Here's my pricing philosophy: I don't compete on price. And you probably shouldn't either.
When someone says "your competitor is cheaper," my response isn't to lower my price. It's to demonstrate more value. Here's why that matters—both for how I run my business and how you should think about running yours.
Why Price Wars Are Losing Wars
Price competition is a race to the bottom. There's always someone willing to cut corners, slash margins, and deliver less—just to win on price. When you enter that race, you lose even if you "win."
Here's what happens when you compete on price:
- Margins shrink: Less profit means less ability to invest in quality
- Quality suffers: You cut corners to maintain margins
- Customers notice: They came for cheap, they leave when quality drops
- Loyalty disappears: Price shoppers leave the moment someone's cheaper
Customers you attract with discounts will only stay for discounts. You're training them to wait for sales and never pay full price. That's not a customer base—it's a liability.
Compete on Value Instead
The alternative to price competition is value competition. Instead of asking "how can I be cheaper?", ask "how can I be worth more?"
Value means different things to different customers:
- Quality: Better ingredients, better preparation, better presentation
- Experience: Atmosphere, service, the way you make people feel
- Convenience: Easy ordering, fast service, efficient operations
- Reliability: Consistency—every visit is as good as the last
- Expertise: Staff who know the menu, can make recommendations, solve problems
When you compete on value, you attract customers who appreciate quality and are willing to pay for it. These customers are more loyal, more forgiving when things go wrong, and more likely to recommend you to others.
What This Means for Your Restaurant
Apply this thinking to your restaurant:
Don't Be the Cheapest
If your positioning is "cheapest burger in town," you're one new competitor away from losing your identity. Price your menu based on the value you deliver, not on undercutting competitors.
Invest in What Matters
Higher margins from value-based pricing let you invest in better ingredients, better staff, better training, better equipment. This creates a virtuous cycle—better quality justifies better prices, which funds even better quality.
Attract the Right Customers
Not every customer is your customer. The ones who only come when you're cheapest aren't building your business—they're draining it. Focus on the customers who value what you do.
Your regulars—the people who come back week after week—aren't there because you're cheap. They're there because you deliver value they can't get elsewhere. Build for them.
Practical Applications
How to implement value-based thinking:
- Know your costs: You can't price for value if you don't know your margins
- Understand your value: What do you do better than competitors?
- Communicate value: Train staff to explain why things cost what they cost
- Raise prices strategically: Regular small increases beat rare large ones
- Cut the discounts: Every discount trains customers to expect discounts
A 10% price increase with 10% customer loss still increases profit. Do the math on your operation—you might be surprised how much runway you have to raise prices without hurting the bottom line.
This is how I think about pricing in my business, and it's the advice I give to every restaurant owner I work with: don't be cheap, be valuable.
Ready to Focus on Value?
Let's talk about building a restaurant that competes on quality, not discounts.
Schedule Free Consultation