In this conversation, Colin Webb, cofounder of Sauce Pricing, speaks with Moy Lombrozo, co-owner of Puesto, about the integration of dynamic pricing into their business model. Puesto, a family-run restaurant chain started in La Jolla, San Diego, expanded significantly over the last few years across California. Lombrozo details the restaurant's growth and its pivot to full sit-down dining, emphasizing the importance of maintaining a strong, family-oriented identity.
Like many restaurant groups, Puesto faced significant challenges during the COVID-19 pandemic, particularly with fluctuating in-store availability and the increased dependence on online delivery. Lombrozo highlights how delivery and to-go sales became crucial for their business, jumping from a mere 2% of sales to 12%. He also touches on the challenges of maintaining quality control in online deliveries.
The conversation then delves into the strategic implementation of dynamic pricing through Sauce Pricing. Their pricing strategy involved increasing prices as much as 8% during busy periods and reducing them by 10-20% in slower times to generate additional volume. This approach, facilitated by Sauce’s platform, proved highly beneficial for Puesto. It resulted in a remarkable 12% increase in overall revenue, amounting to an annual value of $72,000, and an 11% increase in overall orders. These figures underscore the effectiveness of dynamic pricing in driving incremental revenue and profits, especially in a landscape increasingly reliant on online ordering.
Lombrozo also discusses the seamless integration process of Sauce Pricing, its advantages over other tech integrations, and the positive impact on their online ordering business. He notes the importance of additional revenue in supporting their staff and enhancing the in-store experience. Lastly, Lombrozo offers insights for other restaurants considering dynamic pricing and envisions continued growth and success for Puesto, leveraging online ordering and catering services.
Colin Webb: So can you tell us the story of Puesto?
Moy Lombrozo: Yeah, sure. It's a family-run, family-started restaurant. There's five of us cousins that started the restaurant Puesto about 13 years ago down here in La Jolla in San Diego. It actually started as a fast-casual restaurant but then kind of developed into full sit-down dining based on where we saw the trends going and how people really liked to enjoy our food at a more leisurely pace. We slowly started expanding to a second location in San Diego, then to Orange County, where we now have four locations, and then to the Bay Area. We really believe in keeping this restaurant homegrown within the family. California has been great to us, so we're continuing to expand out here and in a bunch of stadiums as well, like at Petco Park in San Diego, up at Levi's Stadium. We're going to be opening at the airport next year here in San Diego. We're really trying to keep the identity of the restaurant strong here in California.
Colin Webb: That's awesome. Really amazing to hear. And congratulations to your family there.
Moy Lombrozo: Thank you.
Colin Webb: Could you tell me a little bit more about your journey into the restaurant world and how you got started?
Moy Lombrozo: There's five of us cousins and we're first-generation Mexican Americans. We grew up surrounded by this food, with lots of family gatherings to celebrate events like birthdays, graduations, weddings. Over the years, we found a local chef, Luisteen, who we hired to cater these events. He's our 6th partner, the number six guy who helped us start the concept. His food is really at the heart of Puesto. People just love it and that's what keeps them coming back. There's the great atmosphere of the restaurants, the drinks, the music, but really, his tacos are, I'd say, the best in California hands down.
Colin Webb: Wow. That's awesome.
Moy Lombrozo: Yeah, he's the man. He goes to Mexico City and puts on a show for people, even over there, and it drives people crazy.
Colin Webb: That's wonderful. Mexico City, by the way, is one of my favorite cities, if not my favorite city in the world.
Moy Lombrozo: Hey, so, you know, some of the best food in the world, period, is in Mexico City, hands down.
Colin Webb: Absolutely. How has the relationship between in-store sales and delivery evolved for you, especially recently?
Moy Lombrozo: Sure you know, COVID kind of threw a grenade into the traditional restaurant model, especially here in California. With three, four closures, I can't even keep track. We open, close, open, closed. Delivery, and to-go sales were actually what helped us keep all of our managers employed throughout the pandemic instead of furloughs by transitioning them to help with to-go orders and delivery. It played a huge role, actually. It jumped up from, let's say, 2% of sales to 10% to 12%.
Colin Webb: Wow. Yeah, that's pretty substantial.
Moy Lombrozo: Anything helps. It's a small margin business, when everything goes perfectly. So if you've already got a full kitchen operating and you can squeeze out a few more orders a day, whether to go or delivery, even with the fee, it helps the bottom line.
Colin Webb: On the topic of delivery, what do you find most challenging about online delivery?
Moy Lombrozo: I would say just quality control. The second the food leaves your restaurant, you can't control temperature. You can't control how long it takes to get there, whether or not the driver gets to the right address or there's just a lot that's out of our control. When you're used to curating a whole experience for a guest, if you're spending, let's say, $20 on a burrito in house and we're delivering it to you fresh off the kitchen line, I think it goes much further than through delivery, where we can't control the temperature, the consistency, things like that. But DoorDash is getting better every day. I had a delivery to my house yesterday. It took, like, 20 minutes. It was fantastic. So we're getting there.
Colin Webb: It's so important to be able to get that food the way that it was made to be prepared, rather than super late and super cold.
Moy Lombrozo: It's the constant battle, really.
Colin Webb: What got you interested in dynamic pricing?
It's that extra three, four, five orders a day that can make a big difference to your labor percentage, to end of the month, bottom line. - Moy Lombrozo, Owner
Moy Lombrozo: Basically what I said about COVID it's that extra three, four, five orders a day that can make a big difference to your labor percentage, to end of the month, bottom line. Anything to help out the operators, because I like to tell our managers there's nothing worse than a slow restaurant because that's when the mistakes happen. You want to keep it kind of engaged, kind of like a muscle. You want to keep it going throughout the whole day, and that's when you're at your best.
Colin Webb: Yeah, absolutely. That's a good analogy. Kind of like a muscle where you want to make sure it's always being used and getting stronger. Cool. How was getting started with Sauce to deploy dynamic pricing at Puesto?
Moy Lombrozo: Super easy. Once we gave you access to the DoorDash menus, it kind of was out of our hands. We just kind of verified that everything looked good at the end. So as far as onboarding, it was pretty seamless.
As far as onboarding, it was pretty seamless.
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Colin Webb: And how did the onboarding compare to the process that you go through with other tech or other marketing projects?
Moy Lombrozo: Yeah, that's definitely more challenging. Like, for example, when we have to create the menus in Toast to line up with DoorDash, it's a lot more cumbersome. We've got to use a lot more resources in house. Same goes if you want to use a third-party reporting system, like Ctuit or Compeat. With any of those, you have to build out all the menus yourself. Make sure every single word is spelled correctly. Both capital case lowercase abbreviations. Everything's got to be perfect, whereas you guys took care of everything, which we appreciate.
Colin Webb: And then how did Sauce overall help Puesto's online ordering business?
Moy Lombrozo: At the beginning, went from hundreds of dollars in extra sales to a couple thousand across the market that we chose, which is Orange County. So, like I said, every marginal increase helps. So we're happy to see both the markups, and we're also happy to see some discounted orders, because like I said, at 03:00 p.m. When the kitchen is dead, we're willing to take one to two dollars off an item in order to just keep the kitchen going, keep the staff working. It still helps.
At the beginning, went from hundreds of dollars in extra sales to a couple thousand.
Colin Webb: Yeah, we are happy to see that as well. What does extra thousands of dollars per month at your stores mean for your business?
Moy Lombrozo: Yeah, it means we can continue to hire our hourly staff. For every extra server that you're able to have on during the shift it's a better experience. Because like I said, the kitchen is pretty much staffed. You have every station pretty much staffed. So that's kind of your set cost. But if you're able to use your to-go and online sales to help bolster your in-store experience, that really helps. Same with any tips that we get from online or delivery goes straight to the tip pool for our tipped staff front and back of house. So they're more likely to stay at Puesto if they're doing well.
It means we can continue to hire our hourly staff. For every extra server that you're able to have on during the shift it's a better experience.
Colin Webb: One of the things that we see when talking with a lot of restaurants about dynamic pricing is obviously there's a concern about the guest feedback and how guests would respond to price changes. Did you have any concerns yourselves before getting started? And what was that kind of guest feedback journey like using Sauce?
Moy Lombrozo: Honestly, we haven't heard any negative feedback from the guests. I don't think they really see the difference on DoorDash because they're so used to fluctuating prices based on whether you choose delivery or pickup, they're kind of recalculating that premium in their head when they do delivery versus going into the store. They can make the calculation of, “oh, I don't need to leave 15% tip, or spend an hour” and maybe that calculation makes sense for them. I think guests orderers kind of take care of that themselves before they actually submit the order.
Colin Webb: Awesome. What would you recommend to other restaurant groups who are considering dynamic pricing?
Moy Lombrozo: I'd say you really have not much to lose. Obviously, the first half year that we did this was sponsored by DoorDash, but I think your pricing is pretty fair where if you're able to pick up an extra couple of orders, let's say even a week, you're able to cover the monthly cost to get onboarded and set up Sauce. If you are able to capture, let's say, five orders a week, that's less than one a day. You're probably covering your costs.
Colin Webb: And then what do you envision for Puesto’s future in terms of growth and online ordering, and how you see Puesto growing beyond?
Moy Lombrozo: We'd love to keep it going. We have a limited number of seats, especially during busy times. So if we're able to reach more people, whether they're stuck in their office or watching the football game on Sunday, the main reason we launch catering, it helps. It's marketing, it's branding, it's extra sales. It's a win, win, win really.