Years ago, when I worked at Rockford Nehi RC Cola company, we had a policy of pile it high and sell it cheap. Fred Adamany ran the plant economically and used the additional margin to promote our products. We pretty much dominated the Rockford market. I think at one time we had as many trucks on the street as Coke and Pepsi put together. Bud Longanecker was my boss. He completed the picture by controlling the shelf space in the supermarkets.
He did this by setting most of the supermarket shelves in the Rockford and surrounding area. I was in constant amazement as I watched him set whole shelves; time and time again, in front of all the managers from the other companies. They seemed to be under his spell. He would start at one end of the shelf and set down packages until he got to the other. Rarely would he have to add an item or shelf spacing for the other companies.
One day I asked him how he accomplished this. One thing I knew was his total devotion to the job. One day we would wax the floors of a new supermarket that was going to open. Another day we would install new shelving in some little tiny store that no one else seemed interested in. I remember him paneling the interior of Jimmy Hughs little grocery on Broadway. But his reply was interesting and has provided me with one of my strongest business philosophies.
His answer was simple. Always clean the shelves really well; most people are lazy and dont. Then dont leave anything else out. Even if its 7 oz. Seven-Up, an item that was almost out of the market, find a place for it and make sure it fits. Make sure it doesnt touch the shelf above, and always make sure that there is sufficient supply so they do not run out between deliveries: sort of a Zen approach. Put yourself in your other. Then after you have taken perfect care of the retailer and the competition, take everything left for yourself.
I became quite experienced in this method and used it to great advantage throughout my soft drink career. Other companies personnel used to ask me how I got away with the things I did, and I would simply tell them. The funny thing about this was that they never listened. Their own needs and desires always got the best of them. They would improperly fit a package to the shelf or get too greedy, and I would walk in the door and knock their reset out of the box.
So its not looking too good. Ive just had a heart attack and bypass surgery. The one business I could count on is losing money. The restaurant in Rockton is closed but still costing me a couple of grand a month. What to do? My staff had some ideas. We sat in the sidewalk café and had a brainstorming session. They provided some answers about bringing in bar business. Some of them I accepted, some I rejected. Mostly cleaning up the specials and creating specials that were more acceptable. To that I added some changes of my own, and here again we get into philosophy.
Like any business, the restaurant business has a philosophy. The general trend of thought is that you make more money on some things than you do on others, higher markups. The traditional line is that you take the sting out of the higher-priced items by taking a lower markup and then recoup that by taking a lower markup on the cheaper items. I had always wondered what would happen if you straight line priced. I had experimented with it and been headed somewhat in that direction for years, but I had never had the guts to stick it out.
You see what happens when you offer specials that are too good, is that you have a tendency to sell down and reduce your total revenue. People who were planning on coming to your restaurant anyhow and ordering a certain item, people with certain price expectations, would be seduced by the lower-priced special and then spend less money than they would have. Usually, when I dabbled in this kind of thing, I had been turned off by the initial loss in dollar volume. But this time, I had nothing to lose; I was losing money anyhow.
Pork chops are cheap, especially the way I buy them, direct from the producer. In the past, using the standard wisdom, I had sold them for $10 or $11.95. This resulted in a multiple of as much as six or seven times their cost. On the other hand, an expensive item like fresh scallops would be on the menu for only two or two and a half times its cost. This time, I decided to go for broke. I listed pork chops for the Monday special at $3.95. The only requirement was that you had to purchase a cocktail. I told my servers that they were to say that it was a loss leader designed to sell cocktails.
More next week.
Mike Leifheits Hanging Out In Rockford reviews locally-owned restaurants, businesses and Rockford life. These columns are available on his Web site, IrishRoseRockford.com. Leifheit is owner of the Irish Rose restaurant in the downtown River District.
From the Sept. 28-Oct. 4, 2005, issue