Tuesday, July 21, 2020

econlife - How a $350 Meal Became $35 Takeout by Elaine Schwartz

In Chicago, there is a restaurant called Alinea.

Legendary for its cuisine, Alinea’s multi-course meal can cost $395 a person (without the wine). At Alinea online, when you make your reservation, you also pay for the meal. But since the amount depends on the time and the day, diners can save some money by booking a Tuesday instead of a Saturday.

The Alinea website conveys their upscale image:

Now, with the pandemic lockdown, Alinea is vastly different from what it used to be.

Alinea’s Pandemic Takeout Plan

After Alinea’s owners saw Hong Kong’s restaurant reservations dive from 96 percent to zero, during late February they started to plan for the pandemic. They realized that staff would have to hand wash hourly, social distance, and do temperature checks. Once the lockdown started, they closed, furloughed staff, and sent all full time employees a $1,000 check.

Meanwhile though, they were designing their own kind of takeout. By requiring pick up time slots, they could pace the kitchen. With just one entree, volume was feasible.

On March 16, their first day, they sold 500 short rib Beef Wellingtons at $35 apiece. Figuring diners would return for a new entrée several weeks later, by May, they had moved onward to coq au vin and cassoulet. Meanwhile, nightly meal capacity ascended to 1,000 and then 1,250, revenue climbed, the staff grew, and they added courses. For their 15th anniversary, offering a six-course meal for $49.95, they sold 1,250 meals a night for 10 days straight. For Easter they sold 3,000 meals.

Below you can see an Alinea takeout reservation. I added the arrow showing the takeout time slot:

Our Bottom Line: Price

I would suggest that price was one reason for Alinea’s success.

In a market system, price sends a message. It tells customers that a $10 t-shirt is inferior to one that costs $100. However, for Alinea, we have the opposite. Few people assumed that a $35 price tag represented a meal equal to other establishments charging the same amount. Everyone instead perceived a bargain. It was their one chance to eat $350 food for one-tenth the price. As is always true for the market, prices said it all.

My sources and more: I enthusiastically recommend the Eater’s podcast, “How Alinea’s Takeout Business Became a Massive Success Story.” Then, with my mouth watering, I went onward to this article.

Our featured image is an Alinea dining room from their website.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.