The restaurant story

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Since I told my favorite story, “The Restaurant Story”, twice in the past few days  I figured I should write about it here. I posted it back in May of 2010 while I was still at my old company, clevermethod (here it is – ignore that it says Doug posted it, all my old posts were changed to his name when I left).  I’m just going to re-post it here with a few minor edits.

Mark Yellen, was the owner of a company, Appraisal.com, that was a client of ours back in the day. He passed away in 2010 and that was what inspired my blog past back then. In the early days of cm he told Matt, Doug, and I, a story, a parable really, that I’ve shared numerous times over the years.  After hearing of Mark’s passing I felt I should relay the story, though I know I don’t do as good a job of telling it as he did.

Here it goes:

It’s the story of one of my favorite restaurants that I go to all the time.  The food and the service are great and it’s always packed.  Shortly after it opened it was always so busy that there would  be a line out the door.   It’s a tiny restaurant with not much seating, and the most popular seats in the house are at the bar where the owner would cook/prepare food right in front of you and chat.   Every time I would go there I kept waiting to see them knock down a wall so they could expand into the area next to them.   But you know what the owner did instead?  He raised the prices a little.  And the line out the door got a little shorter.   So he raised the prices again.  The line got a little shorter.  So he raised the prices again.  Now there’s no line, but the place is always packed.  I think most people’s first instinct, like mine was, would be to expand the restaurant to add more seating to accommodate more people and to make more money.  But to do that costs a lot of money, and adds more staff and overhead, and potential for headaches, and there’s risk involved.  Instead, by raising the prices, he increased his margin and actually made that much more money (since no expenses were added) not to mention with less stress and headaches.  He was also able to talk with and get to know many of his customers since he had the personal interaction with those sitting at the bar.  This is partly what made so many of the customers so loyal and regulars.

Mark told it to us because it can apply to service based businesses too – instead of adding employees to be able to do more work, the other option is to keep a small team and raise your rates and do less projects.

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