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Comment by rmason | Hacker News Reader

We've got a couple of local BBQ place's funded by proceeds from the sale of a local tech company. The founder just posted a video on Facebook yesterday explaining why their popular wings were being taken off the menu.

He breaks down their exact costs, why they're currently selling them at a loss and why they'd have to raise prices 50% to make the dish profitable.

A lot of people were angry when they announced the wings were being taken off the menu. Here's his reply, I thought it was absolutely brilliant marketing.

https://www.facebook.com/Saddlebackbbq/videos/94074725667252...

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It's a nice video, but I don't really understand the formula.

They make the claim that they need to price products assuming 30% goes to food / ingredients, 30% goes to labor, 20% goes to fixed costs, and the remaining 20% is kept as profit. Thus, the increase in wing cost means they have to increase the price from $14 to $22.

However, the labor and fixed costs don't increase just because the ingredient cost increased. They list the new price of wings as $6.56. Assuming the $14 price was based on the formula, this is an increase of $2.36. They could keep the wings on the menu for $16.50 and make the same amount of profit as before.

Exactly, this is so dumb. Our food costs went up a bit, so we have to give everyone a raise to match the percentages?

This is amazing!

Not about the chicken-wing issue per se... but the fact that a local small business has the wherewithal to make a corporate presentation on facebook for their community to judge.

That's really sweet.

great find. it might've been worth increasing the price though, to see if customers still bought them or not in practice. with a note on the table or menu explaining why the price increased.

want to, uh, just summarize it here?

The video isn't that long ;<). To summarize basically they have three choices:

1. Increase the price of wings 50%

2. Cheapen the ingredients

3. Take it off the menu until the price of ingredients drop

After surveying their customers they found demand would drop drastically if they raised prices. They don't want to cheapen the ingredients because it would hurt their brand so the only real choice was to take them off the menu.

There's another choice, they could opt to continue selling the wings at a loss, if that created goodwill or especially if it promoted the sale of other profitable items (e.g. drinks, other side items). This is called a "loss leader" and is a common marketing play seen in supermarkets.

Yeah, but I didn't want to watch it on Facebook.

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