3. Sales and Marketing
3.3. Pricing
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3.3. Pricing
As a start-up restaurant, it is very hard for Viet Village to set a premium price policy during the fresh establishment period because this act will hinder the early traffic coming to the restaurant. If a new restaurant debuts at a high price, the customers will find it hesitant to try because no consumer wants to risk their money. On the other hand, if the prices are too high, it will lead to a high expectation of customers to food and service quality, which are hard to be ensured because of the lack of experience. In order to lay out the most feasible pricing strategy for Viet Village, the information on normal spending of Taipei citizens and market prices of the restaurants of the same location will be analyzed. Besides, the cost structure of restaurant and expected mark-up rate will be estimated for the pricing purpose.
Pricing
According to the latest figures as of February 2020 announced by Numbeo20, a normal Taipei household of four persons roughly spend NTD 86,000 per month (without apartment rent) while a monthly spending of an individual is NTD 23,000. The cost of living of Taipei is 36.8% lower than in New York and ranks at 183th out of 460 cities in the world with the cost of living index at 63.12. Then, most of the spending is on markets (46.4%) while the spending on restaurant service accounts for 7.7%, at the fourth place after 21.6% on transportation and 10.9% on apartment rent.
20 Numbeo is a crowd-sourced global database of reported consumer prices, perceived crime rates, quality of health care, among other statistics.
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The figures above somehow indicate that Taipei people like eating out because after the essential needs like transportation and apartment rents, instead of cooking inhouse to cut expenses, they are willing to spend money on dining out with the expenses just only 3.2%
different from apartment rent. Also, according to a survey conducted by MasterCard on Consumer Purchasing Priorities in Asia Pacific region in 201721, on average, a Taiwanese spends around NTD 7,000 for restaurant dining per month, thereby indicating the eating out habit of this community.
21 According to “Taiwan ranks 4th in dining-out spending in Asia Pacific: survey”, published by Taipei Times as on December 08, 2017.
Figure 13. Distribution of spending in Taipei
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Subsequently, the normal spending22 of Taiwanese people on restaurant, in general, is as follows:
Restaurants Amount
(NTD)
Range (NTD)
Meal, Inexpensive Restaurant 120 90 - 200
Meal for 2 People, Mid-range Restaurant, Three-course 800 500 - 1,000 Mc Meal at McDonalds (or Equivalent Combo Meal) 130 120 - 150
Domestic Beer (0.5-liter draught) 59 40 - 120
Imported Beer (0.33-liter bottle) 70 50 - 120
Cappuccino (regular) 84.5 50 - 120
Coke/Pepsi (0.33-liter bottle) 26.58 20-30
Water (0.33-liter bottle) 19.79 15-25
The table indicates that the normal spending on normal meal at inexpensive restaurants (e.g.
food stalls, fast food, family style, etc.) falls within NTD 90 to NTD 150 with the median of NTD 120 for inexpensive restaurants and NTD 130 for fast food style. Meanwhile, the average payment for mid-range restaurants should be NTD 800, ranging from NTD 500 to NTD 1,000. Therefore, as a brasserie and bistro styled restaurant, which is categorized into
“Mid-Range Restaurant”, the average price of food and drink at Viet Village should be around NTD 130 to NTD 250 as per dish.
Besides, the inclusion of Value Added Tax23 (hereinafter referred to as VAT) and Service Charge is a matter of concern, too, the concern here is that if the menu prices just display the food and drink price and the customers are expected to pay an amount of VAT and/ or service
22 Basing on the figures announced by Numbeo by the end of February 2020
23 According to the prevailing laws of Taiwan as at the date of this thesis, the standard VAT rate for goods and services is 5%.
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charge in addition to the meal price, it will raise an uneasy feeling. And, if either customer thinks the serving manner or the staff service is not good enough, he/ she totally has the right to ask for a payment reduction as a compensation for their bad experience. Hence, to mitigate any possible issues, the quoted prices in the menu will be the prices excluding VAT and service charge but, the announcement of “The Prices Are inclusive of 05% VAT” will be mentioned at the bottom of every page in the menu for clarification while the service charge will be included in the food and drink price.
In terms of pricing, the cost-plus method (or, mark-up pricing) will be applied and, the unit price will be calculated as follows:
Unit price = unit cost price + (unit cost price * mark-up rate) Accordingly:
- Unit cost price: being inclusive of a specific product is inclusive of the average direct costs and average indirect expenses
- Mark-up rate: fixed at 100%
Besides the prices, the customers will pay 5% of VAT based on the billing amount and, this amount will be recorded into the Statement of Comprehensive Incomes at the year end and remitted to the Bureau of Taxation of Taiwan as required by laws.
According to “Restaurant Owner Shows Us Exactly How Much Dishes Are Marked Up”24 released by Business Insider25, the mark-up amount is expected to cover the operation costs of
24 Restaurant Owner Shows Us Exactly How Much Dishes Are Marked Up, written by Carolyn Cutrone, published by Business Insider as on 16 November 2012
25 Business Insider is an American financial and business news website founded in 2009 and owned by the German publishing house Axel Springer SE. It operates 14 national editions and an international edition.
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the restaurant and the salaries for its staff and, the mark-up rate that the common restaurants apply to their own business is around 100%, which means, if the cost price is at NTD 100, with the mark-up rate of 100%, the quoted unit price should be NTD 200 (excluding VAT).
Although the survey results of Business Insider were released quite long time ago and the actual mark-up rates of restaurant businesses nowadays indeed go higher from 158% to 636%26 as announced by Plate IQ27 recently, it is believed that the rate of 100% is appropriate for a start-up restaurant like Viet Village because it enables the restaurant to cover all costs and expenses with some profit while remains friendly and highly approachable to the customers. Even it means, the payback period of Viet Village is lengthened, it is worthy.
Demo Menu
Name of dish/ drink Price (NTD)
Spot 1 – Main Course
1 Broken rice with BBQ T-bones, steamed eggs and, pickles 250
2 Beef stew rice 230
3 Fried rice with beef, pickled cabbages and, sunny egg 200
4 Fried chicken rice 180
5 Fried rice with salted dried fishes and egg 160
6 Vietnamese beef/ chicken noodles 250
7 Vietnamese fish noodles 230
8 Vietnamese crab noodles with tomato and tofu 230 9 Vietnamese stir-fried crystal noodles with crab meat/ eel 230
10 Chicken/ pork/ Oyster congee 180
Spot 2 – Side Dishes
1 Fried silken tofu in homemade sauce 50
26 According to “This Is How Much Restaurant Mark Up the Price of Your Foods”, written by Sarah Kuta, published by Plate IQ as on 17 May 2019.
27 Plate IQ is the digital solution that provides fast, accurate, automated accounts payable and smart, business-transforming insights.
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Name of dish/ drink Price (NTD)
2 Spring rolls (2 rolls/ portion) 50
3 Autumn rolls (2 rolls/ portion) 50
4 Boiled veggies with special homemade sauce 60
5 Daily soup 60
Spot 3 - Desserts
1 Vietnamese jelly with fresh fruits/ raisin 50
2 Mixed fruits 60
3 Banana condensed sweet soup 60
Spot 4 - Drinks
1 Egg coffee (Iced/ Hot) 100
2 Pennywort juice with green bean paste 70
3 Daily fruit smoothie 60
4 Jasmine tea (Iced/ Hot) 30
5 Soft drink 30
Spot 5 – Daily Secret Deal (Bet your luck on this serving)
1 [Unknown serving: 1 main course +1 dessert + 1 drink] 380 Tuesday Serving (details of the serving is announced on social platforms)
1 Special Tuesday Serving 380
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Some illustrations of food offerings28
Broken rice with BBQ T-bones, steamed eggs and, pickles
Beef stew rice
Vietnamese crab noodles with tomato and tofu
Spring rolls
Vietnamese chicken noodles Egg coffee
28 These illustrations are created by Le Rin, a Vietnamese illustration artist.
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Vietnamese stir-fried crystal noodles with crab meat/ eel
Random Secret Deal