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By Izzy Kharasch
If the reason you’re still giving away chips and salsa to your guests (and giving away some of your income in the process) is that you’re afraid of losing customers, it may be time to reconsider.
I was inspired to write this after I saw a post on social media: “I recently went to a local Mexican restaurant. I know times are tough for many restaurants, but they now charge almost $4.50 for a second basket of chips.”
I’m weary of people whining about prices going up and “I don’t get anything for free anymore.” I would like to find out where they are getting their gas for $1.99 a gallon and where they are shopping at stores that still have 2019 prices.
We as restaurant owners know that costs have gone up substantially over the past few years. Consequently, the practice of providing “free” chips is declining and will continue to do so over the next few years. Back in 2019 – before the pandemic threw the hospitality industry into a tailspin – el Restaurante published an article noting that a third of the restaurants it surveyed were charging for chips.
However, if you’re known as a Mexican restaurant that gives away free chips, it’s hard to change, as witnessed by the guest who immediately threatened to go elsewhere because he only gets one basket for free.
Prices Are Skyrocketing
I took a few minutes to calculate what “free” chips costs the average Mexican restaurant. A single basket given to each table costs the restaurant about $20,000 per year. If the average table enjoys two baskets per visit, that cost is now $40,000.
The biggest cost with chips is not the product but the labor. You want to serve a quality product that is fresh, and the only way to get that is to make them daily. We are now paying our staff $15 to $20 an hour or more to make these fresh chips that we are going to give away.
Albert Einstein was a pretty smart guy who said, “The definition of insanity is doing the same thing over and over again and expecting different results.” Restaurants are battling food prices and labor costs that have gone up faster than any time in the past 50 years. “Free” is killing you.
But Free Chips Are a Tradition!
What is your return on investment in free chips? When the costs of food and labor were substantially lower, giving away free stuff was not a big deal. However, we have seen our profit margins cut nearly in half, and giving away items for free does not make sense anymore.
Some of you may argue that free chips help sell drinks. The problem with that theory is that because the price of food and beverage is going up, most people will still only purchase one cocktail. Again, giving away food just doesn't make sense in today’s market.
Also, every non-Mexican restaurant client that I have that offers chips and salsa charges $5 or more as an appetizer, and that is just one basket!
If I Am Not Giving Away Free Chips…
Let’s discuss the alternatives to giving away free chips.
- If you decide to only serve the first basket free, then communication becomes incredibly important. The menu should state that the first basket is complimentary and each additional basket is extra. Also, the servers need to be well trained to communicate this new policy to the guest.
- You can stay the course and serve “free” chips, but as an owner you need to determine the cost of the food and the labor, then extrapolate that information for the year. Once you do that you can determine how much you need to raise all of your menu prices to continue this practice.
- You can do a combination of the first two options by raising menu prices a bit and offering the first two baskets for free.
- You can pull the band-aid off and begin charging for chips. However, we want to create the perception that by paying for chips, the guest is getting a higher quality chip, plus salsa, queso and maybe even guacamole!
These are tough times that call for creative ways to continue to be profitable. A few years ago, I could not believe that restaurants were beginning to charge for bread. Today, in many cities, this is so common that I was not shocked last week to see that the restaurant I was dining at charged $9.95 for bread. However, when I ordered the bread it was fantastic.
The only way to win on this issue is, if you are going to charge for chips, raise your standards and make the guest say, “Wow, that was worth it.”
Izzy Kharasch is the president of Hospitality Works, www.hospitalityworks.com, a restaurant consulting firm based in Chicago. He regularly contributes to el Restaurante magazine. Contact him at Izzy@hospitalityworks.com
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