Pricing Analytics in an F&B Environment

I have been thinking more and more about the pricing analytics that we are applying with great success in Retail and how it can be applied to a restaurant environment.   An item sold has similar attributes attached of location, unit, retail, and COGS. Why is it relevant that it’s a store? Couldn’t it just as easily be a restaurant or a bar?  In fact, the cross-brand analytics might even be more compelling.  Isn’t a Bud draft a Bud draft? Or soup a soup? (Varying costs, but like-for-like probably close?)  I will speculate below.

Lets get mathy, my fellow #datanerds!

Say a Miller draft costs $1.00 and sells for $5.00 in your restaurant.  (I made that up, of course. I would hope the cost is lower, but I don’t know so I like a round number.) You are selling 100 per day at this price.

What’s the break point of different elasticity?  How much can we drop units at each price point and grow profit, and hopefully revenue as well?



To me, the safest bet above is the $5.50 test.  The most likely outcome is the scenario #2, which is  .9 elasticity, resulting in a slight revenue pick up, but a 2.4% profit increase.

Couldn’t this apply just as easily to food? My first inclination is to test deserts. But conversely, I am thinking about a lower price to drive units (I know… that’s where my head is too.)  Let’s assume a cannoli costs $2.00 and retails for $7.00.  What scenario and grid would be the likely outcome?


Again, the pricing signal, with all things being true, would point to a $6.00 price test, and likely the middle scenario: +$28 topline, $12 bottom line. And, 8 happier people.

IF.. and it is a big if.. we could raise a beer, and lower a desert, resulting in a higher total check and increase profit, that’s win- win.   Also, higher cover means higher tips, so happier servers. Win-Win-Win.

In the food space, I would be really curious to apply t0 an add-on menu: Adding items to a pizza costs $2.00, adding cheese to a burger is $1.00, adding a side of turkey bacon to breakfast is $4.00 and so on.  I’d love to see how these pencil out in real-time, both up and down.  How elastic are add-ons? Maybe a 3/$5 deal on a pizza? It seems like add-ons are zero ‘overhead’ and are true incremental pick up -minus COGS of course which I suspect are low, considering.  A slice of cheese for a dollar- that has to be 90+margin. These seem like huge margin drivers….Shouldn’t we be maximize units? (and creating the perception of value?)

Once we can apply this to a bigger scale, and have a few thousand data points to determine best outcomes, the math – and break point- should become self-evident. They  likely vary by location, by region, by geography.   And numbers don’t lie.  I imagine in a large-scale F&B environment the math should justify whatever price-management tools are needed.  BWW? Applebees? Chilis?  Even the neighborhood pizza place.

Analytics Drives Business.

-That Planning Guy

PS- A beer and a cannoli for dinner? Hope there is a calzone in between!

Upcoming Events

A few events to mention this week….
First, this Thursday, 5/12 – a LIVE WebX!
We’ll be talking about one of my favorite topics, PRICING! Hosted by Joe Skorupa from RIS News (@risnewsinsights), the panel includes the amazing Sahir Anand from EKN (@sahiranand, @EKNResearch) and Cheryl Sullivan from Revionics (@Revionics) who know a thing or two about pricing analytics!
Should be a great discussion!

Register here:


Then next week, Road Trip!  LIVE in Chicago! Very excited to participate in a Innovation Enterprise event! Incredible line up of speakers and some just-added compelling panels!

Who’s in?
-That Planning Guy


Vacation, and the the Demi-God Maui

Back from vacation. It’s always hard to come back and get into the swing of things, but alas, what makes a vacation special is the time in between them I guess.

Taking a divergence from my usual Greek God commentary to add in a few Legends of Polynesia…

The legend of Maui is one of my favorites: Maui climbed Haleakala and lassoed the sun to make it move  slower and make the Hawaiian day last longer.  As one who enjoys spending a lot of time under the Hawaiian sun, the length of the day is delightful. Sunrise, sunset, and everything in between.
(Maui did several other things, such as creating the islands by hooking the ocean floor and he and his brothers pulling up the islands…)

Sometimes when we think there is not enough time in the day to accomplish all our tasks, we could use a Demi God like Maui to lasso the time clock and slow it down to give us more analytics time in the day. Perhaps we need a god/goddess of Big Data?  ‘Datalist’ should be the God of Big Data and Analysis? Open to other suggestions~~~
In the meantime, tomorrow is Monday morning, the birth of new data to review, and Datalist will be busy.

With much Aloha,
-That Planning Guy

What’s YOUR Excuse???

This morning at the gym, while I was doing elliptical as I often do, there was a lady on the rowing machine.  She had a prosthetic leg, so she was rowing with 1 leg in the strap/slide thing, and the other on the floor.   I would guess she was 30-ish, though my women-age-guessing is truly awful, so likely between 25 and 45.  She was very fit, workout gear, looked pretty hardcore.  But what stuck me is that she likely could not do other machines, running, elliptical, stair master, etc as they are so leg-centric.  So she was rowing.
Now, I didn’t talk to her, don’t know anything about her, don’t know her story or even her name.  Just seeing her on a workout machine for about 40 minutes put the thought in my head about what excuses we all use every day for whatever we can not do, achieve, accomplish.
(If you are reading this expecting inspiring things, please don’t confuse me for Ghandi- I am taller. You should go read Nelson Mandela, MLK, The Dali Lama, not That Planning Guy. I am just a guy with an opinion)
The Merch Planning system we use does not suit what we need.  Yeah, I said it.  We stopped using it, and have gone offline into Excel sheets of varying difficulty and complexity.  Some are simple 5-line OTB (BOP-Sales-MD+Rec=EOP) Some are incredibly complex using formulas that combine a ISERROR() with IF()  with GetPIvot”” – and external references, and of course build in a forward-forecast engine that re-projects and re-trends.
I would rather we had a system that did this for us, and all levels & sheets rolled up, allocate down,  forward forecast, re-project, auto calc, and we could plan at Div/Dept/Class/Vendor/Location/Region interchangeably and all at once.  But we don’t have it, so should we do a bad job of giving the actionable data to the users? (in this case, Buyers/DMM)
Not having a tool is not a reason to not do a job.  The 19th century Pioneers built houses from trees without a Makita cordless drill/driver, or without a Sawzall. Not even a Poulan chainsaw!   Couldn’t even swing by the Home Depot for a box of nails. (you can do it! We can help! Not so much in 1850) Was it hard? I would assume so. But option 2 of living outdoors was pretty bad as well. Rain, cold, and a chance of being eaten by bears would make me build fast.

We (my company) are actively seeking out and doing due diligence for several planning systems.  JustEnough, ANT, TXT, Logility-we will research and review them, and one will be implemented this year (I hope)
Can we make excuses why we cant do? Sure.  And no one would really question it much.  We could say “We’ll do after we get tools” and that would likely fly.
I bet the lady at the gym could not work out and no one would lose respect- After all, it has to be difficult to do.  Wouldn’t blame someone for not working out at 6:30 AM, least of all a lady with a prosthetic leg.

“I never saw a wild thing sorry for itself. A small bird will drop frozen dead from a bough without ever having felt sorry for itself.”  -D.H.Lawrence

So whats your excuse why you cant get something done? Too busy?  Too Tired? Too short of a deadline? Not enough tools?  Sorry, I am throwing the BS flag on that one.

Not sure which quote to end with- Nike Just DO IT? I prefer Larry the Cable Guy- GET ER DONE.

After you achieve what cant be done, then you can go back and complain about it.

-THAT Planning Guy

PS- The pioneers probably didn’t whine about stress or workloads either.  Can you imagine? Sitting around with the other Pioneer guys, all in flannel, cold, windy, eating jerked meat. “Oh I am so stressed about the harvest, I just don’t know how I will ever harvest all the crops in order to feed my family.  Its just too much work” Huh?