Operators use 'exit' food items to grow margins

By John Harrington

- Last updated on GMT

Related tags: Price, Pricing

Hungry Horse has among the highest exit price outside the premium segment
Hungry Horse has among the highest exit price outside the premium segment
Operators are continuing to offer very competitive price points for entry level dishes but charging significantly more for their most expensive ‘exit’ food items, according to the Menu & Food Trends report from Allegra Foodservice.

Speaking at a briefing on the report, projects director Steve Gotham said he expects entry level prices to have increased by around 1-2%, “possibly two and a half percent”, during 2014, “but in selective instances at the top end we’re going to see 3, 4, 5%”.

Overall Allegra Foodservice found that operators are becoming more confident to increase prices. The average entry level main course increased by 4.2% between Q2 2013 and Q2 2014, from £6.65 to £6.93. There was growth of 3.7% for starters (to £3.69), 2.3% for sides (£2.23) and 4.5% for desserts (£3.49).

The percentage price rise for ‘exit’ dishes was higher, at 4.6% for mains (£15.13 to £15.82), 5% for sides (to £3.96) and 4.9% for desserts (to £5.53), although there was a more modest increase of 1.1% for exit starters (£6.69).

Mains and starter prices for typical dishes were kept tight to increase competitiveness - a typical main dish costs just 0.9% more in Q2 2014 (£9.71) against the same period last year, and the price rise for a typical starter was just 1.2% at £5.13.

Gotham said industry feedback suggests the use of promotional activity is “diminishing” across the sector, but he predicted the rise of on-line and “stealth” promotions. “I think promotional activity will be used to offset some of the price rises that we’ll see come through. I think the two will play hand in hand.”

Allegra found that major brands were charging “pretty competitive” sums for entry level dishes, with value pub restaurant concepts such as Crown Carveries and Hungry Horse charging around £3 - a figure comparable with many fast food operators such as Roosters Piri Piri (£2.99) and Subway (£2.99). Even premium brands such as Browns, Geronimo Inns and Miller & Carter charge under £10 at entry level.

However, Gotham gave the example of Hungry Horse that also has among the highest ‘exit’ price (c£14) outside the premium segment. “There’s a clever price setting architecture going on here that really helps to play the margin game,” said Gotham.

Among casual dining brands, the inclusion of steak options has allowed operators to push up exit prices. For example, TGI Friday’s entry level is c£9 and its exit level is c£22. There’s very little variation between pizza and pasta chains, with PizzaExpress, Prezzo and Zizzi all having an entry level of around £7 and an exit level between c£13 and c£15.

The report found a different approach being applied to the issue of differential prices based on geography. While PizzaExpress, Brasserie Blanc and All Bar One had different pricing on 100% of their mains dishes in London against the Midlands, for Browns, Harvester and Carluccio’s the comparative figures were 55%, 48% and 40% respectively.

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