Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Price Anchoring to Lift Average Ticket
Transcript
- Lucas: So Luna, you remember that sandwich chain we were looking at last month? The one that does the build-your-own overstuffed sandwiches? Luna: The one where you pick every single ingredient and the line takes forever? Yeah, I remember. Lucas: That's the one. Their average ticket was stuck around eleven fifty for two years. Then they added one item to the menu — a twenty-two dollar 'ultimate' sandwich with triple meat, avocado, and a fancy bread — and suddenly their average ticket jumped to thirteen forty. They didn't change the price of anything else. They just gave customers a high-priced reference point. Luna: So the expensive sandwich made the others look reasonable. That's price anchoring, right? Lucas: Exactly. And it's not some shady trick. It's just how our brains compare numbers. When you see a twenty-two dollar sandwich next to a fourteen dollar one, the fourteen sounds like a deal. Before the anchor existed, that fourteen felt like a splurge. Luna: But doesn't that just shift people from the twelve to the fourteen? How do you actually lift the average ticket overall? Lucas: Great question. Because in that case, some people did buy the twenty-two dollar sandwich — a few, maybe three percent. But the bigger effect was that a bunch of people who would've ordered the eleven dollar classic moved up to the fourteen dollar deluxe. The anchor pulled the whole distribution upward. Luna: So you're not just aiming for people to buy the anchor — the anchor changes how everything else looks. Lucas: Right. And that's the key insight for franchisees. If you're running a quick-service or even a retail operation, you can put a high-priced item at the top of the menu, or a premium product on the shelf next to your mid-tier one, and suddenly your mid-tier becomes the 'sensible' choice. Luna: But isn't there a risk of the anchor just sitting there unsold? Like, that twenty-two dollar sandwich probably isn't flying off the shelves. Lucas: It doesn't need to. In fact, you might not want it to. The anchor's job is to make everything else look better. As long as it's priced high enough to create contrast, it's working even if almost nobody orders it. Luna: Okay, so walk me through the practical steps. How does a franchisee actually test this without messing up their whole menu? Lucas: First, pick one hero product — the thing you sell most often, maybe thirty percent of your orders. Then design a 'premium' version that's priced about twenty-five to forty percent higher. It doesn't have to be wildly different, just enough to justify the price tag. Luna: And you put it at the top of the menu, before anything else. Lucas: Right, or in a prominent spot like a framed board above the counter. Then you run it for two to four weeks and track your average ticket. If it shifts up even three to five percent, you've got a winner. Luna: But what if the anchor actually confuses people or feels gimmicky? I've been in places where a $100 bottle of wine on a list of $30 wines just seems silly. Lucas: That's a real risk. If the anchor is too far from the rest of the range, it can feel like a joke. The sweet spot is usually one and a half to two times the price of your core item. If your core is ten dollars, an eighteen to twenty dollar anchor works. If you go to thirty, you're in caricature territory. Luna: So the anchor has to feel plausible, even if it's not the most popular thing. Lucas: Exactly. It's got to be a real product someone could order with a straight face. And that's part of the craft — you need to actually make a decent premium version, even if you only sell a few a day. Luna: I remember reading about a coffee chain that did this with a giant muffin — like a five-dollar muffin next to their two-dollar ones. It worked, but they also got complaints that the big muffin was always sold out. Lucas: Which is interesting — because if the anchor is always unavailable, customers feel like they're being tricked. You need to actually have it in stock, even if you make just a small batch each morning. The point is to be honest. Luna: So what about the service side? Does the staff need to play a role in this? Lucas: Huge. I talked to a franchisee who trained her crew to mention the premium option as a suggestion — not a push, just 'we also have the triple-decker with avocado, it's really popular.' That simple line, when used on maybe half the orders, added another two percent to her average ticket. Luna: So it's not just the menu — it's the conversation. Lucas: Right, and that's where a lot of franchisees miss the opportunity. They put a premium item on the board, but the staff never says a word about it, so it becomes invisible. You've got to script it. Luna: Speaking of the show — you know, it's funny, we're basically doing the same thing here. We put out these business conversations, and we don't run ads on them. A small group of listeners chips in a few bucks a month through buy me a coffee dot com slash fexingo, and that's what covers the editing and the hosting. It's a similar principle — the support makes the main thing feel more valuable. Lucas: That's a good analogy, actually. And it's true — we keep the show ad-free, and it's only because of that listener support. We're not asking for anything big, just enough to keep the lights on. Luna: And it lets us dig into these practical tactics instead of chasing sponsors. Anyway, back to the menu. Lucas: So another thing to watch is the placement on the menu. The anchor should be at the top, but also to the right — that's where the eye goes first. If you list items in a column, the top-right is prime real estate. Luna: And what about digital menus? Those are common now. Lucas: Digital is actually easier to test. You can change the anchor item overnight and measure the impact on mix. One franchise I know — a frozen yogurt shop — rotated different anchor flavors every week. They'd put a 'premium' flavor at the top with a higher price, and they saw their average ticket jump eight percent over a month. Luna: Eight percent is huge. What did they do with the extra revenue? Lucas: They reinvested it into better toppings and a loyalty program that actually works. But the point is, the anchor wasn't a one-time trick. They made it a system. Luna: So what are the numbers a franchisee should track? Obviously average ticket, but anything else? Lucas: You want to track the mix shift — the percentage of customers who choose the premium item or step up to the mid-tier. You also want to watch the gap between your core price and the anchor. If it's too wide, you might see people just skip the anchor and stick with the cheapest option. The sweet spot seems to be about a fifteen to twenty percent price gap between your hero and the mid-tier, and then the anchor sits another thirty to fifty percent above that. Luna: So you're creating a ladder. Core, mid-tier, premium. Lucas: Exactly. And the mid-tier is where you actually make your margin, so you want to steer people there. The anchor pulls them up from the core, and the mid-tier looks like the sensible compromise. Luna: What about the psychological side? Is there a name for why this works? Lucas: It's called the anchoring effect, and it's been studied for decades. Daniel Kahneman and Amos Tversky showed that any number you see first influences your judgment of what comes after. So if you see a $22 sandwich, your brain anchors on that, and a $14 one feels like a deal. Luna: And that's why it works even when people know what they're doing. You can't really un-see the anchor. Lucas: Right. But you have to use it honestly. If you create a fake anchor — like a product you have no intention of selling — customers eventually get wise and it backfires. Luna: So what's your advice for a franchisee listening right now? What's the one thing they should do this week? Lucas: Look at your menu or your product lineup. Pick your best-selling item. Create a premium version that costs about fifty percent more. Put it at the top of the menu, and train your staff to mention it on every order. Run it for two weeks and watch your average ticket. If it moves even two percent, that's significant. Luna: And if it doesn't move? Lucas: Then you adjust the price gap, or the placement, or the way you describe it. The key is to test, not to guess. Luna: I like that. It's a small change with a potentially big payoff. And I'm curious — do you think this works for service franchises too, not just food? Lucas: Absolutely. A cleaning franchise can offer a 'deep clean premium package' that's fifty percent more than the standard. It makes the standard look like a no-brainer, and some people will actually buy the premium. Same principle. Luna: So the anchor is really just a way to reframe value. Lucas: That's the cleanest way to say it. And it's one of those rare tactics that costs almost nothing to implement and can move the needle in a few weeks.