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FOOD FOR THOUGHT - September 16, 2009 - Mark R. Vogel - - Mark’s  Archive

There's a sushi restaurant in my home town that has changed hands four times in four years.  With each transition it remained a sushi restaurant.   I've been to three of the four renditions.  Recently I dined at the most current one and my observations have fueled my musings about why this establishment has experienced such instability.  Even for the restaurant business, four turnovers in the same amount of years is a little off the hook.

     For starters, and at the risk of stating the obvious, our country is experiencing a recession.  As if the restaurant business isn't already fraught with enough peril, now people are eating out less and spending less when they do.  Virtually all eateries have been hit hard by the economic downturn.  Thus, it is inevitable that the economy has been at least a factor in the repeated demise of this bastion of Japanese delights.

     Second, there are three other sushi restaurants in the immediate neighborhood of the subject establishment. Within 10 minutes is a fourth.  Add five more minutes to that travel time and you pick up three more competitors.  Is it just me or does deciding to open a sushi restaurant in the face of such stiff competition sound like a few pieces short of a bento box?   It's not like we're talking about a gas station.  Gas is a product that virtually everyone uses and consumes on a regular basis.  Four gas stations could financially coexist in one busy town.  Moreover, the demand for gas is what economists call "inelastic."  This means its demand is relatively impervious to the price.  You need gas to get to work, bring your children to school, go to the doctor, etc.  It's not like you're going to blow off your mammogram if the price of gas doubles.  But if Coke suddenly and grossly inflated its price, there are lots of other options to drink.  The bottom line is, the ubiquitous and vital need for a product like gas allows for a multiplicity of sellers within a given geographical location.

     Returning to our dubious sushi restaurant, the need for sushi is not as essential or circumscribed as a product like gas.  There's only one kind of fluid you can put in your car but there are innumerable forms of nourishment you can put in your mouth.  Generic restaurants, for example a diner, have some, (not much but some), degree of immunity from competition since a diverse menu can appeal to basically everyone.


  But a restaurant serving a highly specific type of food, usually an ethnic restaurant, is far more susceptible to the presence of multiple rivals.  Nearly anyone can go to a diner and find something that appeals to them.  But not everyone eats sushi, or Thai, or Indian for that matter. 

     So the economy's the pits and Mr. Restaurateur decides to open a sushi restaurant surrounded by competition at a location with a deplorable track record for sushi restaurants.  So far we're off to a good start for a recipe for disaster.  Now for the coup de grĂ¢ce.  Ready for this?  The portions were smaller than the average sushi restaurant and the prices were higher!  This owner is certifiable.  What is he thinking?  How in the world can he divert customers away from his competitors with smaller portions and higher prices?  The only possibility is quality and quite frankly, the food was just as good as any other decent sushi restaurant.  Nothing we ate made it worth paying more for less.  We'll see how long it takes for the 5th proprietor to come along. 

     I find the smaller portions to be even more distressing than the slightly higher prices.  As consumers, we expect prices for most goods and services to rise over time.  That's the nature of our economic reality.  Certainly there are some products, like new technological gizmos, that are initially expensive but then decline in price as cheaper technology and/or additional producers come into the market.  But overall, generally speaking, most products will cost more as time marches on.

     Thus, as stated, we aren’t surprised that prices inflate as the years pass.  But I think it's fair to say that we feel a sharper loss of value from receiving less of our desired commodity as opposed to a rise in its price.  This sense of unfairness is compounded of course when both scenarios occur contemporaneously. 

     Some restaurants have decreased portion size, but have also lowered their prices, a strategy aimed at enticing people to maintain their restaurant patronage.  The thinking is that it's better to reap a little less business than no business at all.  This is not a new concept.  This stratagem has been employed by eateries at lunchtime for ages.  In an effort to capture some of the bringing-lunch-from-home crowd, many restaurants offer smaller and cheaper lunch portions of their dinner entrees.  With today's economy, many establishments are employing this tactic in general.  Some places now offer half portions, (and a concomitant lower price) of their entrees even at dinner.  This approach has even spread to wine service as evidenced by more half bottles and wines by the glass being offered. 

     But to decrease portion size and raise prices just isn't prudent, especially when there's a recession AND strong competition.  Today's cost-conscious customers need to feel that they are still receiving some value for their dollar.  When consumers' cost to portion ratio becomes too out of proportion, they tend to go elsewhere.  That’s when eateries begin experiencing their own disproportionate reality:  a smaller piece of the restaurant business pie.

Also Visit Mark’s website: Food for Thought Online


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