A Canadian restaurant lowered its prices this week, and though news of price tags dropping rather than climbing sounds unusual, the business strategy in this case is not, according to experts in the field.
Kinton Ramen, founded on Baldwin Street in Toronto in 2012, lowered the cost of its ramen bowl by approximately $2 on Monday, from $17 to $14.99.
The answer to the obvious follow-up question – how did a local business bring prices down while food costs remain high – is simple: franchising.
Kinton Ramen pivoted to a franchise model during the pandemic, expanding the local chain from 20 locations at the time, to 38, with sights set on 45 by end of year.
The expansion, which now spans Ontario, Quebec, British Columbia, Illinois and New York, has enabled the restaurant to negotiate with suppliers, according to Kinka Family Senior Director of Franchise Development, Karalyn White.
“We've really been able to leverage our buying power to reduce the prices in the restaurant,” White said.
Supply chain pains were reflected on Kinton Ramen menus during the pandemic, with their original ramen bowls – pork, chicken, beef or fried bean curd with mushrooms, a seasoned egg and scallions – rising from $14.99 to $17 over time.
“We're back to where our prices were in 2021,” White said.
Grocery inflation has come down from its double-digit heights a year ago, but food prices in restaurants have kept rising, with Statistics Canada reporting a 5.1 per cent increase in March from a year earlier.
One of the biggest advantages of franchising is this ability to lower costs for valued customers, said Kersi Antia, a professor of marketing at Ivey Business School. “You get access to vendors who would normally not give you the time of day because you don't represent enough of a volume for them,” Antia said.
When a restaurant suddenly becomes a part of a pool of buyers, the volume of noodles, for example, significantly increases.
That also comes as an advantage to the supplier, explained Ryan Picklyk, Senior Director of Strategic Partnerships and Franchising at A&W Food Services of Canada Inc.
“It's easier for them as well. They gain efficiencies, which can result in getting lower pricing, ultimately for their customer,” he said.
When Picklyk joined A&W 15 years ago, the fast food business had 700 franchise locations in Canada. Now, it has nearly 1,100, Picklyk said.
While Kinton Ramen locations are still in the double digits, Picklyk, who also chairs the Canadian Franchise Association’s board of directors, said they share a foundation.
“It's a group of individuals coming together to achieve more success together than they could individually,” he said.
