Hey podcast listeners. As you may know, Freakonomics Radio is a public-radio project, which means it is supported by you, our listeners. In other words, we need you to send us some money! Just go to Freakonomics.com and click on the “donate” button. Now, you may be thinking, hang on a minute. Sure, I like this podcast fine but it doesn’t really accomplish anything. I could see sending some money if it accomplished something but it doesn’t … does it? Alright, I want to tell you a story, about two people — Mandi Grzelak and Tim Barnhart.
Mandi GRZELAK: Hello!
Tim BARNHART: Hey!
Mandi’s a nursing student in Cincinnati. Tim is an engineer, also in Cincinnati. When the story begins, they didn’t know each other. Mandi, however, is a big fan of Freakonomics Radio…
GRZELAK: I listened to the podcast on a Thursday morning on my way to work and it was titled “What You Don’t Know About Online Dating,” or something along those lines.
This was around Valentine’s Day.
GRZELAK: And I had been single for a while and thought hey, maybe I’ll be able to date an NPR employee because that’s whose profiles they were looking at on the show.
The very day she hears this episode, Mandi Grzelak decides to sign up for online dating. The next day, she comes across Tim’s online-dating profile. They get in touch. The following Monday, they go on a date, to a burger joint.
GRZELAK: The first thing that I said when he pulled up and we gave each other a hug and I said I hope you like beer cheese because they have great stuff here and he’s like, “Oh my gosh, I’m already falling for you.”
That first date went well. Really well. Really, really, really well.
BARNHART: So you know we get the check and we walk out. And I get ready to walk her to her car and I got in my 4Runner, she got in her car, so I started to drive off. And there was just this overwhelming urge to not pull out of the parking lot. And instead, pull up beside her car. Bottom line, she hadn’t gotten in her car yet and she just started walking towards me and I walked towards her and we both knew what was getting ready to happen. It was smooch city. Couldn’t control it.
GRZELAK: It was a great first kiss. And that’s actually the same location where he proposed.
BARNHART: Yep. Exactly.
That’s right. Tim proposed to Mandi. And she said yes. They’re getting married later this summer. All because of Freakonomics Radio.
GRZELAK: We have you to thank.
BARNHART: Yeah, so thank you.
GRZELAK: I feel like we are forever thankful, because really, I mean, I would have not gone online that night. I definitely wouldn’t have chosen the site that I did without hearing the podcast. So it changed my life and you know, ‘till death do us part. Right honey?
Mandi and Tim: you are welcome. Our best wishes to the happy couple. As for the rest of you: if their story doesn’t make you want to go to Freakonomics.com and donate to our show, what will? What’s that? Oh, I hear you — yeah, that’s well and good for Mandi and Tim, you’re saying, but what about me? All right, we’ll give you something too. If you donate, we will send you a nice piece of Freakonomics Radio swag — a t-shirt or coffee mug or signed book — and, this is new, we’re also giving away one 13-inch Macbook Air, donated by Tekserve, the Apple specialty store here in New York. You are automatically entered when you visit Freakonomics.com and make a donation. You don’t have to contribute to enter, but we do hope you’ll support our show with a contribution. If you’re already a monthly supporter of WNYC or Freakonomics Radio, you’re automatically entered to win. So please go to Freakonomics.com now and click the donate button so that we can keep turning your dollars into true love.
VOICE: They’re fried and thin and crispy and super salty.
VOICE: Chewy and it’s salty and they coat the top of it with olive oil.
VOICE: So you’ve got kinda of a crunch and a soft and then a bite of butter. I mean, how do you not love that?
VOICE: They like the idea of drinks and chips and salsa as even a meal. And it’s endless, so they could definitely spend most of their stomach real estate there.
VOICE: Yeah, from a restaurant perspective, I don’t think it makes much sense to do that.
VOICE: I’m not sure, you know, it really doesn’t make much sense.
Larry TINGEN: Hey, Freakonomics. This is Larry Tingen, a math instructor at Cape Fear Community College in Wilmington, North Carolina. My fiancé Kelli and I went out to a Mexican restaurant and the first thing that happened was a server brought us chips and salsa – totally normal, happens every time, I didn’t think anything about it. Suddenly Kelli, my fiancé, asked me, “Why do they give us free chips and salsa?” This led to a long conversation, but no matter how hard we tried, we couldn’t square the circle. To us it seems to go against the restaurant’s financial interest because people always fill up on the free food which leads them to order a smaller and cheaper meal. As we walked out of the restaurant we were thinking, “What’s going on here?” When we got back to the car, the last Freakonomics podcast was playing and I said to Kelli, “I know who we should ask.”
All right, Larry – we’ll bite. Why do some restaurants immediately give you free food when their objective is to sell you food? Or, as Larry properly put it: “What’s going on here?”
VOICE: I’m not sure it is good logic.
VOICE: I try not to fill up on it because I want the rest of the food that’s on the menu.
VOICE: I really don’t know what it is, but I’m not a restaurant person.
* * *
On today’s show, we will try to answer a listener’s question about why it makes sense – or if it makes sense – when restaurants give you free chips and salsa when you sit down, or a basket of bread, or maybe some olives or pickles or other amuse-bouches. Say it with me:
VOICE: The Amuse-bouche.
VOICE: This little amuse-bouche.
Amuse bouche. Something that makes the mouth happy. On the surface, this practice may appear to work against a restaurant’s self-interest. They’re trying to sell you food, not give it to you. But does it really work against their self-interest? And if not, why not? Let’s say this from the start: it’ll be hard to come up with definitive answers to these questions. We looked for good data and research findings on the topic and – well, we were left hungry. But we’ll still do our best. We’ll talk to a pair of professors, both of whom happen to teach at Cornell.
Michael LYNN: My name is Mike Lynn.
He’s a professor of consumer behavior and marketing. You may remember Michael Lynn from our episode on tipping a while back. And we talked to Brian Wansink:
Brian WANSINK: I’m professor and director of the Cornell Food and Brand Lab and Cornell University.
We also hear from a number of people who work in restaurants.
VOICE: I think that food definitely makes a lot of difference in people’s moods, their energy levels, everything! And I think as a server you have to constantly be aware of that.
Including Nancy Silverton, who just won the Outstanding Chef award from the James Beard Foundation.
Nancy SILVERTON: I am the founder of La Brea Bakery, which is a international bread company now. And I am the co-owner of several restaurants.
We also talked to a lot of people like you, and me, people who eat in restaurants.
VOICE: They gave us chips and guacamole and salsa…
VOICE: They didn’t give us bread for free? No? I guess they didn’t give us anything for free.
VOICE: And if it’s good and it’s quality, I’m very willing to pay for it. It’s like, if I don’t want it, don’t give it to me.
So let’s get into the various explanations, shall we? One popular theory among diners for why it doesn’t make sense for restaurants to give you free food at the beginning of the meal has to do with what happens at the end of the meal.
VOICE: It always seemed too stupid to me to bring a bread basket because they’re just going to fill up and then they’re not gonna have dessert.
VOICE: I personally think it’s kinda stupid because then people don’t order dessert and dessert is my favorite thing.
But what if …
LYNN: It may not be in the restaurant’s interest to sell you dessert.
That’s Michael Lynn.
LYNN: After all, dessert is a relatively low-priced item… You’re going to occupy a table. If they’ve got enough other customers who’d be willing to order entrees, they’d be better off turning that table rather than selling you a dessert. And so I suppose you could argue maybe that’s reason to argue that they should give away free chips. They’ll fill up. They’ll get their meal, and then they won’t order dessert, and that’s good from the restaurant’s perspective, because then they can fill that table with another person who’s going to order an expensive entrée.
Brian Wansink, we should say, does not buy this explanation.
WANSINK: That just isn’t most restaurants in the world. And so if you have a restaurant that isn’t full all the time and isn’t dealing with table turns, to implement the strategy that was intended for a place that’s I don’t know, serving food like it’s an aircraft carrier, it’s probably the wrong strategy.
And at relatively high-end restaurants like Nancy Silverton’s …
SILVERTON: A dessert can be as high as $12, right? So that’s an item, we’re making money on that.
Okay, so the dessert theory may or may not make sense. Here’s another explanation for free appetizers – this one we heard especially from restaurant servers:
VOICE: Yeah, the free bread, it will keep them entertained for a couple minutes while you take care of anything you need to care of.
VOICE: Then I don’t have to deal with an angry, hungry…hangry person.
VOICE: And the last thing you want is someone is to be sitting at the table, irritable, hungry, waiting to have their order taken, and all of that can be solved with just this little free carb on the table.
Here’s Michael Lynn again:
LYNN: And that also is a very plausible argument…We know from research again on waiting that perceptions of speed and service increase customer satisfaction… Although, why not have the customer order their own appetizer and pay for it? I mean, if the customer cares so much about that down time while they’re waiting for their order, then they’re willing, they’ll pay for it. Right? And if they don’t care for it enough to pay for it, it obviously isn’t going to bother them that much. Why give them something free? They can talk to one another.
Nancy Silverton says that in her restaurants – which are in California, and Singapore – they do serve free bread, but after customers have ordered. Why? Here’s one reason …
SILVERTON: If somebody comes in really hungry and there’s nothing on the table, they’ll order quicker, eat and leave, and then you can turn that table, rather than if you give them something to sort of nosh on while they’re reading the menu, they’re not going to order as quickly.
So it may be that free bread helps the servers get their job done, which is good for the restaurant, or it may be that free bread slows down the ordering process, which is bad for the restaurant. You see how this is working out, don’t you? It may not be so simple to understand why restaurants give you free food. So, okay, here’s another theory, how do you like this one?
VOICE: People are drinking margaritas, and such, that salty, like chips or whatever, might influence people to drink more, I think.
VOICE: If it’s very salty, it does encourage them to order more drinks.
You’ve probably heard this idea before, right? Many restaurants make a bigger margin from drinks than food, so anything that makes you thirstier might work in the restaurant’s favor. We asked Brian Wansink what he knew about this.
DUBNER: Do you know anything very specifically about the relationship between, let’s say the free chips let’s say at a Mexican restaurant and the number of margaritas that my table is likely to order if I have them or if I don’t?
WANSINK: That would be a cool statistic, but, jeez, it’s got to be positive. You know, the bar food that they have, often the little salty bar stuff is often not cheap stuff. And so you’d think that only reason they’re giving it away is they must be making up for it in $5 beers.
Michael Lynn, however, is skeptical:
LYNN: Your theory really needs to say, look, somehow getting this free thing of chips is likely to cause me to choose a beverage. Because I’m going to have some kind of beverage, but to choose a beverage that the restaurant profits from more than a beverage like water that they don’t make much off of. Is there a good reason to believe that that happens?
Okay, so whether or not the chips or bread let the restaurant upsell you on drinks – what about upselling you on food? That is, instead of thinking of the free bread as a substitute for the food you may buy, what if it’s a compliment?
LYNN: By the way the technician in the other room here has another theory, and his theory is that: look, eating is addictive, once I get started it’s hard to stop.
DUBNER: Yeah, you prime the pump.
LYNN: And so if they’re going to…If they do give you chips before you order, it’s priming the pump and it’s getting you started so that you’ll then subsequently order more.
In this scenario, it really helps that the food the restaurant is giving you is free. Why?
LYNN: Free has a special attraction and appeal to us… Dan Ariely and some of his colleagues did a study where they offered students on campus a choice, they could purchase a fancy Lindt Chocolate for 15 cents, or alternatively a Hershey’s Kiss for one cent. Now when given that option roughly 70 percent of the students chose to buy the fancier chocolate.
But then Ariely and his colleagues subtracted one penny from the price of each chocolate. So the price difference was the same, but now the Hershey’s Kiss was free.
LYNN: Preferences switched, so that about 70 percent or two-thirds of the students in this condition chose the free Hershey Kiss. That’s a nice study in demonstrating that there’s just some special appeal to getting stuff free. So part of what may be going on is simply that by giving away free items you’re increasing the appeal of what you have to offer to the public.
WANSINK: It absolutely is worth pursuing.
That’s Brian Wansink again.
WANSINK: So I’ll give you an example, we wrote this really cool paper awhile back called “Fine as North Dakota Wine,” and we took people who came into this restaurant. And we gave them a complimentary glass of wine. It was actually just Two-Buck Chuck, Charles Shaw wine, that we’d taken the label off and put labels on saying it was either form California, a place known for wine, or labels that said it was from North Dakota, a place not known for wine. And half the tables we said, hey thanks for showing up tonight, we’ve got a complimentary glass of this new cabernet from California, poured it and it would be the same thing from other tables. Well people, again it’s the exact same wine but if people believe they’re drinking California wine, they stayed longer, they rated the wines better, they rated the restaurant better. They rated the food as better, simply because of this halo of this initial experience. Conversely, though, people who thought they were drinking North Dakota wine, they didn’t like the wine as much, they didn’t like the food as much, they got out of there faster. And when we asked people if they wanted to make reservation to come back, one guy even said, “Oh no, I’m really busy for the rest of my life.”
Okay, so maybe North Dakota wine – even if it’s not actually North Dakota wine – doesn’t win you many fans. But free stuff, generally, does.
WANSINK: You know, whether it be somebody gives you a silly mug, or somebody gives you a terrible flower, you like somebody that gives you a gift.
So maybe we “like” the restaurant a bit more when they give us free food – and maybe we want to reciprocate somehow – perhaps by ordering as much food as we would have ordered if they hadn’t given us that bread basket? Wansink’s research seems to show that the free food that restaurants give away doesn’t seem to change how much food people order. Why not?
WANSINK: Yeah, I think what’s going on is we have different scripts in our mind when we go to a restaurant of what we tend to order, if we’re a little bit hungry, or if it’s a celebration meal. That script may be I order a salad or an appetizer, and I order an entrée with some red meat, or I’m going to have two glasses of wine and maybe dessert afterwards. And you say that’s why I do. And if all of a sudden you end up filling up on, I don’t know, breaded mushrooms, or on bread, or chips, nope, nope, I’m not taking it into account, because this is what I ordered when I’m in situations like this. And you default back to this consumption norm for that type of restaurant or that type of celebration experience.
So maybe there’s a “consumption norm,” or an ordering script, that people don’t deviate from whether they get some free bread or not. Which might indicate the free food isn’t necessarily working in the restaurant’s favor, which might lead you to wonder why they give it out. Here’s Brian Wansink again…
WANSINK: This is very simple, and in some ways it’s a prisoner’s dilemma in that if every place offers free chips and all of a sudden you’re the place that doesn’t, well boy you’re looking pretty bad…That’s the reason there’s fry wars and drink-size wars in fast food places.
Michael Lynn agrees.
LYNN: If there’s going to be an arms race, then there’s some economic benefit to giving it as long as no one else is. So let’s assume everyone is charging for chips. If I start giving them away free am I going to get some competitive advantage? Absolutely, I think … And that’s then going to put pressure on other restaurants to start doing it because my competitive advantage is their competitive disadvantage.
Now, if you’re giving away food, for free, you do have to have some faith that customers won’t simply gobble up the free stuff and leave…
VOICE: It would be kinda awkward to go into a restaurant, eat the chips and salsa, and then say, “Thanks!”
VOICE: My friends would go to a restaurant just to get the free chips and salsa and then leave.
VOICE: Yeah! I wouldn’t do it though, I promise.
But of course some people just can’t help themselves …
VOICE: Oh yeah, definitely. As a college student I definitely over-indulged in bread baskets at restaurants.
VOICE: There was those people who would come in all the time that we’d recognize and they’d sample everything and then leave.
VOICE: Red Lobster’s cheese biscuits are awesome.
VOICE: Cheesy biscuits.
VOICE: The cheesy garlic biscuits, OH MY GOD.
VOICE: Just put that [BEEP] in your purse.
VOICE: Just keep getting cheesy biscuits and stuff them suckers right down in there.
Okay, so we’ve talked through some of the reasons why many restaurants give away free food. But, coming up on Freakonomics Radio: there are some deeper questions we haven’t gotten to yet:
LYNN: Are you really getting it free, or is the price of those chips, that bread, being built into the menu cost? And then the question is, why would you build it into the menu price rather than charging separately for it?
And maybe this whole free-appetizer thing is the result of nothing more than an accident of history.
Andrew HALEY: And so free bread becomes a part of that tradition…It was food that you could snack on between courses. But also meant that you were eating less of the expensive fishes and meat.
* * *
Today on Freakonomics Radio, we’re wondering why restaurants give you free food the minute you sit down, before you’ve spent a penny – that bread basket, or the chips and salsa, or that little shot glass of kale-and-melon smoothie.
VOICE: Gosh, Italian restaurants, Mexican restaurants, some of our favorites. In fact, I think we fuss when they charge for such things.
VOICE: I don’t like the charging. That should come with it, you know? That should come with the meal. Like, yeah.
VOICE: Being in the restaurant industry, I did have a couple a few weeks ago actually tell me because we did not do bread service where I worked, they wouldn’t be back.
VOICE: We try to offer it because that’s what people expect.
VOICE: And from personal experience, when that doesn’t happen, people get really mad.
VOICE: You know, in a lot of restaurants in Europe, they do have a table charge, which covers things like bread. We don’t do that here. And actually when we first opened… we didn’t serve bread. And then there was such an outrage or angry guests, so I kinda caved and said I guess we have to serve bread.
Alright… so we’ve come to expect that free bread when we sit down. But why?
Where does this expectation come from? We need to find someone who knows a little food history. How about … you? Yes, you, sir. Please tell everyone your name.
HALEY: I am Andrew Haley.
And what do you do for a living?
HALEY: I am an associate professor of American cultural history at the University of Southern Mississippi.
Do you have some particular area of research that’s germane to our conversation today?
HALEY: I study the history of food and restaurants.
Perfect! Alright then, Professor Haley, tell us what you know about the history of restaurants.
HALEY: People have been dining out for as long as they’ve been traveling. And so there have been taverns and hostels that provided food. But the modern restaurant has two early manifestations. It appeared in China first. But that remained localized to China. More famously it emerged in France in the late 18th century.
Now, these early restaurants weren’t serving free bread, were they?
HALEY: These early restaurants were serving free breads. But I think the free bread probably predates the restaurant itself. Before there were restaurants there were taverns. Taverns served a set dinner at a set time for a set price. And the accounts we have of these tavern meals suggest that bread, probably prepared by a local baker rather than the tavern owner, was part of the meal. And this made sense after all. When you went to one of these taverns you were paying for the meal with a single charge. And it was in the interest of the tavern owner that you filled yourself up with bread so that you would eat less of the expensive fishes and meats.
Wow. That does make sense – economic sense, in particular. For a tavern at least. But what about these early restaurants?
HALEY: Early restaurants pick up that tradition and they serve these table d’hote meals, these fixed price meals. And they have the same incentive as the taverns before them since the price of the meal is all-inclusive, they want you to fill up on bread. And so free bread becomes a part of that tradition. And it’s not just bread. They also sometimes provide crackers or pickles, and olives.
Andrew Haley, we should say here, is the author of a fascinating book called Turning the Tables: Restaurants and the Rise of the American Middle Class. In it, he makes the point that while fixed-price menus are still around, it is the a la carte menu, or a modified a la carte, that most of us are familiar with. He attributes this to the explosion of the middle class.
HALEY: So over the course of the 19th century, restaurants initially served these table d’hote menus to the very wealthy who are able to pretty much pay the set price and not worry too much about it. But by the mid-and-late 19th century, restaurants are trying to attract middle class diners. And middle class diners are more cost conscious… They want to be able to kind of pick and choose from the menu so they can dine out more affordably. You would imagine that these a la carte restaurants began to charge for bread, but it seems like the tradition of eating bread was extremely well-established. And so when we look at these a la carte menus, we don’t see bread listed. It’s just assumed that the bread will be on the table.
Okay, so the bread stays in the picture, for starters at least. But as Haley argues, more middle-class diners meant more restaurants – and what did that mean?
HALEY: Restaurants are facing a lot of competition in the early 20th century. There’s just more and more of them, and they are eager to attract this somewhat frugal middle class, and so they’re looking for ways to keep their prices down… And one of the things that they do is they introduce, some New York restaurants, especially New York hotel restaurants, in 1913, introduce a couvert, a cover charge of 10 cents, which is to cover bread and water, and any of the other free things at the table. And this is met with resistance.
When Haley says this was “met with resistance,” he doesn’t mean just one or two grumpy customers.
HALEY: Coverage in the New York Times in 1913 of this is somewhat incredulous that restaurants would actually try to charge for bread… Patrons are incredibly upset about the couvert charge… These patrons claim that it is an un-American, European import. And they complain about the charge, and in some cases bring their own bread to the restaurants to resist the charge. And it appears that restaurants cave pretty quickly and stopped charging for bread… And so I think that it’s indicative of the fact that the tradition of free bread had become very well-established in American restaurants.
But you know what? Fast forward to today, and that tradition seems to be on the wane – for a couple of reasons. One, now as before, is cost:
VOICE: We are one of the growing number of restaurants that do not give away free bread or snacks or food.
VOICE: It comes down to cutting costs.
VOICE: I think the reason they don’t do it anymore is the same reason a lot of people cutting back, even at the fast food restaurants. You see food is getting smaller. It’s to cut back costs… so they have to take the freebies. They have to take the freebies.
A restaurant, as you have undoubtedly heard, is a notoriously risky business. Roughly 60 percent of them fail within their first three years. Here again is chef and restaurateur Nancy Silverton:
SILVERTON: A restaurant that struggles needs to do everything to tighten their costs, you know, they have to cut down on labor, they might have to cut down on the types of tableware they use or the types of napkins they use, and you start cutting those costs just to survive. And I would say that probably one of the first things to go is bread service… It’s sort of an added-value item, right? I mean, it’s not something that someone is ordering…And so here is something that’s on the table that people don’t really appreciate–it is a food cost.
But Silverton says there’s another reason why she’s seeing less free bread in restaurants:
SILVERTON: I see on menus, it’s not on ours, but I see on menus, at the bottom of the menu, “bread upon request,” which is sort of interesting because a lot of people that are either, say, not eating carbs, a lot of people are trying to stay away from gluten say. So there are a lot of people who are not bread eaters these days. I happen to be not one of them.
You remember Brian Wansink?
WANSINK: I’m professor and director of the Cornell Food and Brand Lab and Cornell University.
But that’s not all he does.
WANSINK: So I had a really great experience a few years ago. I was in charge of the dietary guidelines for the U.S. Department of Agriculture.
WANSINK: Prior to that I’d written a bestseller called “Mindless Eating: Why We Eat More Than We Think.” And I actually have a book coming out called “Slim By Design: Mindless Eating Solutions for Everyday Places.” And what we try to do is we try to find in my lab at Cornell, we try to find easy ways that people can make changes through their immediate environment to help them mindlessly eat less without thinking about it.
Now I would assume, which is probably a bad idea, that when it comes to mindless eating, which is your territory, that a big basket of bread or a big basket of chips before the meal is about as mindless as it gets, no? It’s free, it’s put there without your asking, and you’re doing all this other stuff like talking to you friends or family, and starting to order, and having a drink. I’m guessing those are some of the most thoughtless calories that are ever consumed. Am I right or wrong?
WANSINK: You know, it’s terrible. I think the analog to this is you know, how do you eat less at Thanksgiving? You’d eat 9 percent less on Thanksgiving if you don’t eat the junk that is put out before the meal begins. And it’s the same thing with these restaurants. We don’t quite find it’s 9 percent, but we find it’s somewhere between in the range of 5 and 10 percent of the calories you eat are the calories you consume before you even look at the silly menu.
So there’s one way that restaurants could stop serving free bread or chips if it’s costing them too much. They could simply say: “hey, people, we’re helping keep you from getting fat.” But that’s probably not the message you want to send if you are a restaurant. So here’s another idea, from Michael Lynn:
LYNN: Why aren’t chips simply an item on the menu just like everything else?
DUBNER: As you said, there’s a growing literature on free and what it means, and what it accomplishes. And some of the effects are really strong and interesting there. I think what’s different about this scenario is let’s say I want to buy a car and the car dealer offers me a free something. You know, if it’s a really high-end car maybe they offer me free tickets to a ball game, or whatever it is. That’s nice, but it theoretically doesn’t diminish my demand for the product itself. In fact it might increase it. I get a new car, it makes it easier to drive to the game. In this case, however, the free thing would seem to be working against the paid thing itself. So you’re literally giving me some of the stuff that I’m prepared to give you money for but you’re giving me a portion of that stuff free.
LYNN: Another way of looking at this is, are you really getting it free or is the price of those chips, that bread, being built into the menu cost. And then the question is why would you build it into the menu price rather than charging separately for it. Okay? And there are a couple answers here, too. One is that we know from research that people don’t like being nickeled and dimed. And that if you add too many surcharges on to a bundle that people are purchasing, they become turned off and are less likely to purchase the bundle. So one reason that people may offer the free chips is to avoid this appearance of nickel and diming the customer.
What restaurants may be trying to avoid, Michael Lynn says, is too much of what is called “price partitioning.”
LYNN: What happens when we have separate prices and how do people evaluate separate prices relative to one common price?
Lynn says consumers generally aren’t crazy about too many separate prices for one product – like an airline ticket, then a fee to check your bags, and a fee to eat, or watch a movie… then the pillow fee, the pillow-insurance fee… Okay, I made that last one up – there’s no such thing as pillow insurance – yet. But you get the idea. So if a restaurant can bake the price of the appetizer into the menu prices, it might make sense to give it away. Nancy Silverton again:
SILVERTON: You figure that out ahead of time, what it costs to operate your restaurant, so that means: what does linen cost? What does health insurance cost? What does bread cost? And you tag that percentage onto what you have to upcharge your food so that you make the amount of money you need to be a successful restaurant, you know. And so it’s true, that bread is figured into the cost.
In other words, all the questions we’ve been asking today about why restaurants give you “free” food were probably the wrong questions. Because the food isn’t free. Or, as the late, great Milton Friedman might have put it: “There ain’t no such thing as a free appetizer.”