7 ms·

it’s not magic. there are inputs and outputs. raise prices by a buck a pizza. people will absolutely pay it. problem solved.

anonuser123456 5y ago
Yeah, demand is totally inelastic to price.
- kozd 5y ago
  Well presumably all restaurants would have similar issues hiring cooks so prices should rise everywhere. I would wager that demand for restaurant food as a category is less elastic than demand for any one particular Mexican restaurant's food.
  - anonuser123456 5y ago
    At the margin consumers are sensitive to price. A family of 4 might skip out on getting drinks with their order if the price goes from 36->40$. Drinks are where the entire profit for many restaurants comes from. In terms of total market, the effects are well studied in the field of labor economics. Big producers can easily absorb the added labor costs. They outsource some elements of their labor (prep work). They simplify menus for better economies of scale. They cut back hours on marginal employees and add hours for high productivity ones. Small shops without economies of scale struggle and go out of business. A restaurant owner that owns 1 restaurant is likely working full time to keep it afloat. The added time to respond to the current labor market can break the camels back. vs. McMegacorp that has people that sit around and optimize cost all day long. So the trade off is more McDonalds and Chipotle and less Albertos burrito stands.
    - Sylamore 5y ago
      This is one of the reasons why companies like Sysco and US Foods have been pushing more and more pre-prepped packaged menu items that restaurants can just heat up and serve. USF calls these Scoop items: https://www.usfoods.com/great-food/scoop-.html https://www.usfoods.com/great-food/scoop-.html You may have noticed how lots of places, including mom and pop shops seem to suddenly have nearly identical menu items and it's partially because of this trend in the foodservice industry. They are basically taking the economy of scale that a large chain previously exclusively had and bringing it to the market to street sales (e.g. mom & pop joints). They simply took what they were doing for institutional food service and expanded it because it's substantially more profitable for them than selling the raw ingredients.
smsm42 5y ago
If it worked this way, why not have a $1000 pizza? Raise it a thousand times and... Obviously, it doesn't - at some point, raising it a dollar will start losing customers, it's obvious. Now, where is that point? Do you know? Does business owner know? Who would be the better expert in determining this point - they guy who runs a pizza place or a random guy on the internet whose experience is more like ordering pizza online?
- danaris 5y ago
  Yes, thank you for demonstrating that reductio ad absurdam is still absurd. "You could do better if you raised prices a dollar" and "you would do worse if you raised prices a thousand dollars" can absolutely both be true. In fact, in many, many circumstances, they will be.
- rualca 5y ago
  > If it worked this way, why not have a $1000 pizza? This blend of slippery slope argument is all fine and dandy, but the key point of this discussion is that there are operational expenses and revenue and if your business plan depends on a never-ending inflow of cheap labor from people willing to work for below-poverty wages to drive down your operational expense then not only is your business model completely unrealistic but you also have to take a step back and seriously considering your net contribution to society. I mean, think about it: why is a 1000$ pizza supposed to be a ridiculous idea but 8$/hour to make said pizza is not shocking? Is it reasonable to assume that the person making the pizza should be forced to work about 3 hours making pizzas before he could afford one of his own?
tluyben2 5y ago
There are a lot of factors we do not know here: I was an investor in a small restaurant as I wanted to keep it open after the owners quit. Upping anything on the menu $1 would've killed the business dead because all surrounding restaurants where already cheaper, but we had better cooks, however people are frugal or poor or both and they were not that much better to make the difference that much bigger. We still ran at incredibly thin margins: amounts that seems weird to me as an IT guy. It depends: depending on your location (both country and inside that country) it can very well be that you cannot up your prices even a cent or people won't come back. We had that with beer: our neighbour's restaurant upped the price of a bottle of beer with 10cts and suddenly all the regulars came to drink at ours and eat at theirs (cheaper). A pizza place in the center of a popular city with high ratings probably can up the prices.
- bsagdiyev 5y ago
  Before we left San Diego I offered quite a few times to go in, unpaid, to help out. This man works 6 days a week, open to close. I don’t know what sort of upbringing people on this site seem to have but it doesn’t feel “working class” to me most of the time.
  - Dudeman112 5y ago
    >what sort of upbringing people on this site seem to have but it doesn’t feel “working class” to me most of the time Some people around these parts have ardently defended that 100k USD is poverty wage and that having a net worth of 1 million doesn't make you rich. So I'm inclined to definitely not believe "working class".
    - Ma8ee 5y ago
      I must have missed those people. People here are in general not poor, but most are neither completely out of touch.
  - tluyben2 5y ago
    Actually helping run this place showed me how skewed this world is. I met many hospitality service owners, small ones mostly and most of them are lucky to take 5-10k profit in a year in total: that while most people I know in software and management get angry when they cannot go on multiple 10k vacations a year...
dagw 5y ago
raise prices by a buck a pizza. people will absolutely pay it. Perhaps in some cases, but far from always. Down the street from there are 3 'cheap' pizza places within a ~5 minute walk from each other, that all server basically identical quality pizza at essentially the same price. If any one of those where to raise their prices people would almost certainly not pay and just go to one of the other places instead. There is also a 4th place that serves much higher quality pizza and charges 50-100% more than any of the other places as it is. If they where to raise their price by a buck then people would no doubt still pay since the people who go to that place have already proven themselves less price sensitive.

anonuser123456 5y ago

Yeah, demand is totally inelastic to price.

kozd 5y ago
Well presumably all restaurants would have similar issues hiring cooks so prices should rise everywhere. I would wager that demand for restaurant food as a category is less elastic than demand for any one particular Mexican restaurant's food.
- anonuser123456 5y ago
  At the margin consumers are sensitive to price. A family of 4 might skip out on getting drinks with their order if the price goes from 36->40$. Drinks are where the entire profit for many restaurants comes from. In terms of total market, the effects are well studied in the field of labor economics. Big producers can easily absorb the added labor costs. They outsource some elements of their labor (prep work). They simplify menus for better economies of scale. They cut back hours on marginal employees and add hours for high productivity ones. Small shops without economies of scale struggle and go out of business. A restaurant owner that owns 1 restaurant is likely working full time to keep it afloat. The added time to respond to the current labor market can break the camels back. vs. McMegacorp that has people that sit around and optimize cost all day long. So the trade off is more McDonalds and Chipotle and less Albertos burrito stands.
  - Sylamore 5y ago
    This is one of the reasons why companies like Sysco and US Foods have been pushing more and more pre-prepped packaged menu items that restaurants can just heat up and serve. USF calls these Scoop items: https://www.usfoods.com/great-food/scoop-.html https://www.usfoods.com/great-food/scoop-.html You may have noticed how lots of places, including mom and pop shops seem to suddenly have nearly identical menu items and it's partially because of this trend in the foodservice industry. They are basically taking the economy of scale that a large chain previously exclusively had and bringing it to the market to street sales (e.g. mom & pop joints). They simply took what they were doing for institutional food service and expanded it because it's substantially more profitable for them than selling the raw ingredients.

smsm42 5y ago

If it worked this way, why not have a $1000 pizza? Raise it a thousand times and... Obviously, it doesn't - at some point, raising it a dollar will start losing customers, it's obvious. Now, where is that point? Do you know? Does business owner know? Who would be the better expert in determining this point - they guy who runs a pizza place or a random guy on the internet whose experience is more like ordering pizza online?

danaris 5y ago
Yes, thank you for demonstrating that reductio ad absurdam is still absurd. "You could do better if you raised prices a dollar" and "you would do worse if you raised prices a thousand dollars" can absolutely both be true. In fact, in many, many circumstances, they will be.
rualca 5y ago
> If it worked this way, why not have a $1000 pizza? This blend of slippery slope argument is all fine and dandy, but the key point of this discussion is that there are operational expenses and revenue and if your business plan depends on a never-ending inflow of cheap labor from people willing to work for below-poverty wages to drive down your operational expense then not only is your business model completely unrealistic but you also have to take a step back and seriously considering your net contribution to society. I mean, think about it: why is a 1000$ pizza supposed to be a ridiculous idea but 8$/hour to make said pizza is not shocking? Is it reasonable to assume that the person making the pizza should be forced to work about 3 hours making pizzas before he could afford one of his own?

tluyben2 5y ago

There are a lot of factors we do not know here: I was an investor in a small restaurant as I wanted to keep it open after the owners quit. Upping anything on the menu $1 would've killed the business dead because all surrounding restaurants where already cheaper, but we had better cooks, however people are frugal or poor or both and they were not that much better to make the difference that much bigger. We still ran at incredibly thin margins: amounts that seems weird to me as an IT guy. It depends: depending on your location (both country and inside that country) it can very well be that you cannot up your prices even a cent or people won't come back. We had that with beer: our neighbour's restaurant upped the price of a bottle of beer with 10cts and suddenly all the regulars came to drink at ours and eat at theirs (cheaper). A pizza place in the center of a popular city with high ratings probably can up the prices.

bsagdiyev 5y ago
Before we left San Diego I offered quite a few times to go in, unpaid, to help out. This man works 6 days a week, open to close. I don’t know what sort of upbringing people on this site seem to have but it doesn’t feel “working class” to me most of the time.
- Dudeman112 5y ago
  >what sort of upbringing people on this site seem to have but it doesn’t feel “working class” to me most of the time Some people around these parts have ardently defended that 100k USD is poverty wage and that having a net worth of 1 million doesn't make you rich. So I'm inclined to definitely not believe "working class".
  - Ma8ee 5y ago
    I must have missed those people. People here are in general not poor, but most are neither completely out of touch.
- tluyben2 5y ago
  Actually helping run this place showed me how skewed this world is. I met many hospitality service owners, small ones mostly and most of them are lucky to take 5-10k profit in a year in total: that while most people I know in software and management get angry when they cannot go on multiple 10k vacations a year...

dagw 5y ago

raise prices by a buck a pizza. people will absolutely pay it. Perhaps in some cases, but far from always. Down the street from there are 3 'cheap' pizza places within a ~5 minute walk from each other, that all server basically identical quality pizza at essentially the same price. If any one of those where to raise their prices people would almost certainly not pay and just go to one of the other places instead. There is also a 4th place that serves much higher quality pizza and charges 50-100% more than any of the other places as it is. If they where to raise their price by a buck then people would no doubt still pay since the people who go to that place have already proven themselves less price sensitive.