New prices, inflation?
That’s Kev, the GM of Clover Newtonville, getting ready for the first big lunch rush at our newest Clover. What does he have to do with the price you pay for your chickpea fritter? Warning: slightly lengthy/ detailed post ahead.
We’ve been increasing our hourly pay. Today our average earnings/hour for hourly employees is $19.67/ hr. That’s just shy of the $20/ hr goal I set for Clover back in 2015. At the time I wanted to get that done by 2018. So it took a bit longer but we’re almost there. But I also thought we’d have to sell sandwiches for $11. Currently the Chickpea Fritter Sandwich is $8.87.
About that sandwich price… we set that price in April 2018. That was a long time ago. I just completed a survey of our competitors’ price changes since that time. They are all up, a LOT. Prices for the leaders in fast casual (Chipotle, Panera) are up over 15% over that same period. Others in our industry (Sweetgreen, Dig) have increased prices by 10-14%. Clover? No increases. So we’re a bit overdue. Next week you will notice Clover prices will be on average 7% higher than this week. That Chickpea Fritter Sandwich is going to be $9.32, which is a 5% increase.
Why increase prices? Our costs continue to increase, we pay our employees more, we pay our landlords more, we pay more for utilities, we pay more for the food we buy, we pay more for packaging, we pay more to repair equipment, we pay more in insurance. To remain healthy we need to increase prices to help cover these costs. We’re seeing particularly acute increases in costs over the past few months. But we’re also seeing long term trends. For example since 2019, Clover’s employer taxes and workers’ comp (our costs to employ) have risen from 14% of pay to 17% of pay. That means if I were paying an employee $100 in wages in 2019 I had to pay $14 in employer taxes and workers comp (not withholdings that the employee pays, those were another 18.5% on average). Now in 2021 we pay on average $17 for every $100 in wages.
Here’s a breakdown showing hourly pay, including tips, and taxes, over the past 2 years.
|2019||2020 – Feb||2021 – June|
|Average Hourly Wage||$14.37/ hr||$15.46/ hr||$16.04/ hr|
|Average Tips||$0.76/ hr||$1.88/ hr||$3.63/ hr|
|Average earnings||$15.14/ hr||$17.34/ hr||$19.67/ hr|
|Average taxes withheld||18.43%||17.34%||18.33%|
|Cost to Clover/ hr||$16.38||$17.78||$18.77|
Changing prices is one of the more delicate and complex things we do at Clover. It’s important we take it seriously and get it right. For some customers the price changes don’t mean much, but for other customers this is a VERY big deal. We know you love our food and rely on us for nourishment. We don’t want to put that out of reach for anybody.
- This year we have something really exciting to offer. For those who are managing food budgets (and we know that’s a lot of you) we have the Clover Club. This is a restaurant subscription program we’ve been testing quietly for 3 years and it is now available to all Clover customers. If you want to eat more Clover and save money this is for you. Savings of up to 40% off our normal menu prices.
When we think about changing prices, we look carefully at what others in the market are charging, we look carefully at our own costs, and then after determining the price by item, we change our own expectations for labor as a percent of sales (the way we staff our stores), food costs as a percent of sales.
We also take a hard look at our opportunities to re-invest in our staff. We’ve been working hard on improving pay for hourly employees and we want to make sure we improve pay for Restaurant General Managers as well. These are the folks who make sure Clover restaurants are running every single day.
And so this price change is going to be accompanied by very significant increases in General Manager pay rates. We’re targeting an improvement to General Manager base pay of about $10,000/ year, for some tiers this will be much higher. This is super exciting for me and I think the new pay structure will be very powerful for Clover overall.
|Tier||Sales volume||Current GM Base||New GM Base||Performance Pay (Max)||Total Pay (range)|
|Tier 2||$1M – 1.5M||$56,700||$75,000||$15,000||$75-90,000|
|Tier 3||$1.5M – 2M||$67,500||$90,000||$18,000||$90-108,000|
|Tier 4||$2M – 2.5M||$74,700||$100,000||$20,000||$100-120,000|
|Tier 5||> $2.5M||$81,000||$110,000||$22,000||$110-132,000|
I haven’t yet met somebody who likes to be charged more for something. I get that. But I hope some of this detail will help everybody understand why we are making changes, how important it is for our mission of getting more meat-eaters to fall in love with veggies, and how those price changes enable us to make other positive changes (like increasing pay). When you buy a Chickpea Fritter Sandwich you’re not just paying for that bite, you’re putting your $ to local farm systems and you’re putting your $ into the pockets of the folks working at Clover.
And that inflation question? I don’t know. Seems that there is inflation currently. Will it last? Ask an economist : )