That 15% Discount on Taco Tuesday May Be Costing You More Than You Think
By ProfitWise - a Visa Business Plans company
A Mexican restaurant owner told us that Taco Tuesday was one of his busiest nights of the week.
The promotion was simple: discounted tacos every Tuesday. Customers loved it, the dining room filled up, and sales on what had once been a slower night had increased considerably.
From the owner’s perspective, the promotion was clearly working.
Then we started looking at what he was actually making on those tacos.
That’s when the conversation changed.
Let’s say a plate of tacos normally sells for $18. After accounting for the tortillas, meat, cheese, salsa, guacamole, garnishes, and everything else that goes onto the plate, imagine that the restaurant has $12 left before considering labor and other operating expenses.
Now offer customers 15% off.
The selling price drops by $2.70, but the ingredients still cost exactly the same. The cook doesn’t use 15% less carne asada because it’s Tuesday. The avocado doesn’t suddenly get cheaper, and neither does the cheese.
That $2.70 discount comes directly out of what was left on the sale.
Suddenly, a discount that sounds relatively small has taken a much bigger bite out of what the restaurant was actually making on that order.
Of course, that doesn’t automatically make Taco Tuesday a bad idea.
The promotion may bring people in on a night when tables would otherwise be empty. Those customers may order margaritas, queso, appetizers, desserts, or other items that make the entire check very profitable. Some may discover the restaurant through the promotion and return another night at regular prices.
That’s exactly why the discount can’t be evaluated by looking at the tacos alone.
At ProfitWise, when we work with restaurant owners, we like to look at what actually happens after a promotion is introduced. Did Tuesday sales increase enough to justify the discount? Did the average check change? Are customers adding profitable items to their orders? Did labor need to increase to handle the additional volume?
Sometimes the promotion turns out to be a great decision.
Other times, the restaurant is significantly busier, the staff is working harder, and the owner is surprised to discover that very little of that additional activity is making its way to the bottom line.
Mexican restaurants have another challenge when it comes to discounting because some of the ingredients customers expect most can fluctuate considerably in price. Avocados are an obvious example. Beef, chicken, cheese, cooking oil, and other staples can also move enough that a promotion designed six months ago may no longer have the same economics today.
That’s why an offer shouldn’t live on the menu forever simply because customers like it.
Go back and look at it.
Maybe Taco Tuesday is doing exactly what you wanted it to do. Perhaps it’s time to adjust the discount, change which tacos are included, require a minimum purchase, or create a combination that encourages customers to order items with better margins.
The answer will be different for every restaurant.
The important thing is to know what the promotion is actually doing for yours.
A packed dining room on Tuesday night feels great.
Just make sure you’re not giving away Wednesday’s profit to fill it.
