating a restaurant where people come for a variety of reasons, and not price, special offers or vouchers. People will only look at those things when they can't see any other form of value, i.e. customer service, quality, unique products etc.
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The short answer is no.
Of course we need to keep an eye on our food cost and of course we need to know what our dishes cost (more on this later) but only looking at the food cost or beverage cost as a percentage doesn't help us. For instance in large companies is very common to set the food cost at around 25% and this will most likely be a Key Performance Indicator for the Executive Chef and the one thing he will receive the most grief for. This is especially true when we look at individual dishes, rather than the whole menu. For instance you may have a dish with Lobster or and expensive cut of beef and selling it at 4x cost (plus 20% VAT) may just make it too expensive or not competitive. Say for instance this dish cost you £5 per portion, you should sell it at £24 (£5x4cost +20% VAT)but as this would be too much you decide to sell it for £19.95 or £16.63 + VAT, which is 30% food cost (£5/£16.63 x 100). Now take a normal dish, say a pasta, which costs you £2.00 per portion and you resell at £2.00 x 4 +VAT = £9.60. PASTA DISH GROSS PROFIT: £6.00 LOBSTER DISH GROSS PROFIT: £11.63 Now let's pretend these are both pasta dishes, one with Bolognese and one with lobster. Your customers will only have one pasta dish per meal. Which one would you rather sell? You can play with the figures but the idea stays the same, sometimes we need to look at absolute profit rather than food cost as a percentage. On a little side note, I think it's very important to maintain some sort of minimum price for all our dishes in a certain category. For instance your pasta category. If you have a pasta with tomato sauce on the menu you don't want to just look at the food cost to set up your price as the price (and the gross profit) may be too low and if you end up selling loads of this dish, yes you will have a very low food cost at the end of the month, but your bank balance will be very low too! |
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