I have a loyalty card with a local fast food burrito chain called Freebirds World Burrito. For those of you unfamiliar with the chain, it is a competitor to Chipotle or Q-doba, with similar menu offerings. I'd rate them a little more highly than I would rate the other two, but that's a personal preference.
As a result of having a loyalty card with Freebirds, I am on their e-mailing list, which is a source of coupons and the occasional advertisement. Today, they sent me an email which contained the following excerpt about price increases [sic - All grammar and punctuation errors are in the original text.]:
Yes, it's true. For the first time in two years, we're raising our prices.
Simply put, over the last couple years prices have gone up everywhere. Given this, we were faced with the option of compromising quality and keeping our low price, or raising prices and keep selling great food. We stuck to our guns and chose not to bend on quality so that we can continue to offer delicious, made-from-scratch ingredients. This meant we had to rethink our approach on several menu items, which resulted in the removal of the Taco Combo Meal and an increase in portion and price of our nachos.
As you know, we're committed to giving you the best bite in town. But, we also pride ourselves in providing the best work environment for our rock star team. We take care of our employees because we know we have the best out there. Our Tribe Members make it possible to provide you with great food and unparalleled customer service on the daily. They're rewarded by the dollar incentive that you personally pay. Higher prices, therefore, mean we can maintain our standards and continuously reward our Tribe for their hard work. And for your contributions, we thank you.A couple of brief observations:
First, a price increase is not necessarily the result of inflation. While that is one obvious source of upward pressure on prices, it is not the only one. The fact that Freebirds ultimately decided to raise its prices suggests that it could not capture any additional market share by competing on price. I will note that Freebirds tends to be a dollar or two more expensive than Chipotle for the same burrito - and that's before the impending price increase.
Second, the missing menu items represent another kind of "price increase" that does not directly increase monetary costs, but does in fact impose a cost on the consumer in the form of reduced selection. Those customers who preferred the now-removed "Taco Combo Meal" now have a lower incentive to eat at Freebirds. This, too, suggests that Freebirds' primary difficulty is gaining adequate market share to support their business model.
Third, I find it a little odd that Freebirds would raise its prices rather than eliminating its loyalty program, which involves awarding customers points toward free food. Clearly eliminating the loyalty program is a more logical first-pass at avoiding a price increase without eliminating menu items. This is yet another consideration that leads me to believe that Freebirds is struggling to capture a limited market share.
Finally, when I eat at Freebirds, I do so because I want to eat a delicious burrito, not because I want to support the lifestyles of Freebirds' staff members. It's nothing personal, it's just that if I want to help a lower-income person, I donate to charity; whereas, if I want lunch, I go to a burrito restaurant.
I enjoy the comparatively zany atmosphere that Freebirds offers, the rock and roll music they play in each franchise, the friendliness of the staff, and the freshness of the ingredients. But only two blocks away from my local Freebirds is my local Chipotle, which has not increased its prices, and which also offers friendly customer service and a good-tasting burrito.
Simply stated, I can't justify spending more than $10 for a burrito and a soda when I can get a similar product for several dollars less with only minimal compromises on quality and atmosphere. I fear Freebirds has essentially lost me as a customer. I'll still eat there occasionally, but not nearly as frequently as I used to.