How to come up with a workable pricing plan
While the most obvious effect of the 2015 egg shortage was, well, a shortage of eggs, operators had another menu change to explain to diners: a price hike for the few eggs they were able to source.
“Our customers know what prices are like in the neighborhood and we don’t want them to feel gouged,” says Kevin Dorr, vice president of retail for Morrison Healthcare. “Unlike a restaurant, the people coming to our cafes are there several times per week, so they’re very aware of price changes.” Morrison had to increase its breakfast prices correspondingly, but Dorr says customers took the increases in stride since they were aware of the jump in egg prices at supermarkets.
Because noncommercial foodservice has a more captive audience than grocery stores and traditional restaurants, and its budget usually is just one piece of a large pie in a variety of departments, pricing is based on a different set of criteria. However, operators say they’re still trying to find value for diners while keeping an eye on the bottom line.
Since most university operations are setting meal plan prices in close collaboration with the administration, “pricing needs to fit their needs, which makes this different from running a large restaurant,” says Terry Nahavandi, resident district manager for Compass at the University of North Carolina in Charlotte. “We discuss what [the university] would like and expect and we develop plan prices for them.”
Aretail model at the University of Washington prices food by local market rates. Students on the dining plan swipe their cards for items in the cafeterias, but each item is singly priced. “This allows someone who’s not so hungry to buy what they’d like, and someone who’s hungrier to get more,” says Gary Goldberg, director of dining at the Seattle university.
Food that’s prepared and sold by UW Dining is figured to cost 34 percent of the sale price, giving the operation 66 cents of markup per dollar to use for overhead, which the department clearly communicates to students. “It’s fixed, and we’re very clear about where the money goes,” Goldberg says. “We’re just hoping for a small reserve at the end of each sale.” Profit margins are higher from snack and vending products, which are priced to be competitive with retailers near the campus.
Next year, UW will begin a program providing free drinks to students at dining halls—a practice similar to two-for-one beverage deals at Morrison. “It’s a way to give back to [customers]; they can come to dining and get coffee, tea or a soda. There’s also a possibility while they’re here they’ll buy something to eat, so that will help make up the cost,” Goldberg says.
The traditional dining hall “swipe” model, where guests get food credits and swipe their dining cards for each buffet-style meal, has been popular and profitable for many years, but there have been cracks at the edges of this pricing strategy. At the University of California in Santa Barbara, an effort to tweak it has been made in the name of sustainability.
Danielle Kemp, a dietitian with UCSB dining services, says the school changed its marketing language from “all you can eat” to “all you care to eat” in an effort to control food costs and rising meal plan prices. “We instituted a policy taking away trays recently, which really helped,” says Kemp. “Now you can carry one or two plates to your table, not four or five as you could with a tray. It doesn’t take away the students’ ability to eat more if they want, but they’re getting their food in smaller portions.”