Leadership1 publisher3 min readPublished
A $20 hoodie needs seven buyers to match the margin a restaurant makes on one at $80
An Entrepreneur contributor argues restaurants should price merchandise as marketing and let customers advertise them. The supplier costs he cites put a number on what that repricing has to deliver in volume.
The Board Room · Leadership desk
What happened
- An Entrepreneur column argues that restaurants, bars and other businesses with a following should keep merchandise affordable and use it to reward customers rather than price it as a profit line.
- The author reports that online suppliers sell customisable caps, mugs, hoodies, golf shirts and T-shirts for $5 to $15 an item, subject to minimum orders, with better materials costing more.
- He says venues routinely price those same logo goods at $25, $50, $60 or even $80, citing an Austin restaurant that wanted $80 for a hoodie.
- His evidence for thin demand is behaviour at the counter, where staff freeze, offer to fetch the manager, or say they may still have one or two in the back.
- His alternatives include donating merch profits to a charity with a publicised check, and handing out shirts and hats as prizes at bingo nights, quiz nights, foosball tournaments and online contests.
Compiled by The Board RoomSomething wrong?How this is made
Why it matters
- constraint The cheap-merch case pays only if unit volume rises between five and thirteen times, depending on what the operator pays per item.
- decision An operator now has to place merch on one of two lines: a revenue line measured in units sold, or a marketing budget that absorbs the $5 to $15 unit cost with no offsetting sale.
- contradiction The column asks for affordable merch, while its lead remedy keeps the $80 price and redirects the profit to charity, which leaves the guest who balked at the price still walking out without a shirt.
- cost The goodwill cost falls on the operator, since the column places the $80 logo garment at the end of a list of surcharges the diner has already resented paying.
Take the column's own numbers and the repricing has a price of its own. A hoodie bought for $15 and sold for $80 leaves $65 of gross profit per unit [3][4]. Sold for $20 it leaves $5, so thirteen buyers replace one. At a $10 unit cost the ratio is seven to one, and at $5 it is five to one [14].
The support for that extra volume is observational. "There never seems to be a huge demand," the author wrote, describing counter staff who answer "Hold on. Let me get the manager." when a customer asks to buy [6][7]. Two readings fit the same scene: nobody wants the hoodie, or nobody wants it at $80. The column does not include sell-through figures from any venue [17].
The $80 price may not be aimed at volume at all. It clears a unit or two a week at a high margin, on shelf space the lease already covers. The column's own concern is spillover, that charging that much for a logo garment risks spoiling the good feeling a guest was about to leave with [19].
The remedies mostly leave the price alone. One keeps the $80 hoodie and sends the profit to a charity, publicised with a large check and a local photographer on hand [8]. "You don't even have to lose money. Just share the profits," the author wrote [9]. That treats the goodwill problem. The guest who balked at $80 still walks out without a shirt.
The giveaway proposals do change the line item. T-shirts and hats as prizes at bingo nights, quiz nights, foosball tournaments and online contests; a free drink for the customer who posts a photo wearing the shirt; a free entree for the photo taken farthest from the restaurant, and an extra side of fries for anything overseas [10][11]. Priced that way, merch becomes marketing the venue pays for, at $5 to $15 a unit, with minimum order sizes attached [3]. Approval moves with it, from whoever runs the retail shelf to whoever holds the marketing budget.
A revenue line is measured in units sold and margin per unit, both of which a manager can read off a till. A marketing line is measured in repeat visits and posts. An operator who reclassifies merch this quarter inherits that measurement problem next quarter.
The context the column sets this in is fee fatigue. Its list of what a diner already pays runs through credit card penalties, minimum purchases, forced gratuities, health and wellness charges, sharing charges, processing, delivery and cancellation fees, and cake-cutting fees, with the $80 logo hoodie at the end of it [12]. The author's own position on where the money should come from is blunt: food and drinks, not a T-shirt [13].
What to watch
- An operator publishing merch unit volumes at both a premium and a low price point, which would test whether a lower price moves five to thirteen times the units.
- Whether supplier pricing stays inside the $5 to $15 band the column cites once minimum order sizes and premium materials are counted.
- Whether venues that hand merch out as contest or social-media prizes book it as marketing spend instead of a retail line.