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In the ever expanding market of foods and services one has to wonder, what makes a restaurant successful?

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Introduction

Introduction: In the ever expanding market of foods and services one has to wonder, what makes a restaurant successful? How is it possible that a chain like McDonald's, whose food is less than what most consider quality, can be a dominating force in the market? How is it possible that a restaurant can charge over fifty dollars for a steak and ten dollars for a glass of wine and have customers glad to pay it? It is a cultivation of principles of economics, namely supply and demand. When these principles are applied to a restaurant in the proper manner, that is to say all aspects of a restaurant have been assessed and an appropriate decision is made upon the assessed information, a profit is bound to accumulate. Investigation: A comprehension of simple concepts of economics is crucial in understanding how they affect a business for better or for worse. Since supply and demand are the main concerns of restaurant owners, their evaluation will reveal a great deal about the economics behind their decisions. Demand is the amount of a good or service that consumers are willing and able to buy at a certain price (Billings 111). Say there is a product called a widget that normally sells for ten dollars. If we were to move the price up from ten dollars to twenty dollars, the demand for the widget will lessen because the consumer is not willing to pay or is not able to pay that amount. Conversely, if the price were to drop from ten dollars to five dollars, the demand would increase as more are able and willing to make a purchase. A simple demand curve illustrates the demand schedule. Figure 1: Demand Schedule for Widgets The demand can shift completely without a change in price. Say that people never have seen a widget but upon purchasing one, they fall in love with them. ...read more.

Middle

As you travel from location to location, there is a noticeable difference in the pricing of their products depending on the general wealth of an area. This is due to the fact that in different areas, people are willing to pay different prices for their meals and so by varying prices, McDonalds tries to achieve an equilibrium point with their customers. MacArthur Park lies in Rockville Centre, an upper-middle class neighborhood whose average earnings of persons with income is one hundred twelve thousand, three hundred sixty nine dollars thusly existing in a neighborhood able to pay for dinner. (Per Capita Income). In picking a location one must also know the prices of similar restaurants in the area. There can be a great elasticity in your demand depending on one's peers' prices not to mention one's own. It is wise to check the competitions' prices about once a week. In comparing prices the term used is "apples for apples". What this means is that in comparing prices of competitors restaurant owners see what the prices are for products of similar quality. One owner cannot compare the price of their fifteen dollar steak to the town's finest steakhouse that has aged prime beef in their meat lockers. He can, however, see how much the steakhouse is charging for universal quality products such as their beverages, and, in turn, act upon them. Soda is only ten cents a gallon and generally is of the same quality as it comes from the same supplier (Mahoney). The fact that it comes from the same supplier means that in an area, the cost to supply the product will be the same for all restaurants in that area. This equal quality and cost to supply among the products allows for a more realistic comparison of prices between restaurants. The number one goal of any restaurant owner is to reach equilibrium points. ...read more.

Conclusion

Therefore, the more cautious restaurant owner will make sure there is the supply to meet the demand and a constant price while the more risky restaurant owner will raise the price and hope for the same demand thusly grossing more revenue. Certain products however can automatically have a raised price. Lobster is a great example of such a product. When lobster is included in a menu it is normally at an extremely high price. This is because lobster is a food of prestige that is in a high demand a good portion of the year. This goes along with the principle that owners will raise the price and be more willing to supply a product that is in demand. The lobster is also priced highly because the cost for the restaurant to receive the product is high. Sometimes the cost for the restaurant to get the lobster is so high that there is very little profit made by selling it. A restaurant that has lobster on the menu at a set price all year long will make different profits. A method employed by restaurant owners is to use the word "seasonal" under the pricing for products like lobster so they can charge an amount that will guarantee them a certain amount of profit. Conclusion: When a restaurant makes profits, a bevy of options can be taken by the owner. Possibilities include: expansion; improving the current facilities; hiring more skilled staff; buying better products; etc. Each of these possibilities is designed to draw more people into the restaurant. As aforementioned, the more people an owner has coming to the restaurant, the greater the demand for their goods will be. The demand and supply concerns of a restaurant are so integrated into all main facets that most decisions made by owners invariably affect both the supply and the demand. From maintaining a modern ambience to pricing the meals to keep competitive, the motive remains the same: Gain more cliental and keep them as valuable customers. ...read more.

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