South African restaurants are caught in a perilous position in the fiercely competitive food and beverage industry. Facing constant pressure from customers to reduce prices and offer more specials or deals, they are simultaneously wrestling with escalating input costs and overheads. This precarious balancing act often seems to favour discounting as the way to stay afloat. However, it’s crucial to understand that this path, albeit seemingly lucrative in the short term, can lead to self-destruction in the long run.
Now, this may seem to be restaurant focused, but it has implications in the accommodation and hospitality field too. At the same time, I would like to point out that should you decide to discount a hotel room for an evening to a late walking guest; you will still have that same hotel room to sell the next night; the same does not apply to food. Of course, there are expenses like electricity and amenities, but on the whole, the room is still yours to earn on again.
Customers, driven by their need to maximise value, often urge restaurant owners to drop their prices. While this request seems reasonable from the consumer’s perspective, it dramatically strains the businesses. To survive, restaurants may resort to drastic cost-cutting measures, from significantly reducing input costs to downsizing staff.
Recently, I engaged in a profound conversation that sparked a revelation of sorts. It all began with a private response to a query in a Hospitality WhatsApp group, which led me to cross paths with David Donde – a Keynote Speaker, Entrepreneur, CEO, Talk Show Host, and Writer with expertise in restaurant costing, profitability, and the pitfalls of discounting. Inspired by my dialogue with David, this blog post explores the dire consequences of rampant discounting in the restaurant industry, particularly within South Africa. I extend my deepest gratitude to David for his insight and stimulating discussion. You can find more about him on daviddonde.com. I eagerly anticipate our future interactions and potential collaborations. Here are my thoughts on the perils of discounting for restaurants, inspired and enriched by David’s sage advice.
What follows is a sad tale of degradation. By trying to minimise costs, restaurants often end up compromising on quality. They may opt for cheaper ingredients, less experienced staff, or even cut corners on presentation and ambience. The end result? An inferior product with diminished service. A restaurant’s essence, its soul, lies in its experience, which is inextricably intertwined with its food and service quality. By sacrificing these, restaurants risk alienating the very customers they are trying to attract.
Ironically, those who once exclaimed, “I would love to support you and would if only your prices were lower,” are often the first to turn their backs. The reason is simple – they no longer see value in what’s offered. Once the quality of food and service declines, these customers quickly switch loyalties, leaving the restaurant bereft of its once loyal clientele.
This price war, thus, ends in a lose-lose situation. In their efforts to survive, the restaurants have destroyed the foundations of their business. The customers, while initially attracted to the lower prices, are left disappointed by the inferior quality and service.
As a restaurant owner, it’s crucial to remember that your primary role is not to be the cheapest but to offer good value. The definition of ‘value’ is fluid and greatly dependent on the specific offering, location, and customer base. However, it invariably includes a balance of quality food and exceptional service.
Discounting should never be the primary strategy to attract and retain customers. While occasional promotions and discounts can be helpful to marketing tools, they must not come at the cost of the overall quality and experience. Instead, focus on building solid customer relationships, understanding their needs and preferences, and consistently delivering value.
Remember, a truly successful restaurant does not sell at the lowest price but one that satisfies its customers in every way. By focusing on providing value, restaurants can ensure that they’re building a sustainable business model – one that’s based on trust, quality, and loyalty.
So, South African restaurateurs, don’t discount your way to destruction. Instead, uphold your value, maintain your quality, and let your customers know you’re not just another eatery but a place of experience, enjoyment, and satisfaction. The path to survival and success lies not in incessant discounting but in relentless dedication to quality and service.
