Happy Hours. Loyalty Clubs. Coupons. Nightly Specials. Half-off beer on Tuesdays and $1 oysters on Mondays. Diners are bombarded with deals and discounts. As one of those diners, I know more about restaurant deals than almost any other subject. I might not remember my anniversary, but I definitely remember that great $6 martini deal down the block.
Done right, promotions can strengthen your brand, increase revenue and keep customers coming back. Done badly? At best, loyal customers come down with discount fatigue and unsubscribe from your mailing list. At worst, everyone in town decides your fare is never worth the regular menu price because it’s always on sale.
“The number one guiding principal,” says Alan Lake, a Chicago chef and restaurant consultant, “is never cheapen your brand.”
So how do you discount the right way?
Happy hour is a staple, which is why so many restaurants and bars compete to draw customers with lower-priced menu items and discounted drinks. That’s OK, but don’t be tempted to add off-concept items.
"The number one guiding principal is never cheapen your brand."
-Alan Lake, a Chicago chef and restaurant consultant
“We’re not buying something frozen and dropping it in the fryer and serving it cheap,” says Josh Hahn, operating partner at Washington D.C.-based EatWell restaurants. “If we don’t serve it at dinner, we won’t serve it at happy hour.”
Offering low-cost, happy hour food that isn’t on the menu also creates a strain on the back of the house. “We don’t want to overcomplicate things and add extra work,” Hahn says.
Do the Math
Half-off drinks on Tuesdays might sound good, but does it align with your profit margins? Do you have a specific plan to use the deal as a loss leader, or just a vague sense that people might order food, too?
If you don’t do the math, you might end up with a full restaurant and an empty wallet. Lake cautions against offering deep-discount deals without crunching the numbers. “You’re lucky if you have a 10 percent margin in this business,” he says. “If you’re discounting more than that, you’d better have a plan.”
Chicago restaurateur Nick Kokonas, whose restaurants Alinea and Next are based on a prepaid reservation model, looks at the math differently. He has sold tickets for less popular nights at a lower price than for Saturday evenings, even if it means barely breaking even.
“If I have empty seats and people sitting around waiting to serve people, I’m definitely losing money because I’m not making my labor costs.”
A discounted table is making more money than an empty one, he says. Just pay attention to the numbers.
Be Selectively Cheap
Half off all wine or beer nights might be easy for staff, but the approach can damage your bottom line. Instead, use value as the lure. “Maybe there’s a nice wine we sell by the glass for $14, and when we make it available for happy hour it’s not necessarily at $6, but at $10 or $11,” Hahn says. The approach introduces a wine or food that the customer might be willing to pay full price for during their next visit.
Discourage Discount Hunting
Yes, you want to attract new customers through deals, but you don’t want discount hunters. Be sure to include promotions to reward regulars by offering deals exclusive to them. Also tie discounts directly to loyalty. “Give customers an incentive program—spend X, get Y. Come five times, get something special. Then you’re rewarding good behavior, which in turn will get you more business,” Lake says.
Avoid Discount Fatigue
Discounting regularly will create a customer mindset that always expects a deal and questions why there isn’t one. Draw strategically from the discount well. Look at your sales from year to year and target the slowest periods for discounts. By using deals to introduce diners to your concept, reinforce your brand and reward regulars, you can grow a business based on the quality of your restaurant—not on cheap food and drinks.