Hidden Pricing Is Not Good for Business: A True Story

On a recent business trip to Chicago, my colleague and I stayed at the Sheraton Chicago Hotel & Towers. Nice hotel, but not the topic of this post.

We arrived at the hotel late so we decided to have dinner in the hotel’s flagship restaurant, Shula’s Steak House. At the outset, let me say that dinner was excellent. We ordered appetizers, salad, and vegetables, all of which were well-prepared, attractive-looking, and delicious. Service was also very good. So what is the proverbial “rest of the story”?

Secret Up-Charge for Drinks “On the Rocks”

We ordered drinks. I initially ordered Jack Daniels Single Barrel on the rocks, but amazingly, there was none in the house. Being a flexible person, I changed my order to Woodford Reserve on the rocks and my colleague had the same.

The various bourbon offerings were in the menu, together with their prices. The Jack Daniels Single Barrel was priced at $12 per drink and the Woodford Reserve was priced at $13 per drink. I might not have remembered but for having to take a second look at the list after discovering the absence of Jack. One of us ordered a second drink, but I’m not telling who.

The bill came after the lovely dinner described above. I checked the bill for general reasonableness as I always do and noticed three Woodfords on the tab for $45. Remembering the $13 price, I showed the bill to my colleague, who also specifically remembered the pricing at $13 per drink.

When our server stopped by, I asked her about the price of Woodford Reserve. She said she did not know anything about that. I then asked her to have a supervisor stop by our table. Shortly thereafter, an attractive and very nice supervisor came and inquired as to what I needed.

I asked her about the pricing of the drinks at $15 each, rather than the posted price of $13. She went away for a couple of minutes and came back. Her answer was that there was a $2 up-charge when drinks were ordered “on the rocks.” Let me preface the rest of my comments by saying that I was very nice in tone, word, and expression during the entire conversation.

I asked her, “Why is there an up-charge for ordering a drink on the rocks?” She replied, “That’s the way we do this at Shula’s.”

I responded, “That really doesn’t make sense,” as I pointed to my water glass. “I didn’t even have to ask and this glass was filled with ice water shortly after we arrived and it was topped off at least twice during the meal.”

She really didn’t have much to say, so I continued, “You will give me all the ice and water I want with dinner and charge me for a few cubes of ice with my drink? That doesn’t make sense. She did say, at least one more time words to the effect, “That the way we do this at Shula’s.”

She asked if I wanted the bill to be adjusted and quickly took care of the $6 adjustment (plus tax) and gave me the new bill. I thanked her again for her help and explained once again that we were quite pleased with the meal and service. I surely didn’t want any negative repercussions for our server, who was nice and attentive.

After receiving the adjusted bill, I suggested that this unknown and unexplained price increase represented a form of what I call “margin fraud.” It wasn’t exactly fair to the young lady, because she couldn’t exactly disagree with me, nor could she agree with me. But I’m sure that the conversation caused her to think about the secret pricing policy for “on the rocks” drinks.

I concluded the conversation by thanking her for talking with us and asking her to have someone higher up in the management structure give me a call to talk about my pricing issue.

No one has called me yet.

Lessons for Business and Life

Upon reflection, there are a number of observations or lessons to be drawn from an experience like we had at Shula’s Steak House in Chicago.

  1. Pricing in restaurants (or for goods and services) should be transparent. I don’t like pricing “gotchas.” Most people I know don’t like them as well.
  2. Secret pricing violates customer trust. Trust is developed or lost in every transaction or interaction we have with customers or clients. Many readers of this blog are trusted advisers to business owners. Many others are business owners. We cannot afford to raise issues of distrust with our clients and customers. People want to business with people they trust. If Shula’s Steak House has this policy for up-charges for drinks served on the rocks, what other “gotcha” policies do they have? I don’t want to have to think about it.
  3. The secret up-charge policy at Shula’s represents bad training for employees who must implement the policy. Employers must maintain trust and integrity with their employees. Creating an environment where secret up-charges are condoned has to have unintended and potentially far-reaching implications for employees. “If they (management) will do that, maybe it is okay for me to do … (whatever).”
  4. Secret up-charge policies are, in the long run, bad for business. I have purchased Jack Daniels on the rocks at many locations in the United States and around the world. Not once, over many years, have I encountered an up-charge for serving a drink on the rocks. Shula’s would be better off raising their prices $1-2 per drink if the goal is to increase revenue. However, customers might drink less at higher known prices (or management thinks they might). But at least, with posted prices, they would have a choice.
  5. If something appears not to make sense, it pays to speak up. By asking about the discrepancy in advertised price and charges shown on my bill, not only did I receive an explanation (however convoluted) for the practice, but I was also able to get the hidden charges removed from my payment. Perhaps, if enough other patrons had raised the issue with management before, the restaurant would have ceased the practice. In this particular instance it paid for us to ask about something that did not make sense – in life and in business, this can be a very useful trait to cultivate.

The $6 up-charge for our drinks last night was bad business. And Shula’s didn’t even get the $6 because I caught the discrepancy between the menu and the bill.

I don’t know what impact my experience at Shula’s Steak House in the Sheraton Chicago Hotel and Towers will have on business at Shula’s. What I do know is that my colleague and I will not be having dinner there again as well as probably all restaurants bearing the Shula name.

I did ask to have someone call me. Perhaps if someone does, I’ll feel better about the experience. Perhaps not. I remain open to a call.

But in the meantime, I’m writing this post, which will have an unknown readership. And this experience will go into my “speaker’s bag of stories,” good and bad, that help illustrate points when addressing audiences all over.

As always, please do comment on this blog. Or call me (901-685-2120) or email me (mercerc@mercercapital.com) to discuss any valuation-related matter in confidence.

Until next time, be well!


Please note: I reserve the right to delete comments that are offensive or off-topic.

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