Recently, I had written that the old restaurants in Bangalore need to cash in on their loyalty factor and make use of the inelastic demand in order to remain profitable. Vidyarthi Bhavan in Gandhi Bazaar seems to have gotten it right, at least partially. Of course, they remain closed for lunch and dinner, and on Fridays, thus not making full use of the “capital”, but they seem to be pricing well.
What Vidyarthi Bhavan has recognized is that people come there because they want to eat at Vidyarthi Bhavan and not because they want to eat. I hope you get the subtle difference. I mean, no one will come to Vidyarthi Bhavan and see that the masala dosa there costs 2 bucks more than at the neighboring Roti Ghar, and then go to Roti Ghar. To make it sound more complicated, the demand at this level is inelastic.
Of course, if people eat at Vidyarthi Bhavan once and discover that the dosa there is over-priced, they may reduce the frequency of future visits. However, given the increasing population, some ultra-loyal customers, the historic value and stuff will make up for the reduced frequency. One thing I noticed when I went there last week is the 1-2 minute waiting time for each customer, which I think is optimal from a capacity utilization point of view – you are unlikely to turn away customers and you always have a full hall.
The masala dosa at Vidyarthi Bhavan is priced at Rs. 17, which is more than the price at most Darshinis (~15), but less than most other sit-down places. However, given that it’s “fast food” at Vidyarthi Bhavan it is better compared to a Darshini. Then, the dosa is much smaller than it is at darshinis (orders for 2 dosas is commonplace). Maybe the radius of a “normal” dosa is about sqrt(2) times the radius at Vidyarthi Bhavan.
Add to this a table turnover of 15 minutes (most people finish in that time, and you typically don’t loiter around there. you order, eat, pay and leave) and a perennially full hall, and you know why Vidyarthi Bhavan is still doing roaring business. While others are downing their shutters. ?