5 ms·

Of course there's a ceiling, but you're assuming the ceiling is based on the burger. It's not. It's based on the demand for the burger, and that demand is way,

Of course there's a ceiling, but you're assuming the ceiling is based on the burger. It's not. It's based on the demand for the burger, and that demand is way, way higher than the supply, so the ceiling is higher than the current price. Pretty simple. And yes, you can only raise it to a certain point, but you only need to raise it to a certain point: that certain point is the ceiling. And you don't need to jump from $10 to $30 all at once. You just need to keep raising the price until you find the ceiling where your demand is more reasonable. It's probably more like 30-50% more, rather than 200% more, but who knows. Or better yet, charge more for peak times (like by offering a killer happy hour special during the slow times) to smooth out demand and also serve people who don't want to pay $30 for a burger. Pricing that is based on cost plus some margin for overhead is so dumb. Price based on demand!

tptacek 8y ago
This is a terrible term but I'll use it because it works here: the genre of burger we are talking about here is "cheap burger" (I mean that as a quality/experience descriptor, not price). It's a relatively thin, wide ground chuck patty on a good-but-standard bun; the only "interesting" ingredient they use is hamburger relish. So, yeah I am explicitly saying that the price ceiling and the demand for the burger aren't as neatly related as it looks, because the substitutes for this particular burger are going to be very close to it in quality (it's possible that for something close to 50% of patrons, this burger will be perceived as "worse" than other cheap burgers they've had, because opinions vary). If this was that Raoul's burger, where it's ground short rib and brisket with a triple cream brie and a cognac cream dipping sauce, I'd be right there with you. But Stanich is apparently just a cheap diner burger very well executed (in Alexander's estimation, but I have no reason to doubt him). If you charge $30 for that, people will pay (once), and then feel ripped off. For a little while. Then word will get out. It probably is the best cheap diner burger in America! The dude did the research! I'm just saying, you probably can't charge $30 for a cheap burger, sustainably. You'll do OK in the short term, and then irreversibly harm the business. Scaling out makes a lot more sense. He probably should franchise.
- pdonis 8y ago
  > He probably should franchise. That assumes that whatever it is that he was doing before things blew up can be scaled. I think it's quite possible that it can't. Particularly as, according to Alexander, the things that pushed the place over the top were intangibles about atmosphere, which isn't reproducible. Also, "scaling" assumes that the owner wants to scale. If he's only interested in operating a neighborhood burger diner, he probably doesn't.
  - tptacek 8y ago
    The article talks about him actively considering franchising. And: I doubt there's really anything to the burger here that can't be replicated. Further: he doesn't have to replicate it perfectly, just enough to serve the local customers he wants to serve while the foodies queue up at the original shop.
- ryanwaggoner 8y ago
  Again, you're just comparing burgers in isolation, but that's not how it works. This isn't delivery. People pay extra for ambiance, for service, for exclusivity, for visuals, etc. The fact that people are standing in line for 5 hours means that they don't view it as just another cheap burger. They're willing to pay more. I'm half convinced that people in NYC will pay more BECAUSE they stood in line. How else would you know if it's good if there's not a bunch of New Yorkers validating your choices by waiting in the freezing cold too?? :) And you don't need to charge $30. Charging a few extra bucks probably solves this problem without the downsides you're talking about. Finally, I'm also not convinced those problems you suggest would be caused by charging $30 are actually problems. Maybe people feel like it wasn't worth it, but so what? Word gets out that the $30 burgers are overpriced...does that mean people will stop coming? There's an entire class of overpriced crappy restaurants that stay busy because of former glory, or location, or whatever. Like almost every big restaurant in a tourist zone of major world cities. And if they DO stop coming, then doesn't that solve the original problem? Crowds dry up, you drop the prices back down, life goes on. Just seems like almost anything would be better than throwing your hands up and shutting down the restaurant. Which ironically isn't even what happened here!

tptacek 8y ago

This is a terrible term but I'll use it because it works here: the genre of burger we are talking about here is "cheap burger" (I mean that as a quality/experience descriptor, not price). It's a relatively thin, wide ground chuck patty on a good-but-standard bun; the only "interesting" ingredient they use is hamburger relish. So, yeah I am explicitly saying that the price ceiling and the demand for the burger aren't as neatly related as it looks, because the substitutes for this particular burger are going to be very close to it in quality (it's possible that for something close to 50% of patrons, this burger will be perceived as "worse" than other cheap burgers they've had, because opinions vary). If this was that Raoul's burger, where it's ground short rib and brisket with a triple cream brie and a cognac cream dipping sauce, I'd be right there with you. But Stanich is apparently just a cheap diner burger very well executed (in Alexander's estimation, but I have no reason to doubt him). If you charge $30 for that, people will pay (once), and then feel ripped off. For a little while. Then word will get out. It probably is the best cheap diner burger in America! The dude did the research! I'm just saying, you probably can't charge $30 for a cheap burger, sustainably. You'll do OK in the short term, and then irreversibly harm the business. Scaling out makes a lot more sense. He probably should franchise.

pdonis 8y ago
> He probably should franchise. That assumes that whatever it is that he was doing before things blew up can be scaled. I think it's quite possible that it can't. Particularly as, according to Alexander, the things that pushed the place over the top were intangibles about atmosphere, which isn't reproducible. Also, "scaling" assumes that the owner wants to scale. If he's only interested in operating a neighborhood burger diner, he probably doesn't.
- tptacek 8y ago
  The article talks about him actively considering franchising. And: I doubt there's really anything to the burger here that can't be replicated. Further: he doesn't have to replicate it perfectly, just enough to serve the local customers he wants to serve while the foodies queue up at the original shop.
ryanwaggoner 8y ago
Again, you're just comparing burgers in isolation, but that's not how it works. This isn't delivery. People pay extra for ambiance, for service, for exclusivity, for visuals, etc. The fact that people are standing in line for 5 hours means that they don't view it as just another cheap burger. They're willing to pay more. I'm half convinced that people in NYC will pay more BECAUSE they stood in line. How else would you know if it's good if there's not a bunch of New Yorkers validating your choices by waiting in the freezing cold too?? :) And you don't need to charge $30. Charging a few extra bucks probably solves this problem without the downsides you're talking about. Finally, I'm also not convinced those problems you suggest would be caused by charging $30 are actually problems. Maybe people feel like it wasn't worth it, but so what? Word gets out that the $30 burgers are overpriced...does that mean people will stop coming? There's an entire class of overpriced crappy restaurants that stay busy because of former glory, or location, or whatever. Like almost every big restaurant in a tourist zone of major world cities. And if they DO stop coming, then doesn't that solve the original problem? Crowds dry up, you drop the prices back down, life goes on. Just seems like almost anything would be better than throwing your hands up and shutting down the restaurant. Which ironically isn't even what happened here!