Is the Restaurant Wasting Money? Maybe.

Monday, February 2, 2015

I've been sampling some of the finer eating establishments in my town. Some have been fantastic, others less so. One sticks out in my mind: a restaurant that has built a reputation on its burritos. Upon my arrival, I was shocked by the very long line of customers ahead of me. The food must be great if so many were willing to wait, so I took their implied dedication as a form of social proof that the product being sold must be worth it. My resolve to eat at this place increased substantially.

Ten minutes later, when I placed my order, I was instantly amazed at what I saw. Everything I had learned about efficiency had been thrown out of the proverbial window. The managers of this restaurant had clearly integrated an assembly line system into their food preparation process. This, in and of itself, was not particularly shocking. Assembly lines have two main advantages over other methods of production:

1. They allow managers to hire lower-skilled (lower-priced) employees.
2. They allow production tasks to proceed more quickly.

Really though, how skilled does the average employee have to be to deposit already-prepared fillings into a tortilla? Obviously the first advantage didn't apply. Frustratingly, the second didn't appear to apply either. Not one but several bottlenecks were plainly visible while I waited for my meal to be prepared. There were several instances in which my burrito sat unloved, starved for attention from the line cooks, while (at the same time) many of the employees stood around waiting to perform their rote tasks.

The firm could likely have reduced its costs (and increased the speed of processing each customer order) by ensuring that each burrito is created by a single person. It seemed like a no-brainer that the managers would be thrilled to consider. But as time went on, I began to second guess myself. What if all of this inefficiency were intentional? After all, the effort heuristic would likely cause the restaurants' many customers to increase their perception of the value received from their meals. Perhaps visible, intentional inefficiency can lead to increased perception of value.

While that statement may not hold for the much maligned DMVs in this country, it just might hold for a restaurant. But there's one problem: one of the criteria upon which fast food is based is that it is, uh, fast. While a customer's perception of value might be increased by this inefficiency, it may also be reduced by the time required to receive his meal.

I'll leave the determination of the end result to the managers of the firm (unless, of course, they decide to contact me for a private consultation). That said, if you're looking to improve your profitability and are not subject to the effort heuristic, take a look at my book on software pricing. It's an easy read that will leave you with plenty of time for other things - like standing in line for a burrito.