On Monday, I went out for dinner with my friend Anne. We were trying a restaurant in the World Trade Centre (who knew that Johannesburg possessed a World Trade Centre?!). The restaurant is Gwefey, and it claims to “redefine Asian cuisine”. It’s one of those restaurants that comes with an interior designer and a tree constructed from fairy lights and tables that are slightly too large for intimate conversation. It also has many signs floating around, showing off its “Leisure Options Reader’s Choice Best of Joburg 2013” awards*.
*Best Romantic Restaurant, Best Business Lunch Restaurant, Best Asian Restaurant.
To be honest, I don’t really believe in Reader’s Choice awards. Case in point: Mugg & Bean won the Best Breakfast award. Which leaves me speechless.
And this opinion was not helped by a google search for Gwefey reviews. To say that they were “mixed” would be kind. The reviews ranged from “1 out of 5 because the stupid effing review form wouldn’t let me give it zero” to “OMG amaze loved it so authentically asian”. Which is really my way of saying that the positive reviews looked suspiciously…self-appraised.
So I arrived sceptically. Unnecessarily, as it turns out. Some reflections:
- Actually, the food was just fine (certainly not worth a 1 star out of 5).
- Although the seafood spring rolls were distinctively fishy*.
*even if you think that fish should taste like fish – you want the freshness of crisp caribbean shores rather than feeling like you’re suckling down dried kelp lifted off a Cape Town beach front.
- And the dim sum dipping sauce was basically rice vinegar.
But I’m getting distracted – because the main point of this post is the menu.
You open to page 1, and immediately, sitting pride of place, is the Peking Duck:
- Half Portion – R198
- Full Portion – R398
At which point, there is a slight constriction of breath, until you turn over and see that most of the Dim Sum portions come in at under R70 a plate. This would be the cue for the nervous bill-payer to settle down, breath a sigh of relief, and start choosing what to order.
Here’s my question
Why am I bringing this up? Permit me a math moment:
1 half portion + 1 half portion = 1 full portion
Therefore, if one half portion costs R198, then a full portion should cost (at most)
R198 + R198 = R396
But a full portion here goes for R398…
Does that make any sense?
If anything, you’d expect the cost of the full portion to be less than the combined cost of two half portions. It’s a question of fixed costs. Let’s say that you spend R100 on ingredients to make a half portion of peking duck, and R50 in fixed costs for staff and rent = a total cost of R150. It takes the same amount of time to produce half a duck as it does to make a full duck. So to make a full portion, you’d spend R200 on ingredients, and still only R50 on fixed costs = total cost of R250 (ie. not double the cost). And because your costs aren’t doubled, if you wanted to make the same gross profit margin, you wouldn’t charge double the price*.
*Profit margin on a half portion = (R198-R150)/R198 = 24%.
Profit margin on a full portion = (R398-R250)/R398 = 37%?
To answer my own question: no, it doesn’t make sense. At least, not from a costing perspective. And certainly, it doesn’t make sense that a single full portion would cost more than two half portions.
Perhaps some intrepid diner would notice this, and think to himself:
“This place must be full of the rich idiots that don’t pay any attention to price. If you ordered two half-portions instead of one full portion, you’d save R2! Luckily, I’m smart.”
But is anyone really that smart?
The trouble with thinking that you’re smarter than all those “rich idiots” is that, generally speaking, the rich are not fools. It’s why they are rich. Because a fool and his money…
So perhaps there is another reason. And clearly, I think that there is another reason, otherwise I wouldn’t be writing this post.
And here goes:
I think that the answer can be found on page two, when you glance down the prices of the dim sum, and you breathe that sigh of relief.
It also arrives at the end of the meal, with the bill.
When my bill came to the table, Anne turned to me and said “Actually, it wasn’t that expensive. Reasonable, even.” Which then turned into a conversation about price-anchoring, and the cost of the Peking Duck on page 1.
How Restauranteurs Prepare Their Menus
By placing an unusually high (irrationally high!) price on page 1, Gwefey immediately created an expectation of what I would be paying for dinner. So when the R70 plates of Dim Sum appeared, those prices were so much lower than the R398 peking duck that I immediately felt relieved. And ordered three different types.
Should I have felt relieved though?
R70 for a plate of three dumplings is at least 50% higher than what I would normally pay for dim sum in a high-end noodle bar, and it’s more than double what I would pay for dim sum in Chinatown.
But in the moment, that was irrelevant. I was thoroughly distracted by the expensive decoy.
The moral of the story: just ignore the most expensive item on the menu. Even the restaurant has no real intention of selling it.
And Gwefey – maybe you want to consider making it less obvious?
PS: if I’m forced to confess it, we actually did order the duck half portion. And it was delicious.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.