• restaurant ticket sales

    The Reasons Restaurants Should Sell Tickets

    Apr 12 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic History, Economic Humor, Entertainment, Labor, Lifestyle, Tech, Thinking Economically • 123 Views

    Award winning restaurant Alinea once crashed the Chicago phone exchange 312-867 because its call volume was huge on the day that monthly reservations opened up. To manage so large a number of reservation requests for just 20 tables, Alinea required three full time employees that cost them $140,000 a year. Sadly, it was the reservationists’ job to say “No” to most of the calls that got through and to hundreds of voicemails. Perhaps even sadder, eight percent of the people who did get reservations were no-shows–a $260,000 annual revenue loss.

    This great Sex and the City excerpt shows how getting a table can be infuriating:

    Realizing that the current system was flawed, one of Alinea’s owners said, “There has to be a better way.”

    Where are we going? To how restaurants are solving the reservations problem.

    “Tickets go on sale soon.”

    When the owners of Alinea planned the opening of a second restaurant in 2010, they decided that this time would be different. Concluding a 60 second video about their new eatery, they used the teaser, “Tickets go on sale soon.” And people said whaat??

    Now sister restaurants Alinea and Next sell tickets that cover the price of the food and the gratuity. Like a concert, you pay in advance for a non-refundable ticket and cannot cancel a reservation. From the restaurant’s perspective, there is no such thing as a no-show. They have guaranteed revenue and tables for two, four or six to create capacity utilization (odd numbers waste seating room). As a result, the expense of a reservations staff is gone, they know their cash flow, their no-show numbers have plunged and they throw out much less food. Next had 72 tables booked and more than one half million dollars within two days of initiating the new approach.

    Here you can see their graph of the short-sat problem where diners make a reservation for four people and then show up with only two. Once diners paid in advance, they brought fewer people much less frequently.

    Pricing power diminishes no shows.

    From: Alinea

    Alinea’s ownes have also had success with dynamic pricing. Charging more for that Saturday night 7:30 slot than Tuesday at 9:30, they have optimized their customer flow. During the Super Bowl they tweeted,  “Don’t care about football tonight?  Come eat at Alinea instead. $165 super bowl special.”  That 35 percent discount meant $ 23,800 of extra revenue or as they explained, “Not a normal night, but not a disaster.”

    On the customer side, the tickets and pricing can be plusses. You can get a better deal on off nights and have a less-frustrating, more transparent reservation experience. Furthermore, tickets can be resold in secondary markets.

    Our Bottom Line: Pricing Power

    I know you can say that their success was based on their stupendous popularity. However, through a new business model that offers a menu of payment systems, the restaurant business can become more productive and profitable. When there is a payment system choice, restaurants enhance their pricing power. On both the supply and demand sides of the market, incentives change.

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  • The econlife.com Weekly Roundup

    Weekly Roundup: From Desirable Currency to Rejected Coins

    Apr 11 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Fashion, Gender Issues, Government, Innovation, Labor, Lifestyle, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Sports, Thinking Economically • 82 Views

    Our Posts Roundup

    Everyday economics and boosting baseball popularity Sunday 4.05.15

    How to boost baseball popularity…more

    Everyday economics and dollar coins Monday 4.06.15

    The dollars no one wants…more

    everyday economics and sisplaying conspicuous consumption, China's growing middle class wants more Prada while the very affluent want more elite brands. Tuesday 4.07.15

    The reason for Prada’s China problem…more

    Everyday economics and currency design Wednesday 4.08.15

    Norway’s amazing looking money…more

    Chain store prohibitions. Thursday 4.09.15

    Debating whether we want chain stores…more

     

    Everyday economics and the gender gap in the executive office Friday 4.10.15

    A “one is done” gender gap problem…more

     

    Ideas Roundup

    • gender gap
    • glass ceiling
    • human capital
    • competition,
    • regulation,
    • opportunity cost
    • money supply
    • currency
    • conspicuous consumption
    • demand
    • monopoly

     

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  • Ask Alexa Economic Advice from econlife.com

    Dating Decisions

    Apr 10 • Ask Alexa • 582 Views

    Hello Alexa,

    I am a single person who is looking to settle down. I typically date online because my career is very demanding. However, to my dismay, I have encountered great difficulty in finding a person who meets all of my criteria: smart, funny, driven, loyal, attractive, and spontaneous. Is it possible to find someone who satisfies all of my requirements?

    From,                                                                                                                                                                           Alex

    Dear Alex,

    Not only do we share similar names, but we also have both been confronted with the challenging prospect of finding that perfect someone behind a computer screen. Are there people with everything we are looking for or are we indulging in illusions? Turning to the economic principle of inflation provides a satisfying answer.

    Economically speaking, inflation occurs when there is a decrease in value of an object. This decrease could be anything from grades to money. In terms of grading, let’s say in a college class, as grades go up, they represent less. In other words, if all the students in the class receive an A, although not everyone deserved an A, then the value of the grade is not as meaningful to a hardworking student compared to if only one-fifth of the class received an A. Turning to your wallet, your money buys a decreasing portion of an item as inflation increases. In a fictitious world, for example, the price of gas inflates 10% each year. Currently, you are paying $2.00 per gallon, but in twelve months, you will be doling out $2.20 per gallon. Your $2.00 can no longer buy the same amount of gas that it once did as a result of inflation. Unfortunately, inflation does not increase the quality of the good you are purchasing.

    Inflation also runs rampant on dating websites where many people bolster their profiles with false information to make themselves seem more desirable. In this sense, the profiles are inflated for personal benefit, even though true personalities are often masked. So, while you may think you are chatting with someone who belongs on the front page of a glamorous magazine, you could be communicating with a person who appears on the last page of their town newspaper.

    So, what to do? The first step towards attracting an online match is recognizing that nobody is perfect; anyone who appears to be a “10” might not be one in real life. If you’re looking for an ideal date with an authentic person, try reaching out to someone who seems to have more realistic qualities. Keep in mind that picture perfect is not always a reflection of perfection. I hope you meet your special someone!

    Sincerely,

    alexa-sig

    P.S. Alexa sends an H/T to Carolyn Hax and her Washington Post article titled “Stop Thinking of Dating as Solely a Numbers Game” for inspiring this post.

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  • Everyday economics and the gender gap in the executive office

    A One is Enough Gender Gap Problem

    Apr 10 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Gender Issues, Labor, Macroeconomic Measurement, Thinking Economically • 87 Views

    It might be counterproductive to applaud a firm that hires a woman for a top management position.

    “One is Done?”

    A new study suggests one woman near the top does not lead to others. Actually diminishing by 51 percent the chance that other women will join the firm’s five highest executives, the one woman who makes it has broken through the class ceiling but not raised it. The origin of the study’s conclusions was a statistical anomaly. Comparing the specific numbers of women who were among firms’ top five to what 100 simulated examples indicate they would most likely be, data from 1500 firms revealed a big difference.

    Not sure why, the study’s authors say that maybe it is “one and done.” The leadership feels the pressure to hire a woman, they do it, and then the executive suite door slams shut. They also suggest that male management could be resisting a female presence and lower ranking female executives leave because they do not expect a top promotion. Meanwhile, observing more women at the top with female CEOs, they discarded a “Queen Bee” scenario.

    Female CEOs

    Looking at S&P 500 companies, Catalyst reports that only 23, a meager 4.6 percent of all CEOs, are women. Furthermore, lest we be impressed by that 25.1 percent number (below) for female senior level managers, we should keep in mind the possibility that their dispersion could confirm that “one is done.”

    The gender gap an "one is done" in the executive suite.

    Our Bottom Line: Human Capital

    Whether reading the research or using plain old common sense, we know that we are diminishing our human capital potential when we constrain a woman’s participation in the work force. Or, like IMF chief Christine Lagarde, we can cite an “insidious conspiracy” against women that depresses a country’s economic growth by as much as 30 percent. (Lagarde was referring to a new IMF study that we will save for another day.)

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  • Everyday economics and chain store prohibitions.

    When Cities Ban Chain Stores

    Apr 9 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Government, Labor, Lifestyle, Regulation, Thinking Economically • 94 Views

    During my visit to San Francisco last month I was delighted to have discovered Philz. Totally individualized, the coffee was only pour over, my fruit muffin tasted homemade, and the baristas knew their beans. As a small, sophisticated and shabby shop, Philz had a San Francisco identity.

    Tradeoffs and chain stores and competitive market structure

    From: Philz

    During my flight back to NJ on Virgin America, i was surprised that they served Philz coffee. Then, a little research revealed that there were 14 Philz coffee shops. Bigger than I had assumed, Philz is a chain.

    Where are we going? To the municipalities that limit chain stores.

    San Francisco’s Chain Store Dilemma

    San Francisco’s formula store ordinance requires certain business categories like coffee shops that have 11 locations anywhere in the world to apply for a conditional use permit that could take a half a year to get and cost thousands of dollars. The reason is to protect local homegrown small businesses from bigger chain competition.

    But Philz is a homegrown local business. Because it has 14 locations, to establish #15, it would have to undergo the conditional use process. It could even be banned in the San Francisco neighborhoods that bar all chains. Local officials say they are trying to create an exception for the Philzs of the city.

    Other municipalities are wrestling with the chain store dilemma.

    Jersey City

    The mayor of Jersey City wants to limit chains. His proposal would create a 30 percent cap for the commercial downtown space that all businesses with 10 other locations within 300 miles from Jersey City could occupy.

    Nantucket

    Located 30 miles off the Massachusetts coast, the island of Nantucket also limits chains. Yes, there is a Ralph Lauren Polo store that seems to have crept in just before the prohibition was imposed while Cumberland Farms and two Stop ‘n Shop supermarkets got a special okay. Otherwise, populated mostly by small charming restaurants and jewelers, clothing shops and art galleries, the island’s Main Street and beyond have no chains.

    Our Bottom Line: Competitive Market Structure

    Looking through an economic lens, we can say that banning chain stores changes our competitive market structure. On a market structure scale, below, we are moving toward the left where smaller businesses have less pricing power unless government protects them.

    Tradeoffs between market structures

    By banning the chains, cities decrease competition. The result? According to a San Francisco study, prices are 17 percent higher. On the other hand, mom and pops can create more of a local spending multiplier because the money stays at home and they bring local charm.

    In Nantucket I do miss Starbucks. But the tradeoffs are worth it.

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