Discounting “Does Not Work” Says City Analysts

wallet-2125548_960_720Discounting meals to get diners through the door doesn’t work says city analyst Langton Capital.

Langton Capital site the recent company voluntary arrangements (CVAs) in the sector which they say has shown discounting doesn’t work and operators should bite the bullet and re-base prices.

It stated: “The rash of CVAs suggests ‘quick fixes’ have been found out. Discounting is contagious and addictive. But here’s a thought – why not bite the bullet and re-base prices, a la The Restaurant Group? Because even at inflated prices, Prezzo and others have struggled, organised CVAs etc. Is the cart before the horse? Is it the operating costs that make these incumbents so reluctant to reduce prices? Is it the customers’ job to fund a cocktail of high rents, blistering rates, inflated ‘c-suite’ salaries etc? The customers themselves certainly don’t think so.

“Fulham Shore is one of a few operators that works on a lower margin, offers value, and makes money by being popular rather than upselling, menu engineering or gouging. Everyday low pricing has worked well for JD Wetherspoon and McDonald’s over the years and, furthermore, nobody questions their quality. We’d suggest it’s simple but not easy – be good at your job and work hard.

“Our point is, while the market is undoubtedly in a tough spot right now, there are some gaping differences in customer propositions and financial health out there. The losers are highly visible – lease-encumbered, debt-saddled, (often) private equity-backed incumbents that charge too much and discount to no avail. But there will also be winners – relevant operators that offer value for money, a unique experience, and interesting cuisines that resonate with the consumer, for example.”

 

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