Meal Deals - The Death of a Takeaway!
By Kevin Moyse
They say the light that burns twice as bright burns half as long, and this applies to the humble takeaway as much as anything else. The one thing you want to do as a new takeaway is bring in new customers, and if you are an established takeaway you'll be wanting to keep existing customers at the same time. So in your eagerness you might dazzle your customers with your takeaway menu, enticing them with too-good-to-be-true deals and amazing offers, but if it's not done right you could be mixing all the ingredients for disaster.
The initial temptation here may be to simply undercut the competition. Collecting information on your competitors’ prices and lowering your prices to beat them is a simple idea, but imagine if every takeaway took this approach, entering into a vicious circle of ever decreasing prices, tighter profit margins and frantic marketing (think of all the new menu designs, menu printings and menu inserts you would need for every change - great news for us here you might think but actually we're like you, we're in it for the duration, and we want your takeaway business to succeed as much as you do!)
Believe it or not this constant undercutting has been a common practice in a lot of places, and many takeaway owners could tell you tales of pricing wars.
They've got the time to tell you, they're not in business anymore.
The problem with this approach - apart from those mentioned above – is that takeaways cannot afford to undervalue their products without it having a knock on effect. The upshot of this is that while your customers are marvelling at the value, the deals are costing the takeaway money instead of earning them profit. So while your customers are congratulating themselves on bagging a bargain, your takeaway’s rent, staff wages and bills are due and you’re struggling to make payments despite the number of orders you took last night.
To be blunt about this, meal deals can be the death of a takeaway. The tantalising money-spinner that it may appear initially will quickly burn through your stock, your capital, and your chances at longevity.
Give it some serious thought because you’ll be taking a risk. The truth is your takeaway can probably live without any meal deals. It may surprise you to learn that some of Cheap Takeaway Menus’ oldest and most successful clients have never promoted meal deals in their restaurants, aside from a little bit of upselling (adding fries and a drink for a pound, or adding more fries for 50p to turn a medium meal into a large one).
If you’re determined to have meal deals as part of your strategy, then to avoid sending your beloved business into an early grave, you need to be smart and creative about it. A little work to discover exactly how much your food actually costs to make and the appropriate mark-up can put you exactly where you need to be. Remember, a successful food outlet should run roughly 200% - 300% gross profit (i.e. before fixed costs like rent etc.) So a dish which costs £1 in ingredients must be sold for £4 = 300% gross, costs £3 sell for £9 = 200% gross.
The meal deal is a staple of the takeaway food industry. Customers accept them as a value choice. The reality is that the combination of items is – or should be – similar if not the same in price as it would be to buy the items individually. Ignore this fundamental rule and I’m afraid your takeaway is not long for this world…
The right meal deal is more about creating the idea of an attractive discount rather than offering such an obvious discount that it makes no money for the business. If done correctly and with a bit of thought, the individual orders you take will be larger, the items on your menu which have a higher margin will sell more than they would otherwise have done, the customer will still be happy to have received a good deal, the quality of your product will not have diminished and the bank manager will be just as happy that your takeaway is doing so well. Everybody wins!
Meal deals are popular because they appeal to that part of all of us that likes a bargain (or the illusion of a bargain) and they simplify a customer’s ordering experience (it’s called fast food for a reason). The right deal highlighted on your takeaway menu can become a popular order for the same customer who knows what they like and can get it quickly and at a good price. A perceived good price, that is…
So how should you approach meal deals if you’re set on including them? And what should you avoid?
The two for one deal, on the face of it, seems like a ridiculous offer for a business to make. They are basically giving away free something you have to pay for if you buy it on its own. Where’s the sense in that? There’s no secret. The two for one is an enticement, and should be marketed with that in mind. In other retail businesses it might be call a loss leader, because it stimulates interest in the other products on the menu. Buying two pizzas for the price of one might generate a sale of garlic bread, or fizzy drink, or other side dishes. So work out your most popular menu items, cross reference them with the items which are cheapest to produce, and put a two for one offer on one of them. However, only the big brand takeaways can afford to have two for one offers running regularly, so don’t have an offer permanently on your menu. Two for ones are great on a one off voucher instead of a menu. Give the offer a shelf life too. Put yourself in the minds of your customers (‘That two for one offer finishes tomorrow. If we want to take advantage of a bargain, we’d better order it tonight.’) . If you’re daring then you can set one up to counteract any mid-week quiet periods your takeaway experiences (a certain massive pizza chain has a two for one running every Tuesday, and you can bet they don’t do it because they’ve worked out Tuesday is when most people want pizza…).
The combo deal is where there’s money to be made. I have a menu in front of me right now and their combo deals, when broken down into their individual components and added up again is an average of thirty pence cheaper than buying the individual items themselves. But these deals are £18 - £30 and contain many of the higher margin items like breads and drinks. These people are doing it right. You want your customers to buy more and feel like they got it for less. The great thing is they did get it for less. BUT THEY BOUGHT MORE!
Indian restaurants also do this particularly well. A typical thali meal costs close to £30, saving roughly £8 -£10 on the total of the items if bought individually. Considering the costs of the ingredients that leaves plenty of profit left on the £30. Another great promotion is ‘spend over £20 and get £10 off your next order over £20’, which lasts 7 days - so maybe you have encouraged customers to spend more than £20 and they don’t come back to use the voucher or you’ve also encouraged them to come back earlier so they can save £10. Because it’s over £20 it works out as less than 25% discount! These are the kind of deals that work for you any way you look at them.
Promotions should be short term, and cyclical. A customer has a long memory when it comes to a good deal they feel they got once before, so if they see it again later in the year they’ll be tempted. Recent research has also identified what might be described as a ‘meal deal fatigue’ where so many particular deals have been around for so long that they become the norm and customers no longer see them as deals to be taken advantage of before they end. So even if you feel your meal deal offers are more or less working for you, shake them up a bit every now and then. That long memory we were just talking about will also notice when their favourite deal isn’t around anymore, so something new and similar on offer (with a slightly higher price perhaps…) might be their next order.
Think about people’s lives and habits. For many people Friday night is takeaway night, so target a deal for then. Or offer a ‘family night’ deal or a ‘date night’ special. Valentine’s Day was recently celebrated; it’s half term as I write this; Easter is coming up. Tailor deals to events on the calendar. This summer is the World Cup, how about ‘England match deals’ or ‘semi-final’ deals. The possibilities are myriad.
Also if you want to cut some delivery costs or promote orders at the counter introduce a ‘collection only’ deal.
Meal deals can indeed be the death of the takeaway. Throwing money away on gimmicky offers for short term benefits is not the way to go at all. Not doing your homework, not knowing your profit margins and your own costs or your restaurant’s place in the world around you will only hasten your takeaway’s end.
But if you’re adamant you want to use them then it is possible that you can make meal deals work well for you. They should be designed to entice your takeaway’s customers to buy more, not be given more. If a business, any business, doubles its prices for the same product then it might lose half of its customers. But that business will be making the same amount of profit on half the amount of product. If your customers are buying more, it’s going to cost you less. It’s simple but it’s clever. And it works!
Meal deals are actually as popular as they ever were. They have evolved, and so they should. Studies have shown that today’s main takeaway customers – the 18-30 years old crowd – just want their deals to feel different to the tired old deals of the past. Present your takeaway’s deals in a new way, a creative way, and they will work for you consistently and give you more of the one kind of customer your takeaway thrives on – the regular customer. As sure as meal deals can kill your takeaway, regular customers are what will definitely keep your takeaway alive and in good health.