Give Away Free Food, Increase Revenue 300% -- And Also Build A Stronger Community

from the nope,-free-doesn't-work-at-all dept

This year, it seems, there's been a big trend for restaurants to experiment with free food promotions. While I've been a bit skeptical about some of them, they do seem to be working wonders. David sends in yet another story of free food doing quite well for a restaurant. In this case, it's a pair of restaurants in Texas that are offering free entrees on Mondays. It's not all entrees, but apparently it's a pretty decent selection. Diners are still required to pay for any other food (appetizers, desserts, drinks, etc.) and (of course) tip. Apparently the promotion is doing amazingly well -- increasing the revenue on Mondays by 300%. While the profit margin is obviously down a bit due to the food giveaway, it's not that bad. The giveaway stuff was the lower margin items -- the paid food is higher margin. Plus, the restaurant is actually saving a lot of money because it killed its marketing budget, recognizing that this acts as a better promotion.

But, perhaps the most interesting phenomenon of all is that the restaurant has really used this "free Mondays" to better "connect with fans." Apparently, there's now a group of regulars, and it makes the overall restaurant feel more like a family gathering -- as patrons keep coming back, saying that "It makes it feel like it's a neighborhood restaurant." Those same people are coming during other days as well, now that they feel so comfortable at the restaurant, so it appears that it helps boost revenue on other days. Once again, when used properly, free absolutely makes sense as a part of a larger business model.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    TheStupidOne, Aug 25th, 2009 @ 4:32pm

    Wait staff there

    probably love Mondays ... it would be a lot busier, but if some of the patrons are like me and tip better for highly discounted or free items they could be making a killing.

    Speaking of which I'm off to my Tuesday special ... $1 shrimp tacos

     

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  2.  
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    Scott, Aug 25th, 2009 @ 5:15pm

    Food Costs

    Mark up on food at restaurants can be between $100% to 300% depending. Wine and liquor tends to be more toward the 300% range particularly on the wind side. So, giving away select entrees is brilliant. Especially if they're pasta based.

    Pasta has the largest cost to price charged ratio due to the ease of prep and relative low cost of ingredients which is why you generally get a huge plate of it.

     

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  3.  
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    Anonymous Coward, Aug 25th, 2009 @ 5:24pm

    Basic restaurant business:

    Food costs should be no more than 35%, and the lower end entrees shouldn't be more than about 50-60% of the total bill.

    So really, giving away the entree on average will still make about a break even check, plus you wait staff get tips, the place is business on a monday when it might otherwise be empty, etc.

    It's a nice idea, something that has been used many, many times before in various ways, such as two for one, second meal free, etc.

    Very little "new" here, even if the term "FREE!" is in there.

     

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  4.  
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    Anonymous Coward, Aug 25th, 2009 @ 5:29pm

    When I read this, I thought it was about a promotion about Denny's was doing with free Grand Slams. But alas, that was something I told Techdirt about several months ago, and never was published.

    Oh well. We can always visit Denny's in Japan. Mmmm. Looks tasty.

     

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  5.  
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    Cheese McBeese, Aug 25th, 2009 @ 5:35pm

    Re: Food Costs

    "Pasta has the largest cost to price charged ratio due to the ease of prep and relative low cost of ingredients which is why you generally get a huge plate of it."

    ...which contributes to why so much of the American population is so fat.

    Portion control in this country is out of control. Too many people extend their Costco value mentality to restaurants.

     

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  6.  
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    Thomas (profile), Aug 25th, 2009 @ 5:45pm

    But ..

    If the pirates steal all the free food, how will the chefs get paid?????

     

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  7.  
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    Anonymous Coward, Aug 25th, 2009 @ 5:48pm

    Re: But ..

    the chefs will find a way. they're smartasses.

     

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  8.  
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    Anonyous Coward, Aug 25th, 2009 @ 5:57pm

    already tried in Melbourne

    This is not a new model. There is a place in Melbourne called Lentils as Anything that has been operating on the "pay what you want" model for about 4 years now. Apparently, it is widely successful and the owner has made a lot of money from it.. more than he would have with a normal restuarant model.

    At Lentils as anything, the staff don't have a fixed salary either.

     

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  9.  
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    ashdjk, Aug 25th, 2009 @ 7:22pm

    15% of free

    How do you leave a percentage tip for a free meal?

    I'll gladly tip 100%.

     

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  10.  
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    Anonymous Coward, Aug 25th, 2009 @ 9:07pm

    THEM STEALERS ARE DESTROYING FREE FOOD!!!

     

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  11.  
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    Chunky Vomit, Aug 25th, 2009 @ 11:38pm

    Re: 15% of free

    It is only impossible to tip 15% of a free meal if you are a jack ass looking for a lousy excuse to not pay your waiter.

     

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  12.  
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    Anonymous Coward, Aug 26th, 2009 @ 4:04am

    Monday is a slow day anyway

    Monday is generally a slow day for restaurants. They are packed full of people at the end of the week and the weekend but relatively poorly attended at the start. Creating a free promotion on a Monday gets people in through the door who will end up paying something for drinks, starters etc. It would be interesting to see whether they honoured the offer for people who only wanted to eat the free meals and didn't pay for anything else.

    If we assume that the restaurant is a dine-in affair (rather than a takeaway) then the exposure of the owner to punishing costs is limited because there is a maximum number of diners who can claim at any one sitting and the cost of the food has been restricted by the offer (they aren't giving away the lobster thermador). The deal is probably limited to one free meal per sitting.

    I dare say that it would be a different story if they were giving away as much beer as you can drink with a meal. There would be a lot of full plates and empty beer bottles in what was left of the restaurant!

     

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    Another AC, Aug 26th, 2009 @ 5:16am

    Taxes

    I worked in a restaraunt many years ago and I remember the owner getting dinged by the tax man for not paying the taxes for the free meal on a BOGO. I dont remember if that was state or federal, but needless to say that promotion ended in a hurry.

    I wonder if that will apply to this place?

     

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  14.  
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    Another AC, Aug 26th, 2009 @ 5:17am

    Re: Taxes

    Actually now that I think about it, it must have been the state meals tax.

     

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  15.  
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    Sean T Henry (profile), Aug 26th, 2009 @ 6:31am

    Re: 15% of free

    You do the same thing you normally do tip a minimum of $1 per person (assuming that the bill is under $7). Other wise tip the 15-20% and add $1-3 or the price of the FREE item to the tip.

     

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  16.  
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    ChrisB (profile), Aug 26th, 2009 @ 6:52am

    Re: Re: 15% of free

    > or the price of the FREE item to the tip.

    What is the point of going to a "free" night if you end of paying the same amount?

     

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  17.  
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    Anonymous Coward, Aug 26th, 2009 @ 6:53am

    I have had cheap taco Tuesday for years... The local taco chain is not up to 5 Tacos for $5 on Tuesday (when I started the tradition it was 2 tacos for $1). Over the course of 20 years I must have eaten there on Tuesdays about 500 times and about 200+ other times of the week. I have even gone out of my way in different cities I knew they have the Chain I knew with it cheap taco Tuesday deal. 1 hour drive to get cheap tacos.... mmmmmmmm.

     

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  18.  
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    chris (profile), Aug 26th, 2009 @ 7:09am

    Re: But ..

    If the pirates steal all the free food, how will the chefs get paid?????

    piratebay money in offshore accounts.

     

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  19.  
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    Anonymous Coward, Aug 26th, 2009 @ 8:41am

    Re:

    Who said that it was a new model?

    Really people, no one cares if the model is new or old. They only care if it works or not.

     

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  20.  
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    nasch (profile), Aug 26th, 2009 @ 8:53am

    Re:

    1 hour drive to get cheap tacos.... mmmmmmmm.

    Spending more in gas than you would have for expensive tacos... mmmmmmmmmm.

     

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  21.  
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    Gene Cavanaugh, Aug 26th, 2009 @ 9:44am

    Free at restuarants

    In support of what Mike is say, "Mike's Cafe" (different Mike) gave free side dishes with a low cost prime rib last night, here in the Bay Area of California. It was excellent prime rib, reasonable portion, with great potatoes and veggies. I don't know how they did, but the reactions I got from the patrons indicate it was a huge success.
    BTW, the prime rib was $5.00, no other charges for the full meal.

     

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  22.  
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    Lucretious, Aug 26th, 2009 @ 9:46am

    How do you keep out the bums though? I'd imagine there would be a sizable conga line of pissing-their-pants drunks coming in on a regular basis.

     

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  23.  
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    Thomas (profile), Aug 26th, 2009 @ 5:56pm

    waiting for the lawsuit

    from restaurants that charge for food.

     

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  24.  
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    PersonMan, Aug 27th, 2009 @ 9:08pm

    It's true. I wouldn't ever have eaten at most of the restaurants on campus during college except that they all had free food days during the first week of classes. I really, really liked the food, especially when I could compare it to what I had been eating in the dorms.

     

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  25.  
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    chicken recipes, Nov 11th, 2009 @ 1:08pm

    Free food is just great!

    Free food is a great idea and if both customers and owners are happy, i hope it will stay that way. I always enjoy seeing fresh news ideas like this, especially in the restaurant industry!

     

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  26.  
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    mm, Jan 23rd, 2010 @ 9:14pm

    free food

    I am glad you are all excited about free food in the restaurant industry. you are all right, the mark up of 300% TO 500%, they should be giving away free food! That is why so many restaurants go out of business, right!!Becauase they are raking in the cash!!!!! Well I beg to differ with all your views of free food. the sad reality is it is done to bring in more business in desperate times. And most likely the restaurant is on the verge of going out of business. The saddest fact is that a restaurant does not have a 300%-500% mark up. Most restaurants hope to have between a (realistic) 35% and 50% food cost. And that doesn't include operating cost(electricity,heating,liability insurance,repairs), and lets not forget about payroll. I think it is sad that most people think restaurants are printing money, when reality is it is the most difficult industry to be in. So lets celebrate free food from the restaurant industry, they deserve the desperation. Everyone should go to their favorite store and let them know, if i don't get things for free, i won"t be back. MORAL OF THE STORY "WHY WOULD YOU WORK HARD AND SELL A PRODUCT FOR A PROFIT TO BUILD YOUR BUSINESS, WHEN YOU CAN GIVE IT AWAY, GO OUT OF BUSINESS, AND COLLECT UNEMPLOYMENT!! Just a thought!!!!!!

     

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