4 ms·

I'm sure things are more complicated than you describe, but it seems like they fear increasing prices will lead to closing, and to avoid this they're... just go

I'm sure things are more complicated than you describe, but it seems like they fear increasing prices will lead to closing, and to avoid this they're... just going to close?

kop316 5y ago
Sorry, should have been more specific! More correctly, they are debating if it's just time to retire now and be grandparents full time rather than risk losing a lot money in the restaurant due to increased prices, then being forced to retire. I assume "closing down the restaurant and retiring" means they will sell the restaurant (or at least the property), but I am not sure to be honest?
- ac29 5y ago
  Would raising prices 5 or 10% be so catastrophic to revenue that they couldnt even give it a few weeks? Or are they looking at a 50%+ price increase? If they want to retire anyways, then good for them. But a lot of businesses have had to raise prices this year, including grocers, which are arguably restaurants only competition. I think folks would understand.
  - Arainach 5y ago
    If raising the prices drives away customers, you have now lost a notable value if you try to sell. Brand perception is (almost) everything. Unless you offer something truly unique or exceptional, you're replaceable in just about every market. There was a local beer taproom/bottle shop that I frequented a lot for years. Even as craft beer became more prominent and there were more local options, I liked it enough to keep going, but fundamentally there came a point where they raised their prices enough that I started going elsewhere, and once I broke that habit there was never a big reason to go back unless I was meeting someone else there once in a while. In this case, "enough" was in the 20% range, but given what's happened to food prices lately I don't think 5-10% is a realistic number for a restaraunt either.
    - ac29 5y ago
      > If raising the prices drives away customers, you have now lost a notable value if you try to sell. Brand perception is (almost) everything. Unless you offer something truly unique or exceptional, you're replaceable in just about every market. Agreed in general terms, but who is going to buy a business that cant even cover its costs? It sounds like this business has a negative expected value without raising prices.
    - fumar 5y ago
      Is this inflation creeping up in all the expected places? The value of goods is the same but the value of the USD is lower and thus we must increase costs. I don’t see it impacting brand perception if all prices go up.
      - wetmore 5y ago
        https://www.investopedia.com/terms/p/price_stickiness.asp https://www.investopedia.com/terms/p/price_stickiness.asp
syntheticnature 5y ago
They're just going to close... without risk of losing money by trying to raise prices and seeing what happens.
bluGill 5y ago
There is a certain amount of investment needed to keep going. If you are going to close the restaurant next year you can keep the current tables, otherwise replace them before they get too worn out. Or maybe it is the fry machine at the end of life, replace it for $50,000. If the restaurant continues for a few more years it is worth it, to fix/replace things, but if the restaurant is doomed it is better to cut your loses. Even in the best of times restaurants are the hardest business to run successfully. These are not the best of times, and (as always) it isn't clear what the future will hold.
- patentatt 5y ago
  I realize this was in hypothetical terms, but do fry machines really cost $50k!?
  - greedo 5y ago
    No. Perhaps the fully automated/robotic type that McDonalds uses do, but any restaurant that is spending $50k per fryer is insane.
    - saryant 5y ago
      They really are that expensive, and not just the robotic ones.
      - greedo 5y ago
        Perhaps with the entire hood/exhaust and fire suppression system. But not a simple two basket fryer. When I bought mine (new) in 1995, they were roughly $3K. And this had a built-in filtering system. Actually, to spend $50K on a fryer system is pretty hard: https://www.webstaurantstore.com/63853/deep-fryer-with-oil-filtration-systems.html https://www.webstaurantstore.com/63853/deep-fryer-with-oil-f...
    - crooked-v 5y ago
      McDonald's fryers are generally just standard commercial fryers with preset temperatures and timers. The only custom part is the (separate and standalone) machine that measures out standardized portions of fries into baskets, and while I'm sure they'd call it a trade secret it's really just a big plastic hopper and some sort of weight sensor arrangement.
teawrecks 5y ago
If your expected return on investment is negative, isn't the rational decision to not invest in the first place?

I'm sure things are more complicated than you describe, but it seems like they fear increasing prices will lead to closing, and to avoid this they're... just going to close?

kop316 5y ago

Sorry, should have been more specific! More correctly, they are debating if it's just time to retire now and be grandparents full time rather than risk losing a lot money in the restaurant due to increased prices, then being forced to retire. I assume "closing down the restaurant and retiring" means they will sell the restaurant (or at least the property), but I am not sure to be honest?

ac29 5y ago
Would raising prices 5 or 10% be so catastrophic to revenue that they couldnt even give it a few weeks? Or are they looking at a 50%+ price increase? If they want to retire anyways, then good for them. But a lot of businesses have had to raise prices this year, including grocers, which are arguably restaurants only competition. I think folks would understand.
- Arainach 5y ago
  If raising the prices drives away customers, you have now lost a notable value if you try to sell. Brand perception is (almost) everything. Unless you offer something truly unique or exceptional, you're replaceable in just about every market. There was a local beer taproom/bottle shop that I frequented a lot for years. Even as craft beer became more prominent and there were more local options, I liked it enough to keep going, but fundamentally there came a point where they raised their prices enough that I started going elsewhere, and once I broke that habit there was never a big reason to go back unless I was meeting someone else there once in a while. In this case, "enough" was in the 20% range, but given what's happened to food prices lately I don't think 5-10% is a realistic number for a restaraunt either.
  - ac29 5y ago
    > If raising the prices drives away customers, you have now lost a notable value if you try to sell. Brand perception is (almost) everything. Unless you offer something truly unique or exceptional, you're replaceable in just about every market. Agreed in general terms, but who is going to buy a business that cant even cover its costs? It sounds like this business has a negative expected value without raising prices.
  - fumar 5y ago
    Is this inflation creeping up in all the expected places? The value of goods is the same but the value of the USD is lower and thus we must increase costs. I don’t see it impacting brand perception if all prices go up.
    - wetmore 5y ago
      https://www.investopedia.com/terms/p/price_stickiness.asp https://www.investopedia.com/terms/p/price_stickiness.asp

syntheticnature 5y ago

They're just going to close... without risk of losing money by trying to raise prices and seeing what happens.

bluGill 5y ago

There is a certain amount of investment needed to keep going. If you are going to close the restaurant next year you can keep the current tables, otherwise replace them before they get too worn out. Or maybe it is the fry machine at the end of life, replace it for $50,000. If the restaurant continues for a few more years it is worth it, to fix/replace things, but if the restaurant is doomed it is better to cut your loses. Even in the best of times restaurants are the hardest business to run successfully. These are not the best of times, and (as always) it isn't clear what the future will hold.

patentatt 5y ago
I realize this was in hypothetical terms, but do fry machines really cost $50k!?
- greedo 5y ago
  No. Perhaps the fully automated/robotic type that McDonalds uses do, but any restaurant that is spending $50k per fryer is insane.
  - saryant 5y ago
    They really are that expensive, and not just the robotic ones.
    - greedo 5y ago
      Perhaps with the entire hood/exhaust and fire suppression system. But not a simple two basket fryer. When I bought mine (new) in 1995, they were roughly $3K. And this had a built-in filtering system. Actually, to spend $50K on a fryer system is pretty hard: https://www.webstaurantstore.com/63853/deep-fryer-with-oil-filtration-systems.html https://www.webstaurantstore.com/63853/deep-fryer-with-oil-f...
  - crooked-v 5y ago
    McDonald's fryers are generally just standard commercial fryers with preset temperatures and timers. The only custom part is the (separate and standalone) machine that measures out standardized portions of fries into baskets, and while I'm sure they'd call it a trade secret it's really just a big plastic hopper and some sort of weight sensor arrangement.

teawrecks 5y ago

If your expected return on investment is negative, isn't the rational decision to not invest in the first place?