I recently ate a reasonably upscale sushi restaurant with the following pricing strategy: For a single price (which I don't remember, but I think it was about $50) you could order as many items off the menu as you wanted, in any quantity you wanted. (There were many items on the menu in about the $20 range.) There were only two rules: First, you have to order everything up front; there's no deciding to order more after you've finished your first plate. Second, you agree to pay an enormous fine for anything you don't finish. I was delighted, partly because it's so very rare to see any attempt at creative pricing in restaurants.
There used to be an all-you-can-eat Asian restaurant, I think Korean, near us that offered some sushi, although mostly offering raw meat to cook at your table. You could get additional stuff but there was a penalty for leaving stuff uneaten.
Nope, many regular pay-what-you-order places. (All you can eat restaurants have time limits, too. But I didn't feel like this was worth mentioning.) I can try snapping some pictures of examples, if you are interested.
Oh, a category I forgot about, but which is most prototypical: cafes popular with students almost invariable post a time limit, because it's common for students to order one coffee (or other soft drink) and then spend the whole afternoon studying there.
Here's one reason I can think of. The table rental is also a function of how slow the service is or how slow the kitchen is and these are more likely when the restaurant is close to or at capacity. And who gets the rental charge, the server who loses out on tips or the owner who loses food sales.
I think this is the major factor. In particular, you'd be constantly fighting with customers who claim they should be charged for half an hour less because the service was slow.
And yet there are now plenty of restaurants that specify in advance how long you are allowed the table. Even (horrors!) some in Paris are doing this now, too, as no doubt younger restaurant entrepreneurs understand the economics of turns.
They make you leave. At least if there are customers waiting. Not that I have ever seen anyone kicked out at exactly the stated time.
[Or at least, I have never seen one that charges more to stay longer.]
They are doing it, of course, to clear the table for new customers who have reservations. who not only will generate more revenue, but have a general expectation that their reservation will be honored at approximately the time for which it was taken.
Most of the recent final season of the TV show The Bear, a show centered on a fancy tasting menu restaurant, revolves around a single night where they are overbooked and are trying to come up with creative ways to satisfy all of the customers while turning over many of the tables twice on a rainy night where all of the early reservations show up late, figuring out how to get people out as quickly as possibly while still loving the experience and without coming across as rude.
And the time from being given menus to when they signal they are ready to order; and stop the clock when they signal for the check. There are lots of ways to refine it, all getting fussier and more obnoxious.
At the corner coffee shop (in Italy), a coffee or a sweet pastry is €1.30. Savory pastries and sandwiches start at €1.50. At the corner pizza place, a slice is €2.
At both places, a soft drink is €3. Such pricing is typical. It probably costs them around €1 in bulk, and the customer takes it from the fridge and pays for it. So they have as much or more profit on it than the total price of other items, which also include some work, and which you can't easily get from a grocery store for much less.
My guess is price discrimination: rich people will overpay for the drinks, while poorer people will buy them at a grocery store, but still come in for pizza, pastry etc.
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Another one: Why don't non-stop convenience stores charge more at night or on Sundays? They usually have higher prices than other stores to compensate for the more expensive nighttime/weekend labor. But that must mean they have few customers when other, cheaper stores are open.
That generalizes. US restaurants plop down a tap water glass on your table whether you want it or not. Soft drinks are high margin, so the water price of zero is price discrimination -- you can have a low margin meal and have something to wash it down with.
I don't buy soft drinks. The only experience I have with high margin drinks is with wine. Which, in the US is extremely high margin, so high that it keeps me out of restaurants!
Europe is the opposite: No free water and no absurdly priced wine! In Italy it's common to be charged a coperto -- cover charge -- when you dine. I'm guessing that's a substitute for the high margin beverages. And, like absurd US wine prices, it keeps the alcs out of restaurants. In Italy, France, Germany you can't charge the alcohol drinkers and non alcohol drinkers separately -- for everybody feels that beer or wine are complements to food.
I once asked what the drinking age was of a restauranteur in Italy. He didn't understand the question.
It's not due to excise tax. You can buy a bottle of wine for €5 (SEK 50) at the liquor store, but even a cheap restaurant will charge €9 a glass, which gives a gross margin above 80%.
So it's like the US, then. I suppose France, Germany, and Italy are the outliers, in the sense that one can charge drinkers and no drinkers different prices in the US and Sweden, but not in France, Germany and Italy, where everybody is a drinker.
Lots of restaurants will allow you to bring your own wine but charge a corkage fee. The fee usually isn’t nothing, but it’s often $25 or $50. This is often better than paying the 2 or 3 times retail on the wine list.
At one of our favorite restaurants, the sommelier routinely waives the corkage fee, but we give her a glass of the wine. (Note: I do not bring Josh Cellars or 19 Crimes or similar crap wine.)
I've read about that, and I find it weird. I assume restaurants generally don't charge based on time because people would feel like they're paying for nothing, and would be reluctant to go. If they pay for overpriced food/drinks (compared to what they would cost without considering the time*space used), they still feel like they're getting something for their money.
But paying to open your own wine, if anything, feels even more ridiculous, even more like paying for nothing, than paying based on time. So, at that point, I don't see why they don't go for a time-based fee, or at least a fixed cover charge (along with reasonably priced wine).
I know, I know. Corkage puts the price of the wine I drink into the range of what the restaurant charges. So, it's still price discrimination, but hardly a discount.
“Another one: Why don't non-stop convenience stores charge more at night or on Sundays? They usually have higher prices than other stores to compensate for the more expensive”
Besides the difficulty of varying prices on inventory, this one I can answer:
While it’s true they might face a higher cost for the clerk, they get to spread the much higher costs of their rent over more hours being open and generating sales.
Merely either one of the norm of not irritating customers with ever changing prices and/or the difficulty/expense of “showing” variable prices seems sufficient to me.
Given the difficulty of variable pricing alone (separate from the norm / not wanting to irritate customers point), if the gross margin dollars generated on the Sunday night exceed the marginal costs (mostly electricity for the lights and the clerk’s compensation, I’d imagine), it is of course rationale to keep the store open then.
Whether labor is or is not more expensive on a Sunday / night I don’t know empirically, but I went along with the presumption as my suspicion is similar to the other commenter’s that it is at least sometimes true.
But I grant that the wording of my first answer was not ideal, since it was the “besides…” bit that did most of the work.
"Why don't non-stop convenience stores charge more at night or on Sundays? They usually have higher prices than other stores to compensate for the more expensive”
That IS price discrimination by time of day! The customers who have reason not to inform themselves or be in a hurry, pay more than necessary during the day. Everybody pays a high price when there is no competition.
A simple answer is that restaurants offer a nice congenial atmosphere for eating. The food is necessary, but so is the atmosphere, and nickel and diming everything detracts from that.
I think you are partially wrong here. Food is necessary, but atmosphere is not, as demonstrated by many take-out only restaurants. Food trucks too, I suspect fall under that category, likewise gas station fast food places like Sheetz or Wawa. Hell, there is even a drive in barbeque place near where I grew up that is still there after 50 odd years where you sit in your car to eat.
Are any of those fine dining? No. (I still love you, Sheetz.) They do divorce the table from the food aspects entirely, however. I have seen a number of restaurants that do a mix of take out and eat in options as well, of course.
You said "restaurants offer a nice congenial atmosphere for eating. The food is necessary, but so is the atmosphere..." That is what I am saying is wrong, as food is the necessary offer and atmosphere is not, being entirely lacking sometimes. So, no, ambiance is not the simple answer as it leaves out huge swaths of restaurants, which is why I said I thought you were partially wrong.
Some fine dining places do focus on ambiance and so you are right that they are probably doing the right thing to avoid nickel and diming customers and just baking the cost of the table into the cost of the meal. People who don't care to see prices on menus are not worried about how much their long dinner is costing anyone.
More cost sensitive customers probably would be interested in saving 10$ if they left their table faster than they might otherwise.
Technically you can no more have no ambience than you can have no price. The price is always there, even if it's zero or free or included. Ambience is always there, even if it's stand next to traffic and smell the fumes.
I brought up tables because you mentioned food trucks and take-out which don't have tables, and David started this whole thing by discussing renting table space distinct from the food. I suggested they don't charge for table time because they want an ambience that doesn't nickel and dime customers over table rent.
Last week I waited over 90 minutes for my food. Do I get paid to wait if they have a clock on my table? If the waiter comes up as soon as we sit and offers us a menu, does the clock start then?
"all you can eat buffets come close, although they charge a fixed price for the table, not a price per minute"
My favorite local buffet charges a fixed price per two hours per person at the table. All you can eat -- for two hours. After that, you leave or pay for another two hours. I don't know if they ENFORCE it, but the signage is clear on the matter.
Does anyone, in your observation, actually stay for the full two hours? What country is it in — I think of long dinners as more common in Europe than in the US.
I've never stayed for the full two hours myself, and I would rate my family as "long stayers" at buffets, since we take our time to talk, etc.
If I had to guess, I'd guess that some do ... and that they maybe even overstay without the restaurant seeking the second payment. The groups I'm thinking of -- there always seems to be at least one -- involved 8-12 senior citizens who have pushed multiple tables together and are clearly doing some kind of periodic outing either as a sort of club or from a local "senior community." They're there when we arrive, they're there when we leave, and they seem to be talking amongst themselves more than eating.
Which goes to the problem you describe in how to price:
The purpose of the policy clearly isn't to optimize revenue to table space in general, but to keep e.g. THAT guy from coming in at opening, paying for "all you can eat," and just sitting there eating until close, taking up a table by himself (their smallest tables seat four) and just costing them more and more in both food and "customer throughput" revenue every minute he stays.
Those large senior groups are probably very reliable return customers. I suspect they do regular outings and are there once a month or whatever, and the restaurant owner would rather have them there reliably, even if it ends up being for three hours, than have to fill their tables with random walk-ins. Especially since, on average, older people eat less than younger people. The restaurateurs presumably hate to see a family of four, two of them big athletic teenage boys, tuck in for an all you can eat experience.
Not especially relevant recollection: My ex-wife and I used to go to a seafood place that advertised "all you can eat crab legs" one night a week for $17.99 (this was in the early 1990s). We probably ate two plates apiece on average, and it was our sort of "monthly nice meal out" thing. One night we arrived and it was no longer "all you can eat" but some other proposition. We ordered anyway, and when the manage came by to say hello and ask how we were doing, I mentioned that we wished they still had the "all you can eat." He disclosed that they had stopped it because two ladies started showing up every night that special was running and eating $200 food cost in crab legs between them each time. This was not one of those "always busy" restaurants even with that special, and this couple were basically eliminating the profitability of the special to the restaurant. But he told us we were welcome to all we could eat! We were loyal to that place until it closed, but it did close. I thought their food and service were excellent, but the location wasn't very good and the place was never wildly busy.
One possible factor: charging time (lines) instead of money will skew toward younger fans, which allows you "lock up" a fan for 2-3 decades longer than the highest paying older fans would be. You'd expect older artists to then shift to higher prices/shorter lines.
"Cities should build and preserve libraries, parks, playgrounds, walkable streets and mixed-use spaces as amenities and places where low-stakes contact can happen."
I remember from the first year I could read a big sign in a small park in the South Bronx: No roller skating. No bicycle riding. No running. Remember this is your park!
While I enjoy reading Fryer, I fear he gets only half the story here.
Probably the main reason is that psychological costs are very costly. In a pay-by-the-minute scheme, I have to constantly ask myself "is the expected value of continuing this conversation worth the expected dollar cost of doing so?" Or even "is the cost of eating slower and more deliberately worth the benefit?"
These are nontrivial calculations, so probably the best solution is to either a) not care or b) have some kind of general limit like one hour or c) rush through the meal. If a) then there is no point to a by-the-minute scheme except for surge pricing (so just do surge pricing), if b) then just do rent by the hour, if c) then your restaurant is no fun for anyone. Thus d) restaurants just go with first come first served, stay as long as you like.
If nothing else, a simple and intuitive decision criteria like this prevents people from blaming the restaurant if they can't be seated and instead diffuses it onto the patrons or just the way events transpired in general.
>> The average customer is no worse off in the short run as a result of such a policy, since it merely converts cost in time into cost in cash. And he is better off in the long run. So why should customers be offended?
Why do nice hotels bother with giant lobbies that do nothing but waste space? Why do airline passengers complain about paying for many different fees, from luggage to wifi to even refreshments, when it should actually benefit them? Why do Costco and Amazon have such nice return policies? Why am I willing to pay so much more for Lego than lepin?
Psychological safety. I'm not going to enjoy my meal if I feel like I'm racing to eat against the clock. Being on a clock always makes leisure less fun--hell, I'll feel less happy even if I know the clock is ticking just on my parking space.
I don't mind having a limited amount of time for a table at a buffet restaurant, because I realize customers could take advantage of the restaurant, but also usually it's a lenient length of time, something like 2 hours. Any time short enough to actually create valuable pricing would then introduce anxiety. Even if I were aware of this phenomena and tried to rationalize myself into ignoring it, my marginal behavior would still be impacted.
Also similar is the notion of free samples at icecream parlors - securing a table may feel like being given a gift, like the gift of getting to try flavors, and now I feel it's my duty to pay that back. The longer I stay, the more I'll feel compelled to buy. Studying at a cafe, I'll always end up getting extra snacks to justify my spot.
If charging for time reduces the propensity of people to order appetizers, desserts, after dinner drinks, etc it may not be worth it to the restaurant as those tend to be the highest margin items.
I've been to many restaurants that have a max or fixed time for a reservation (often poorly enforced, generally 90min to 2.5 hours), but that's probably optimal for restaurants that are reservation oriented since that lets them schedule reservations predictably, and in the margin there they'd prefer you to stay the whole time and order more things.
Some restaurants do that! I've been to a few in Tokyo. They are usually advertised as co-working cafes. You pay a set amount per hour, and separately can order (or not) food or drinks. The price per hour was, if I remember correctly, somewhere in the order of one sandwich.
A wit once wrote: Anything you can't understand in pricing is probably price discrimination. Ever since I read in Steve Landsburg's The Armchair Economist the chapter "Why Popcorn Costs More at the Movies and Why the Obvious Answer is Wrong" I look for price discrimination under my bed. I know it's hiding somewhere!
I think charging for food but not the time is an example of bundling. It attracts lingerers + eaters. The lingerers eat, too. If they had to pay for time, not so many would come and they wouldn't eat.
45 min of my time is worth $10? What year did you write this in, 1975? This is *leisure* time, not working time - so it's more expensive than working time (or I'd be working). And the wait in line time is a deadweight loss, too - the restaurant gets nothing out of it (except advertising, but if they have lines all the time they hardly need that).
I think restauranters are just bad at business. Most of them. (The ones I know love doing it but make hardly anything at it.)
I remember visiting the Din Tai Fung restaurant in Hong Kong some 13 years ago. It is a Michelin star restaurant, so you'd expect exorbitant prices (at least compared to other places in HK). But the food was actually affordable. The trick was that the restaurant operated under what I'd call a Michelin fast food model. There was a short queue but we only had to wait for about 10 minutes. Then we could pick from a menu which had check boxes for what we wanted to eat, structured into starters, main course, desserts. When we picked they started bringing in food (very quickly after we ordered, the restaurant was big, the menu was not so long and the people rotated a lot). We had the option to keep adding items to the menu but we always had to either be eating or have something ordered, otherwise we had to leave. This is how they could combine good prices and amazing food. I wonder why this model is not more common. It was not a place to stay for the whole night and chat but we could do that in some bars later. We were interested in great food and we got it for very little money.
Not quite your model David, but I see some similarities and someone has clearly thought about the costs of both time and food and how they interact.
Well, Michelin handed out stars to street food stalls here in Singapore. You can eat there for under 5 USD. (But what does a tire company know about food?)
And are they good? :) I've been to various hawkers' stands in Singapore but none struck me as Michelin level. But my only point of reference is the Din Tai Fung, I have never been to any other Michelin star restaurant ...
So we have some excellent hawker food, but I wouldn't call Michelin's selection particularly inspired or noteworthy.
You should ask some locals for tips about where and what to it. Quality varies.
Of course, from here I can't tell whether you just don't like typical hawker food or whether you just got unlucky.
I can recommend Jason Penang Cuisine in ABC Brickworks Hawker centre for Char Kway Trow. But in general, ask a local, or as a last ditch fallback: get whatever has the longest queue.
Don't take me wrong, it was good. Just not something I would remember years later (unlike that restaurant in Hong Kong). But my main point was not about Michelin. Just that you can optimize your restaurant w.r.t. time in ways other than those that David knows and that he suggested in his post.
I've had the exact first idea for several years now. I'd love to try it. I think it would open up a lot more food options: bring your own, reasonably priced vegetable plates, at cost drinks. I think it would be a huge hit when people see the quality of food vs price. People would likely be willing to pay for substantially higher quality food than usual. It would probably drive away some people who don't eat much or who already ate and just want to hang out with the dinner crowd, or who don't drink. Basically it would shift costs from those who eat and drink a lot to those who don't. Rational for the restaurant i still think, but it does shift the audience who benefits most.
In the depths of my memory, I came up with being an 11 year old and a 15 year old tourist in Germany with my mother. I thought I remembered such. So I googled:
"Bringing your own food to excursion bars (Ausflugslokale) and traditional beer gardens was very common across Germany in the 1950s and 1960s. In regions like Bavaria and Franconia, this practice was—and still is—a formalized right.
Bavarian King Maximilian I issued an 1812 decree stating that while the brewers could sell their beer [in beer gardens], they were forbidden to sell food. Patrons were required to bring their own meals. [Government limited competition. Nothing new. But Bavaria was pretty classical liberal for the times. So this was the improved version.]
[In the 1950's and '60's] packing a rucksack with hearty bread, sausage, and cheese was the primary and most economical way for working-class families and day-trippers to enjoy a weekend excursion. [So, price discrimination -- separation by income.]
Excursion bars and traditional beer gardens provided the seating, infrastructure (plates, cutlery, cleaning), and beverages, expecting guests to buy their drinks on-site to generate a profit.
The rise of the snack bar (Imbissbude) eventually led to the widespread availability of on-site food sales at these locations. [Poor restaurants; they have competition.]"
So, I don't think your plans would fly today, unless of course you had a King Maximilian I on your side!
I recently ate a reasonably upscale sushi restaurant with the following pricing strategy: For a single price (which I don't remember, but I think it was about $50) you could order as many items off the menu as you wanted, in any quantity you wanted. (There were many items on the menu in about the $20 range.) There were only two rules: First, you have to order everything up front; there's no deciding to order more after you've finished your first plate. Second, you agree to pay an enormous fine for anything you don't finish. I was delighted, partly because it's so very rare to see any attempt at creative pricing in restaurants.
There used to be an all-you-can-eat Asian restaurant, I think Korean, near us that offered some sushi, although mostly offering raw meat to cook at your table. You could get additional stuff but there was a penalty for leaving stuff uneaten.
It's pretty common here in Singapore.
Well, it's commonly announced via signs. I have never seen it enforced. People usually leave small amounts uneaten without penalty.
I think the restaurants just want to have the option to enforce the policy on flagrant offenders.
Are these all-you-can-eat restaurants?
Nope, many regular pay-what-you-order places. (All you can eat restaurants have time limits, too. But I didn't feel like this was worth mentioning.) I can try snapping some pictures of examples, if you are interested.
Oh, a category I forgot about, but which is most prototypical: cafes popular with students almost invariable post a time limit, because it's common for students to order one coffee (or other soft drink) and then spend the whole afternoon studying there.
We have this here in the Midwest, but it's 25 dollars and 18 for lunch lol. But even though it's good for Midwest sushi, it's still Midwest sushi...
Here's one reason I can think of. The table rental is also a function of how slow the service is or how slow the kitchen is and these are more likely when the restaurant is close to or at capacity. And who gets the rental charge, the server who loses out on tips or the owner who loses food sales.
I think this is the major factor. In particular, you'd be constantly fighting with customers who claim they should be charged for half an hour less because the service was slow.
And yet there are now plenty of restaurants that specify in advance how long you are allowed the table. Even (horrors!) some in Paris are doing this now, too, as no doubt younger restaurant entrepreneurs understand the economics of turns.
If you go over your time do they charge you or make you leave?
They make you leave. At least if there are customers waiting. Not that I have ever seen anyone kicked out at exactly the stated time.
[Or at least, I have never seen one that charges more to stay longer.]
They are doing it, of course, to clear the table for new customers who have reservations. who not only will generate more revenue, but have a general expectation that their reservation will be honored at approximately the time for which it was taken.
Most of the recent final season of the TV show The Bear, a show centered on a fancy tasting menu restaurant, revolves around a single night where they are overbooked and are trying to come up with creative ways to satisfy all of the customers while turning over many of the tables twice on a rainy night where all of the early reservations show up late, figuring out how to get people out as quickly as possibly while still loving the experience and without coming across as rude.
A simple variation would be to charge only from the point food is served.
And the time from being given menus to when they signal they are ready to order; and stop the clock when they signal for the check. There are lots of ways to refine it, all getting fussier and more obnoxious.
Not simple at all at a place serving bread - appetizer - main - dessert - coffee, let alone a tasting menu.
Another one: the pricing of drinks.
At the corner coffee shop (in Italy), a coffee or a sweet pastry is €1.30. Savory pastries and sandwiches start at €1.50. At the corner pizza place, a slice is €2.
At both places, a soft drink is €3. Such pricing is typical. It probably costs them around €1 in bulk, and the customer takes it from the fridge and pays for it. So they have as much or more profit on it than the total price of other items, which also include some work, and which you can't easily get from a grocery store for much less.
My guess is price discrimination: rich people will overpay for the drinks, while poorer people will buy them at a grocery store, but still come in for pizza, pastry etc.
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Another one: Why don't non-stop convenience stores charge more at night or on Sundays? They usually have higher prices than other stores to compensate for the more expensive nighttime/weekend labor. But that must mean they have few customers when other, cheaper stores are open.
That generalizes. US restaurants plop down a tap water glass on your table whether you want it or not. Soft drinks are high margin, so the water price of zero is price discrimination -- you can have a low margin meal and have something to wash it down with.
I don't buy soft drinks. The only experience I have with high margin drinks is with wine. Which, in the US is extremely high margin, so high that it keeps me out of restaurants!
Europe is the opposite: No free water and no absurdly priced wine! In Italy it's common to be charged a coperto -- cover charge -- when you dine. I'm guessing that's a substitute for the high margin beverages. And, like absurd US wine prices, it keeps the alcs out of restaurants. In Italy, France, Germany you can't charge the alcohol drinkers and non alcohol drinkers separately -- for everybody feels that beer or wine are complements to food.
I once asked what the drinking age was of a restauranteur in Italy. He didn't understand the question.
> Europe is the opposite: No free water and no absurdly priced wine!
I see you have not been to Sweden, on both counts.
I have been to Sweden. Too expensive in restaurants!
High wine prices in Sweden are likely due to excise tax. You gotta drink water. :-)
You know the story: Danes go to Germany to drink. Norwegians and Swedes go to Denmark to drink. And Finns go to Estonia to drink.
It's not due to excise tax. You can buy a bottle of wine for €5 (SEK 50) at the liquor store, but even a cheap restaurant will charge €9 a glass, which gives a gross margin above 80%.
So it's like the US, then. I suppose France, Germany, and Italy are the outliers, in the sense that one can charge drinkers and no drinkers different prices in the US and Sweden, but not in France, Germany and Italy, where everybody is a drinker.
Lots of restaurants will allow you to bring your own wine but charge a corkage fee. The fee usually isn’t nothing, but it’s often $25 or $50. This is often better than paying the 2 or 3 times retail on the wine list.
At one of our favorite restaurants, the sommelier routinely waives the corkage fee, but we give her a glass of the wine. (Note: I do not bring Josh Cellars or 19 Crimes or similar crap wine.)
I've read about that, and I find it weird. I assume restaurants generally don't charge based on time because people would feel like they're paying for nothing, and would be reluctant to go. If they pay for overpriced food/drinks (compared to what they would cost without considering the time*space used), they still feel like they're getting something for their money.
But paying to open your own wine, if anything, feels even more ridiculous, even more like paying for nothing, than paying based on time. So, at that point, I don't see why they don't go for a time-based fee, or at least a fixed cover charge (along with reasonably priced wine).
Think of corkage as a parking fee, so a fee normally paid by the wine buyers, but not if you BYO. :-)
I know, I know. Corkage puts the price of the wine I drink into the range of what the restaurant charges. So, it's still price discrimination, but hardly a discount.
I guess it depends on your wine price point.
It always does.
“Another one: Why don't non-stop convenience stores charge more at night or on Sundays? They usually have higher prices than other stores to compensate for the more expensive”
Besides the difficulty of varying prices on inventory, this one I can answer:
While it’s true they might face a higher cost for the clerk, they get to spread the much higher costs of their rent over more hours being open and generating sales.
That doesn't explain why they don't price differently at night or on Sundays if labor is more expensive then. Is it?
Er… why doesn’t it?
Merely either one of the norm of not irritating customers with ever changing prices and/or the difficulty/expense of “showing” variable prices seems sufficient to me.
Given the difficulty of variable pricing alone (separate from the norm / not wanting to irritate customers point), if the gross margin dollars generated on the Sunday night exceed the marginal costs (mostly electricity for the lights and the clerk’s compensation, I’d imagine), it is of course rationale to keep the store open then.
Whether labor is or is not more expensive on a Sunday / night I don’t know empirically, but I went along with the presumption as my suspicion is similar to the other commenter’s that it is at least sometimes true.
But I grant that the wording of my first answer was not ideal, since it was the “besides…” bit that did most of the work.
I am not assuming continuously varying prices but prices that vary by time and day in a pattern designed to produce only short lines.
The above was referencing only convenience stores. Where there are a great many prices that would need to be changed.
I surely agree with you that higher prices for restaurants at times that cause very long lines makes sense.
But I’m dubious any one is likely to do it any time soon.
Something like a blanket 10% discount at weekday daytime could work, without changing individual prices twice a day.
"Why don't non-stop convenience stores charge more at night or on Sundays? They usually have higher prices than other stores to compensate for the more expensive”
That IS price discrimination by time of day! The customers who have reason not to inform themselves or be in a hurry, pay more than necessary during the day. Everybody pays a high price when there is no competition.
A simple answer is that restaurants offer a nice congenial atmosphere for eating. The food is necessary, but so is the atmosphere, and nickel and diming everything detracts from that.
I think you are partially wrong here. Food is necessary, but atmosphere is not, as demonstrated by many take-out only restaurants. Food trucks too, I suspect fall under that category, likewise gas station fast food places like Sheetz or Wawa. Hell, there is even a drive in barbeque place near where I grew up that is still there after 50 odd years where you sit in your car to eat.
Are any of those fine dining? No. (I still love you, Sheetz.) They do divorce the table from the food aspects entirely, however. I have seen a number of restaurants that do a mix of take out and eat in options as well, of course.
Food trucks and take-out joints don’t have tables, and that was the point of the article.
Fast food joints have tables, and that’s a legit exception. Few people go to them for the ambience.
You said "restaurants offer a nice congenial atmosphere for eating. The food is necessary, but so is the atmosphere..." That is what I am saying is wrong, as food is the necessary offer and atmosphere is not, being entirely lacking sometimes. So, no, ambiance is not the simple answer as it leaves out huge swaths of restaurants, which is why I said I thought you were partially wrong.
Some fine dining places do focus on ambiance and so you are right that they are probably doing the right thing to avoid nickel and diming customers and just baking the cost of the table into the cost of the meal. People who don't care to see prices on menus are not worried about how much their long dinner is costing anyone.
More cost sensitive customers probably would be interested in saving 10$ if they left their table faster than they might otherwise.
Technically you can no more have no ambience than you can have no price. The price is always there, even if it's zero or free or included. Ambience is always there, even if it's stand next to traffic and smell the fumes.
I brought up tables because you mentioned food trucks and take-out which don't have tables, and David started this whole thing by discussing renting table space distinct from the food. I suggested they don't charge for table time because they want an ambience that doesn't nickel and dime customers over table rent.
Yeah, we see food trucks without tables, but no ambiente trucks without food!
Last week I waited over 90 minutes for my food. Do I get paid to wait if they have a clock on my table? If the waiter comes up as soon as we sit and offers us a menu, does the clock start then?
Use a chess clock -- one button for the customer, one button for the waiter.
"all you can eat buffets come close, although they charge a fixed price for the table, not a price per minute"
My favorite local buffet charges a fixed price per two hours per person at the table. All you can eat -- for two hours. After that, you leave or pay for another two hours. I don't know if they ENFORCE it, but the signage is clear on the matter.
Does anyone, in your observation, actually stay for the full two hours? What country is it in — I think of long dinners as more common in Europe than in the US.
I've never stayed for the full two hours myself, and I would rate my family as "long stayers" at buffets, since we take our time to talk, etc.
If I had to guess, I'd guess that some do ... and that they maybe even overstay without the restaurant seeking the second payment. The groups I'm thinking of -- there always seems to be at least one -- involved 8-12 senior citizens who have pushed multiple tables together and are clearly doing some kind of periodic outing either as a sort of club or from a local "senior community." They're there when we arrive, they're there when we leave, and they seem to be talking amongst themselves more than eating.
Which goes to the problem you describe in how to price:
The purpose of the policy clearly isn't to optimize revenue to table space in general, but to keep e.g. THAT guy from coming in at opening, paying for "all you can eat," and just sitting there eating until close, taking up a table by himself (their smallest tables seat four) and just costing them more and more in both food and "customer throughput" revenue every minute he stays.
Those large senior groups are probably very reliable return customers. I suspect they do regular outings and are there once a month or whatever, and the restaurant owner would rather have them there reliably, even if it ends up being for three hours, than have to fill their tables with random walk-ins. Especially since, on average, older people eat less than younger people. The restaurateurs presumably hate to see a family of four, two of them big athletic teenage boys, tuck in for an all you can eat experience.
Not especially relevant recollection: My ex-wife and I used to go to a seafood place that advertised "all you can eat crab legs" one night a week for $17.99 (this was in the early 1990s). We probably ate two plates apiece on average, and it was our sort of "monthly nice meal out" thing. One night we arrived and it was no longer "all you can eat" but some other proposition. We ordered anyway, and when the manage came by to say hello and ask how we were doing, I mentioned that we wished they still had the "all you can eat." He disclosed that they had stopped it because two ladies started showing up every night that special was running and eating $200 food cost in crab legs between them each time. This was not one of those "always busy" restaurants even with that special, and this couple were basically eliminating the profitability of the special to the restaurant. But he told us we were welcome to all we could eat! We were loyal to that place until it closed, but it did close. I thought their food and service were excellent, but the location wasn't very good and the place was never wildly busy.
One possible factor: charging time (lines) instead of money will skew toward younger fans, which allows you "lock up" a fan for 2-3 decades longer than the highest paying older fans would be. You'd expect older artists to then shift to higher prices/shorter lines.
A very good point, given that the restaurant business can be particularly fickle.
The goal being long run revenues/profits, not just short run.
But it still depends on the norm of fixed pricing, which is the big thing DF is challenging here.
See today's (July 11) piece in the Wall Street Journal by Roland Fryer regarding the benefits of waiting in line.
Here's one sentence from the article:
"Cities should build and preserve libraries, parks, playgrounds, walkable streets and mixed-use spaces as amenities and places where low-stakes contact can happen."
I remember from the first year I could read a big sign in a small park in the South Bronx: No roller skating. No bicycle riding. No running. Remember this is your park!
While I enjoy reading Fryer, I fear he gets only half the story here.
Probably the main reason is that psychological costs are very costly. In a pay-by-the-minute scheme, I have to constantly ask myself "is the expected value of continuing this conversation worth the expected dollar cost of doing so?" Or even "is the cost of eating slower and more deliberately worth the benefit?"
These are nontrivial calculations, so probably the best solution is to either a) not care or b) have some kind of general limit like one hour or c) rush through the meal. If a) then there is no point to a by-the-minute scheme except for surge pricing (so just do surge pricing), if b) then just do rent by the hour, if c) then your restaurant is no fun for anyone. Thus d) restaurants just go with first come first served, stay as long as you like.
If nothing else, a simple and intuitive decision criteria like this prevents people from blaming the restaurant if they can't be seated and instead diffuses it onto the patrons or just the way events transpired in general.
>> The average customer is no worse off in the short run as a result of such a policy, since it merely converts cost in time into cost in cash. And he is better off in the long run. So why should customers be offended?
Why do nice hotels bother with giant lobbies that do nothing but waste space? Why do airline passengers complain about paying for many different fees, from luggage to wifi to even refreshments, when it should actually benefit them? Why do Costco and Amazon have such nice return policies? Why am I willing to pay so much more for Lego than lepin?
Psychological safety. I'm not going to enjoy my meal if I feel like I'm racing to eat against the clock. Being on a clock always makes leisure less fun--hell, I'll feel less happy even if I know the clock is ticking just on my parking space.
I don't mind having a limited amount of time for a table at a buffet restaurant, because I realize customers could take advantage of the restaurant, but also usually it's a lenient length of time, something like 2 hours. Any time short enough to actually create valuable pricing would then introduce anxiety. Even if I were aware of this phenomena and tried to rationalize myself into ignoring it, my marginal behavior would still be impacted.
Also similar is the notion of free samples at icecream parlors - securing a table may feel like being given a gift, like the gift of getting to try flavors, and now I feel it's my duty to pay that back. The longer I stay, the more I'll feel compelled to buy. Studying at a cafe, I'll always end up getting extra snacks to justify my spot.
These are interesting questions! I think I have answers, though at least one I have stolen from others.
--"Why do nice hotels bother with giant lobbies that do nothing but waste space?"
In case there's a crowd or surge. It's not uncommon, e.g. when a tour bus arrives.
--"Why do airline passengers complain about paying for many different fees, from luggage
to wifi to even refreshments, when it should actually benefit them?"
I think David gave an evolutionary psychological explanation somewhere: In the small
bands in which we evolved, markets [or exchanges] were thin. Easy to get exploited. If
anything in the environment changed and a price went up someone was trying to cheat
you! The customer interprets unbundling as an attempt to exploit, simply because "its
always been bundled".
--"Why do Costco and Amazon have such nice return policies?"
To capture careless as well as careful customers. That's straightforward price
discrimination. The careless do better.
--"Why am I willing to pay so much more for Lego than lepin?"
Reputation.
--"I'm not going to enjoy my meal if I feel like I'm racing to eat against the clock."
Going clockless captures anxious as well as non-anxious customers. The anxious get the
good deal. Straightforward price discrimination.
--Studying at a cafe, I'll always end up getting extra snacks to justify my spot.
Repeated game. You want to to do the same thing tomorrow. Don't anger the proprietor.
As I said elsewhere on this thread, I look for price discrimination under my bed!
If charging for time reduces the propensity of people to order appetizers, desserts, after dinner drinks, etc it may not be worth it to the restaurant as those tend to be the highest margin items.
I've been to many restaurants that have a max or fixed time for a reservation (often poorly enforced, generally 90min to 2.5 hours), but that's probably optimal for restaurants that are reservation oriented since that lets them schedule reservations predictably, and in the margin there they'd prefer you to stay the whole time and order more things.
Some restaurants do that! I've been to a few in Tokyo. They are usually advertised as co-working cafes. You pay a set amount per hour, and separately can order (or not) food or drinks. The price per hour was, if I remember correctly, somewhere in the order of one sandwich.
Fascinating, of course!
A wit once wrote: Anything you can't understand in pricing is probably price discrimination. Ever since I read in Steve Landsburg's The Armchair Economist the chapter "Why Popcorn Costs More at the Movies and Why the Obvious Answer is Wrong" I look for price discrimination under my bed. I know it's hiding somewhere!
I think charging for food but not the time is an example of bundling. It attracts lingerers + eaters. The lingerers eat, too. If they had to pay for time, not so many would come and they wouldn't eat.
45 min of my time is worth $10? What year did you write this in, 1975? This is *leisure* time, not working time - so it's more expensive than working time (or I'd be working). And the wait in line time is a deadweight loss, too - the restaurant gets nothing out of it (except advertising, but if they have lines all the time they hardly need that).
I think restauranters are just bad at business. Most of them. (The ones I know love doing it but make hardly anything at it.)
That restaurant is so crowded, nobody goes there anymore.
--Yogi Berra
I remember visiting the Din Tai Fung restaurant in Hong Kong some 13 years ago. It is a Michelin star restaurant, so you'd expect exorbitant prices (at least compared to other places in HK). But the food was actually affordable. The trick was that the restaurant operated under what I'd call a Michelin fast food model. There was a short queue but we only had to wait for about 10 minutes. Then we could pick from a menu which had check boxes for what we wanted to eat, structured into starters, main course, desserts. When we picked they started bringing in food (very quickly after we ordered, the restaurant was big, the menu was not so long and the people rotated a lot). We had the option to keep adding items to the menu but we always had to either be eating or have something ordered, otherwise we had to leave. This is how they could combine good prices and amazing food. I wonder why this model is not more common. It was not a place to stay for the whole night and chat but we could do that in some bars later. We were interested in great food and we got it for very little money.
Not quite your model David, but I see some similarities and someone has clearly thought about the costs of both time and food and how they interact.
Well, Michelin handed out stars to street food stalls here in Singapore. You can eat there for under 5 USD. (But what does a tire company know about food?)
And are they good? :) I've been to various hawkers' stands in Singapore but none struck me as Michelin level. But my only point of reference is the Din Tai Fung, I have never been to any other Michelin star restaurant ...
So we have some excellent hawker food, but I wouldn't call Michelin's selection particularly inspired or noteworthy.
You should ask some locals for tips about where and what to it. Quality varies.
Of course, from here I can't tell whether you just don't like typical hawker food or whether you just got unlucky.
I can recommend Jason Penang Cuisine in ABC Brickworks Hawker centre for Char Kway Trow. But in general, ask a local, or as a last ditch fallback: get whatever has the longest queue.
Don't take me wrong, it was good. Just not something I would remember years later (unlike that restaurant in Hong Kong). But my main point was not about Michelin. Just that you can optimize your restaurant w.r.t. time in ways other than those that David knows and that he suggested in his post.
No worries.
We have Din Tai Fung branches in Singapore as well. It's ok, but rather mid tier. :-)
I've had the exact first idea for several years now. I'd love to try it. I think it would open up a lot more food options: bring your own, reasonably priced vegetable plates, at cost drinks. I think it would be a huge hit when people see the quality of food vs price. People would likely be willing to pay for substantially higher quality food than usual. It would probably drive away some people who don't eat much or who already ate and just want to hang out with the dinner crowd, or who don't drink. Basically it would shift costs from those who eat and drink a lot to those who don't. Rational for the restaurant i still think, but it does shift the audience who benefits most.
In the depths of my memory, I came up with being an 11 year old and a 15 year old tourist in Germany with my mother. I thought I remembered such. So I googled:
"Bringing your own food to excursion bars (Ausflugslokale) and traditional beer gardens was very common across Germany in the 1950s and 1960s. In regions like Bavaria and Franconia, this practice was—and still is—a formalized right.
Bavarian King Maximilian I issued an 1812 decree stating that while the brewers could sell their beer [in beer gardens], they were forbidden to sell food. Patrons were required to bring their own meals. [Government limited competition. Nothing new. But Bavaria was pretty classical liberal for the times. So this was the improved version.]
[In the 1950's and '60's] packing a rucksack with hearty bread, sausage, and cheese was the primary and most economical way for working-class families and day-trippers to enjoy a weekend excursion. [So, price discrimination -- separation by income.]
Excursion bars and traditional beer gardens provided the seating, infrastructure (plates, cutlery, cleaning), and beverages, expecting guests to buy their drinks on-site to generate a profit.
The rise of the snack bar (Imbissbude) eventually led to the widespread availability of on-site food sales at these locations. [Poor restaurants; they have competition.]"
So, I don't think your plans would fly today, unless of course you had a King Maximilian I on your side!