Sharing Success

High School Movie Tickets

Maureen and I recently enjoyed a nice dinner out together before an evening at the movies. Perhaps because of Covid, it had been quite a while since we had visited a theater.

Paying for our tickets, the prices seemed a bit higher than what I expected. They were certainly much higher than the $4 I remember paying back in high school.

Then it hit me. I was comparing “Apples to Oranges.” Back in high school, a theater ticket may have cost $4, but my first “real” job (besides working on our family’s farm) paid $4.50 per hour. Back then, my “starter job” earned me enough per hour to buy one movie ticket, with just a little left over. Today in our area, a young person with the same type of “starter job” still earns about enough per hour to buy a movie ticket (at today’s prices) with a bit left over.

Today in our area, a young person with the same type of “starter job” still earns about enough per hour to buy a movie ticket (at today’s prices) with a bit left over.

Of course, this doesn’t work for everything. For example, automobile fuel has certainly risen faster than average. But on average, if you measure consumers’ wages in terms of “what you can buy” for an hour’s worth of work, the cost of many goods, including restaurant meals, have remained equally reasonable over time.

I feel that this offers an important business lesson regarding inflation. As business owners, the reason that cost-inflation is so frustrating is that it messes with our perception of “what things should cost” vs. what value they provide.

In our heads, our perception of “what things should cost” is based on past experience. (This is especially true when we were younger and had barely enough money to make ends meet, which caused us to pay closer attention to prices.) Like a $4 movie ticket, if it has been a while since we paid close attention to the cost of a particular item or service, we tend to best remember what it cost “back then” versus the reality of what it costs now.

As owners, we especially HATE raising our prices, even when necessary to keep pace with rising costs. Our natural concern is customer affordability at the new price point. But the reality over time is that, as the cost of many things gradually increases, average wages also tend to inch upward.

Based on my experience interacting with restaurateurs, I believe that restaurant food, particularly pizza and Italian food, remains highly affordable when compared “Apples to Apples” to what the average consumer can buy with an hour’s worth of wages.

To test this idea, I asked La Trattoria editor, Steve Rouse, to reach out to a several of our pizzeria customers and request printed menus from ten to twelve years ago. (Thankfully, many of them keep great records!) They also shared their current menu prices, which all had been raised within the past year.

I then asked Steve to compare their “back then” menu price for a premium large pizza versus government stats for average hourly wages earned by American consumers that year. Steve then repeated the comparison using their current menu prices and current government stats for hourly earnings.

Our sample was admittedly small. But when measured in “how much premium pizza can consumers afford with an hour’s wages,” even after recently increasing their menu prices, these successful pizzerias remain as equally affordable today as they were ten years ago!

Here is my point. In business, pricing decisions are highly personal, and as owners we often rely on “gut instinct” to help guide them. However, just like my $4 high school movie tickets, always remember that our gut feelings about “what things should cost” were most likely formed back when money was tighter, and we paid much closer attention to prices.

Assuming that you are confident in the superior quality of your offerings, feel equally confident in charging what they are worth! A few things are for certain. While cost-inflation is frustrating, the great news is that consumers still LOVE great-tasting restaurant food, and great-tasting restaurant food has remained exceptionally affordable!

On a personal note, Maureen and I wish you the best during the coming holidays and hope you enjoy special time together with your loved ones!