Give Away Free Food, Increase Revenue 300% -- And Also Build A Stronger Community

from the nope,-free-doesn't-work-at-all dept

Tue, Aug 25th 2009 4:14pm — Mike Masnick

This year, it seems, there's been a big trend for restaurants to experiment with free food promotions. While I've been a bit skeptical about some of them, they do seem to be working wonders. David sends in yet another story of free food doing quite well for a restaurant. In this case, it's a pair of restaurants in Texas that are offering free entrees on Mondays. It's not all entrees, but apparently it's a pretty decent selection. Diners are still required to pay for any other food (appetizers, desserts, drinks, etc.) and (of course) tip. Apparently the promotion is doing amazingly well -- increasing the revenue on Mondays by 300%. While the profit margin is obviously down a bit due to the food giveaway, it's not that bad. The giveaway stuff was the lower margin items -- the paid food is higher margin. Plus, the restaurant is actually saving a lot of money because it killed its marketing budget, recognizing that this acts as a better promotion.

But, perhaps the most interesting phenomenon of all is that the restaurant has really used this "free Mondays" to better "connect with fans." Apparently, there's now a group of regulars, and it makes the overall restaurant feel more like a family gathering -- as patrons keep coming back, saying that "It makes it feel like it's a neighborhood restaurant." Those same people are coming during other days as well, now that they feel so comfortable at the restaurant, so it appears that it helps boost revenue on other days. Once again, when used properly, free absolutely makes sense as a part of a larger business model.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: business models, food, free

26 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

TheStupidOne, 25 Aug 2009 @ 4:32pm

Wait staff there
probably love Mondays ... it would be a lot busier, but if some of the patrons are like me and tip better for highly discounted or free items they could be making a killing.

Speaking of which I'm off to my Tuesday special ... $1 shrimp tacos
[ link to this | view in thread ]
Scott, 25 Aug 2009 @ 5:15pm

Food Costs
Mark up on food at restaurants can be between $100% to 300% depending. Wine and liquor tends to be more toward the 300% range particularly on the wind side. So, giving away select entrees is brilliant. Especially if they're pasta based.

Pasta has the largest cost to price charged ratio due to the ease of prep and relative low cost of ingredients which is why you generally get a huge plate of it.
[ link to this | view in thread ]
Anonymous Coward, 25 Aug 2009 @ 5:24pm

Basic restaurant business:

Food costs should be no more than 35%, and the lower end entrees shouldn't be more than about 50-60% of the total bill.

So really, giving away the entree on average will still make about a break even check, plus you wait staff get tips, the place is business on a monday when it might otherwise be empty, etc.

It's a nice idea, something that has been used many, many times before in various ways, such as two for one, second meal free, etc.

Very little "new" here, even if the term "FREE!" is in there.
[ link to this | view in thread ]
Anonymous Coward, 25 Aug 2009 @ 5:29pm

When I read this, I thought it was about a promotion about Denny's was doing with free Grand Slams. But alas, that was something I told Techdirt about several months ago, and never was published.

Oh well. We can always visit Denny's in Japan. Mmmm. Looks tasty.
[ link to this | view in thread ]
Cheese McBeese, 25 Aug 2009 @ 5:35pm

Re: Food Costs
"Pasta has the largest cost to price charged ratio due to the ease of prep and relative low cost of ingredients which is why you generally get a huge plate of it."

...which contributes to why so much of the American population is so fat.

Portion control in this country is out of control. Too many people extend their Costco value mentality to restaurants.
[ link to this | view in thread ]
Thomas (profile), 25 Aug 2009 @ 5:45pm

But ..
If the pirates steal all the free food, how will the chefs get paid?????
[ link to this | view in thread ]
Anonymous Coward, 25 Aug 2009 @ 5:48pm

Re: But ..
the chefs will find a way. they're smartasses.
[ link to this | view in thread ]
Anonyous Coward, 25 Aug 2009 @ 5:57pm

already tried in Melbourne
This is not a new model. There is a place in Melbourne called Lentils as Anything that has been operating on the "pay what you want" model for about 4 years now. Apparently, it is widely successful and the owner has made a lot of money from it.. more than he would have with a normal restuarant model.

At Lentils as anything, the staff don't have a fixed salary either.
[ link to this | view in thread ]
ashdjk, 25 Aug 2009 @ 7:22pm

15% of free
How do you leave a percentage tip for a free meal?

I'll gladly tip 100%.
[ link to this | view in thread ]
Anonymous Coward, 25 Aug 2009 @ 9:07pm

THEM STEALERS ARE DESTROYING FREE FOOD!!!
[ link to this | view in thread ]
Chunky Vomit, 25 Aug 2009 @ 11:38pm

Re: 15% of free
It is only impossible to tip 15% of a free meal if you are a jack ass looking for a lousy excuse to not pay your waiter.
[ link to this | view in thread ]
Anonymous Coward, 26 Aug 2009 @ 4:04am

Monday is a slow day anyway
Monday is generally a slow day for restaurants. They are packed full of people at the end of the week and the weekend but relatively poorly attended at the start. Creating a free promotion on a Monday gets people in through the door who will end up paying something for drinks, starters etc. It would be interesting to see whether they honoured the offer for people who only wanted to eat the free meals and didn't pay for anything else.

If we assume that the restaurant is a dine-in affair (rather than a takeaway) then the exposure of the owner to punishing costs is limited because there is a maximum number of diners who can claim at any one sitting and the cost of the food has been restricted by the offer (they aren't giving away the lobster thermador). The deal is probably limited to one free meal per sitting.

I dare say that it would be a different story if they were giving away as much beer as you can drink with a meal. There would be a lot of full plates and empty beer bottles in what was left of the restaurant!
[ link to this | view in thread ]
Another AC, 26 Aug 2009 @ 5:16am

Taxes
I worked in a restaraunt many years ago and I remember the owner getting dinged by the tax man for not paying the taxes for the free meal on a BOGO. I dont remember if that was state or federal, but needless to say that promotion ended in a hurry.

I wonder if that will apply to this place?
[ link to this | view in thread ]
Another AC, 26 Aug 2009 @ 5:17am

Re: Taxes
Actually now that I think about it, it must have been the state meals tax.
[ link to this | view in thread ]
Sean T Henry (profile), 26 Aug 2009 @ 6:31am

Re: 15% of free
You do the same thing you normally do tip a minimum of $1 per person (assuming that the bill is under $7). Other wise tip the 15-20% and add $1-3 or the price of the FREE item to the tip.
[ link to this | view in thread ]
ChrisB (profile), 26 Aug 2009 @ 6:52am

Re: Re: 15% of free
> or the price of the FREE item to the tip.

What is the point of going to a "free" night if you end of paying the same amount?
[ link to this | view in thread ]
Anonymous Coward, 26 Aug 2009 @ 6:53am

I have had cheap taco Tuesday for years... The local taco chain is not up to 5 Tacos for $5 on Tuesday (when I started the tradition it was 2 tacos for $1). Over the course of 20 years I must have eaten there on Tuesdays about 500 times and about 200+ other times of the week. I have even gone out of my way in different cities I knew they have the Chain I knew with it cheap taco Tuesday deal. 1 hour drive to get cheap tacos.... mmmmmmmm.
[ link to this | view in thread ]
chris (profile), 26 Aug 2009 @ 7:09am

Re: But ..
If the pirates steal all the free food, how will the chefs get paid?????

piratebay money in offshore accounts.
[ link to this | view in thread ]
Anonymous Coward, 26 Aug 2009 @ 8:41am

Re:
Who said that it was a new model?

Really people, no one cares if the model is new or old. They only care if it works or not.
[ link to this | view in thread ]
nasch (profile), 26 Aug 2009 @ 8:53am

Re:
1 hour drive to get cheap tacos.... mmmmmmmm.

Spending more in gas than you would have for expensive tacos... mmmmmmmmmm.
[ link to this | view in thread ]
Gene Cavanaugh, 26 Aug 2009 @ 9:44am

Free at restuarants
In support of what Mike is say, "Mike's Cafe" (different Mike) gave free side dishes with a low cost prime rib last night, here in the Bay Area of California. It was excellent prime rib, reasonable portion, with great potatoes and veggies. I don't know how they did, but the reactions I got from the patrons indicate it was a huge success.
BTW, the prime rib was $5.00, no other charges for the full meal.
[ link to this | view in thread ]
Lucretious, 26 Aug 2009 @ 9:46am

How do you keep out the bums though? I'd imagine there would be a sizable conga line of pissing-their-pants drunks coming in on a regular basis.
[ link to this | view in thread ]
Thomas (profile), 26 Aug 2009 @ 5:56pm

waiting for the lawsuit
from restaurants that charge for food.
[ link to this | view in thread ]
PersonMan, 27 Aug 2009 @ 9:08pm

It's true. I wouldn't ever have eaten at most of the restaurants on campus during college except that they all had free food days during the first week of classes. I really, really liked the food, especially when I could compare it to what I had been eating in the dorms.
[ link to this | view in thread ]
chicken recipes, 11 Nov 2009 @ 1:08pm

Free food is just great!
Free food is a great idea and if both customers and owners are happy, i hope it will stay that way. I always enjoy seeing fresh news ideas like this, especially in the restaurant industry!
[ link to this | view in thread ]
mm, 23 Jan 2010 @ 9:14pm

free food
I am glad you are all excited about free food in the restaurant industry. you are all right, the mark up of 300% TO 500%, they should be giving away free food! That is why so many restaurants go out of business, right!!Becauase they are raking in the cash!!!!! Well I beg to differ with all your views of free food. the sad reality is it is done to bring in more business in desperate times. And most likely the restaurant is on the verge of going out of business. The saddest fact is that a restaurant does not have a 300%-500% mark up. Most restaurants hope to have between a (realistic) 35% and 50% food cost. And that doesn't include operating cost(electricity,heating,liability insurance,repairs), and lets not forget about payroll. I think it is sad that most people think restaurants are printing money, when reality is it is the most difficult industry to be in. So lets celebrate free food from the restaurant industry, they deserve the desperation. Everyone should go to their favorite store and let them know, if i don't get things for free, i won"t be back. MORAL OF THE STORY "WHY WOULD YOU WORK HARD AND SELL A PRODUCT FOR A PROFIT TO BUILD YOUR BUSINESS, WHEN YOU CAN GIVE IT AWAY, GO OUT OF BUSINESS, AND COLLECT UNEMPLOYMENT!! Just a thought!!!!!!
[ link to this | view in thread ]