When Little Caesars recently raised the price of a $5 pizza for the first time in 25 years, it got a lot of attention.
The 11% increase does not take into account the total cost of the pizza now, which is $5.55. However, it is important to note the fact that one of the most famous pizza franchises did this.
Little Caesars raises the price of hot and ready pizza for the first time in 25 years
Little Caesars began franchising its stores in 1962, and currently has more than 5,000 outlets worldwide. When it comes to pricing for over 4,000 outlets in the US, the pricing is the same. This allows for standardization across the board so that customers can expect to pay the same amount no matter where they are. This is one of the advantages of owning a franchise.
By paying the same amount for supplies, marketing, and other related costs, franchisees save money on overall operating costs. This makes it possible to offer $5 pizza for 25 years without increasing the price. This is one of the perks of having a franchise, but not everyone can afford to get the most popular franchises like Little Ceasars. But pricing challenges affect all businesses, no matter how big or small.
Franchisees Facing the Challenges of Inflation and Supply Chain Crisis
Many factors go into raising the price of the products or services you offer to your customers. When it comes to perks, the price is generally set by the company. This removes the stress of justifying the cost increase because the franchisor sets it up. However, if you don’t have a franchise and run a small business, raising prices can be difficult.
Given the past two years of the pandemic along with rising wages, inflation and supply chain issues, price increases are expected. But finding the right balance is very important because you don’t want to alienate your customers. Therefore, you should use economics to determine your prices or price elasticity.
As a small business owner, knowing how much your customers want a product when the price goes down or how much they demand less when the price goes up will allow you to better gauge the price you can set. This is the elasticity of demand for the products and services that your business provides.
Furthermore, you should also take a look at some of the different characteristics of your products or services. This includes whether they have alternatives, are they a luxury or a necessity, how special are they, and last but not least, who pays for your products?
As a small business owner, you can make changes quickly if you know the price elasticity of the demands of what you offer. The key is to set your rates accordingly to better serve your customers in the long run.