For partners: We outline our approach to pricing.
Our Approach to Pricing
In this article we will be answering...
- How do we price our menus?
- How do we calculate COGs?
- How does stacking support our COGs calculation?
- What is your take home (net profit)?
How do we price our menus?
Our menus are carefully priced based on a number of factors.
First, we look at COGS calculations. Calculating the cost of ingredients and packaging gives us an idea of how much we need to charge for each menu item in order to turn a profit across the menu. Next, we conduct consumer research into the market to ensure that our retail prices match consumer expectations. To do this, we align each of our new brand launches with existing ‘target’ brands (or competitor brands) to ensure that the pricing we are proposing is fair. For example for our Burger stack, we reviewed brands such as Shake Shack (Texas Mess Burgers) and Honest Burger (The Burger District) which offer a similar style of menu. This way we are able to understand what consumers are willing to pay, and what a competitive price for our menus should be.
We take a 3-tiered approach to pricing by stacking our brands. Our brands range from Premium, Core and Value, which allows us to appeal to a broader sector of consumers without the brands competing. For example, in our Chicken stack we have Seoul Chicken, Flip the Bird and Wings & Tings. As a Premium brand, Seoul Chicken is more likely to appeal to consumers who are willing to pay more for less common cuisines such as Korean. On the other side of the stack, we have Wings & Tings, a more ‘Value’ brand which appeals to consumers who might be on a budget and looking for more common cuisines such as American.
How do we calculate COGS?
COGS (Cost of Goods Sold) are a direct cost associated with making a product. For instance, the cost of raw materials and packaging. However, it does not include indirect costs like labour or rent.
We calculate a weighted average for the cost of goods across our brands. This means that in a stack of three brands we aim for blended COGs of around 30%. We are constantly monitoring our supply chain to ensure we are aiming towards a blended COGS of 30%, which means that some products might cost more whilst others cost less. For instance, potato fries may cost less than 30% whilst sweet potato fries may be slightly above 30%.
To find out more about what is included in our calculation of COGS, please read this article: What are COGS?
Note: We aim for 30% COGs, but in the current market this is not fixed due to the rise in inflation.
How does stacking support our COGs calculation?
In order to capture as many customers as possible, and in turn allow partners to generate as much revenue as possible, we vary the pricing between brands across a stack. This means individual brands are not competing with each other and we are able to provide an offering for Premium, Core and Value customer segments.
Within each Premium, Core and Value category we benchmark and compare our pricing against a cross-section of competitors to ensure our pricing is competitive.
As a result, menu prices will vary across the brands for items that will cost the same to produce. For example, our menu prices for Seoul Chicken will be higher than Wings & Tings. As most sales come from the premium brand, the difference in COGs will balance out.
To see an example of how the COGs are balanced by stacking please read this article: What are COGS?
What is your take-home (net profit)?
Our partners net profit is determined by a number of factors including COGs, sales and sales-mix, customer refunds and aggregator costs. As these factors are variable, your take-home may change on a fortnightly basis.