The Delivery Dilemma: How One Restaurant Chain is Taming Pricey Delivery Costs

Norm Brodsky visits Mulberry & Vine, an NYC based chain dealing with high delivery costs.

Mulberry & Vine is a NYC-based, fast casual restaurant chain with a heavy lunch-driven clientele. They offer a fresh take on fast dining with healthy food, options to accommodate the trendiest of diet fads, and a comfortable, easygoing setting. Mulberry & Vine’s founders, Michelle Gauthier and Justin Schwartz, want to change people’s perception of what eating healthy is all about. Their motto – Live dirty. Eat clean – conveys perfectly how these two want to put the fun back into healthy eating. But when they say “live dirty,” they didn’t intend for that to include messy and expensive costs to deliver their healthy entrees.

Taming the Delivery Costs Beast

When Inc. magazine and I visited Michelle and Justin at one of their restaurants, I could see right away that these two were very dedicated to the success of their restaurant chain and had a lot of integrity for the food that they serve. They had a few challenges, and I asked them to share with me what their biggest were. The answer is one that every restaurant owner will identify with: delivery costs.

“Delivery has become a huge part of our revenue stream, in particular in the last three years. And it’s a challenge. Very few people are able to make money with delivery,” Michelle explained.

I understood only too well. One of my businesses is a fast-casual chain called Kobeyaki. My partners and I experienced the exact same problem with delivery costs when we had to introduce delivery options to fix an unprofitable branch. Delivery is expensive, and it can cut too deeply into your profits if you don’t think creatively about how to get around that. Mulberry & Vine had outsourced their delivery rather than pay to hire dedicated staff. Even so, delivery was costing them up to 35% of their profits. But I knew a trick that could help offset those costs.

Mulberry & Vine had a catering menu. I suggested that they simply base their prices off of their catering menu instead of their dine-in menu. Catering and delivery are pretty much the same thing. They both generate more costs to produce, so it makes sense that the delivery menu should reflect catering prices. With that simple trick Michelle and Justin can recover about 20% of their delivery costs, bringing the total expenditure into a much more manageable range.

The Right Way to Raise Prices

I had a hunch about their prices, so I asked them when was the last time they raised them. I could see on their faces that they probably hadn’t gone about price setting in an optimal way. I was right.

“We raised them about two months ago,” Michelle told me. But Justin was quick to add, “That was the first time in about five years.”

I gave them another tip that holds true for just about every business that exists. You have to raise your prices every year, even if it’s just by pennies to cover the rising costs of running your business. A lot of business owners get this wrong. They don’t want to upset their customers, so they keep prices as is until they have no choice but to raise them. When they finally do, the rise is gigantic, and the very thing they feared happens. Their customers get upset and complain. But no one notices a dime here, a quarter there. Michelle and Justin agreed that this was definitely the better way to go moving forward.

I left them with a lot to think about that I’m pretty confident they’ll take action on. Mulberry & Vine is a great little chain of restaurants with a smart team driving its success.

You can read my column in its original form at Inc. magazine’s website.

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