Case Study

You Decide How Much Meals Are Worth, Restaurants Tell Customers

It sounds like a recipe for financial ruin: A restaurant that allows customers to pay what they think their meal is worth. Yet the business tactic is proving a success and pay what-you-like restaurants are spreading across Britain.

The idea was spawned by Michael Vasos, the owner of Just Around The Corner, a French bistro in north London, where customers often spend two hours drinking fine wine and gorge themselves on salmon stuffed with crab. Afterwards, they must work out their own bill and most, surprisingly, leave a fair or generous amount.

Mr. Vasoss success is such that three other pay-what-you-like restaurantsMju in Knightsbridge, central London, Lanes in east London, and Sweet Melindas in Edinburghhave copied the idea. If you give very good service and very good food, people leave a lot in tips, said Mr. Vasos. So I thought why not just leave the whole bill to customers and they can pay what they think its worth. As long as we gave a good show, I knew it would do well and weve been very successful from the beginning.

Mr. Vasos has stakes in four other restaurants, all with fixed-price menus. They, do not, however, take as much money as Just Around The Corner. The other restaurants take about 60 percent profit a week; this one takes between 65 to 70 percent each week, he said.

Just Around The Corners most generous customers were four Americans from the United States government who came in on Christmas Eve. They had quite a few bottles of wine, champagne and ate three-course meals. They paid 600 and asked the waitress if it was enough. In a fixed-price restaurant they would have probably paid around 250. This is why the restaurant does better, as people are more generous, he said. Mr. Vasos also has a foolproof way of ensuring that patrons do not underpay. When people pay a silly amount, I give them their money back and make them feel very small so they realize that if they want to come back, they should really pay more. He was amazed that pay-what-you-like restaurants were only just catching on as he has been running his business for 18 years. Im delighted that other restaurants have now taken the idea on board as it shows customers that others, not just me, can succeed, he said.

Margaret Coutts, with her son, David, and his girlfriend, Danielle Kronenberg, celebrated her 66th birthday with free-flowing champagne and a three-course meal, including lamb Wellington and supreme of chicken with tarragon and juniper berries.

The decision on how much to pay was left to David who put down 70. Mr. Coutts, 36, a carpenter from west London, said, If you can order a glass of Coke or champagne and still give a reasonable amount at the end of the evening why not go for the champagne. Mrs. Coutts, a chef visiting her son from Sydney, Australia, said, Being able to choose your own price does put you under a little added pressure because you really have to think about what youve eaten; in a way you have to become a food critic. However, its very clever because no one could ever complain. Kevin OConnor, who co-owns Sweet Melindas seafood restaurant, was taken aback by the pay-what-you-like policy and pinched the idea for Tuesday nights.

His business partner, Karen McLean, said, People are normally bang on with their prices. They can be wary about the lack of prices, but it tends to be because theyre worried that they havent paid enough. The Brits being what they are, dont want to offend. Its very rare that we get people who take advantage. It does happen, and when it does you just have to smile at them and hope that they come back on another night.

There were two boys who had a beer each and three courses each and left 50p for all the food25p each. We are leaving ourselves open to exposure, so it serves us right when people take advantage, but generally people are nice and dont. Mju, which offers contemporary European cuisine with an Asian twist also realized the potential of the pay-what-you-like policy after one member of staff visited Mr. Vasoss bistro.

Last year the restaurant decided to try the strategy out for the month of February and it proved so successful at bringing in new clientele that it is running it again for the next two weeks. Jeremy Payne, Mjus sales director, said, Our policy is slightly different as it is just on the food element of your bill, not for drinks.

Case Study Questions (20)

1. Design a PR strategy for the venture and what could be the best sources of generating investment amount (justify with logic)? (10)
   1. Marking rubic
      1. Selecting right target audience for investment (3 marks)
      2. Resource Requirement (3 marks)
      3. Activities required for identifying the market and bringing in investment (4 marks)

2. Develop a grand open event plan by giving detail reasoning and justification of your strategy. (10)

1. Marking rubic
   1. Grand Open Event
   2. Event calendar (2 marks)
   3. Event activities (2 marks)
   4. Resource requirements (2 marks)
   5. Sequence of activities in event (2 marks)
   6. Quality of response (2 marks)