Well, I feel like I'm being drawn into this thread. I wondered why my ears were burning. I guess it's because BWT mentioned Checotah, OK. That is the location of my theater, the Gentry Cinema, although it's closed and for sale. (See GentryCinema.com for details.)
First, I'm not sure where you are getting your population data, BWT. Perhaps in some certain mile radius around the town? Checotah has a little less than 3,500 people within the city limits, but most people live out of town. Sperling's uses 2009 data (I think) and shows there are over 12,500 people in zip code 74426. While pretty much every reference shows McIntosh County to have a little under 20,000 residents, as of the year 2000 census. So, how many people are in my market area? I count the 20,000 and leave it at that since I am the nearest theater for almost all residents of the county.
Now, how does that relate to how I priced my concessions? Well, it is true that Checotah is not as affluent as the wealthy metro suburb of 90,000. So, I priced many of my concessions based on what I thought the market would bear, and also on what my competitors 22 and 37 miles away were charging. And, I also considered a basic restaurant concept in my pricing strategy, and that is that COGS (cost of goods sold) should be held down to 30%. I normally only used the 30% figure as a 2nd check to see if I were charging enough to earn a decent margin. If not, then I would have to raise the price or discontinue the item.
It certainly does depend on the item when deciding how much to mark it up. Of course popcorn is marked up far beyond most other items. This is because people accept that it will cost several dollars and not just the small change a 30% COGS figure would dictate. One competitor had a $1 small popcorn, and our small bag seemed pretty small to me. The banks give that size away for free in Checotah. Therefore, I matched the competitors price and made it $1. I opted not to offer a medium size, although it could be argued that was a mistake, but it kept my paper goods cost down not to have to stock another size. I think it worked out about the same since some people would upsize if there were no medium and some would go down. Usually the free refill on large swayed a lot of people to go up, especially when it was for more than one person. Instead of a medium, I offered a large (85 oz.) bucket for $5. And, oh by the way, if anyone asked, the bucket held exactly 5 of the small bags, so it was a fair price based on volume.
On drinks, I had small (16 oz) for $1.50, medium (24 oz) for $2.50, and large (32 oz) for $3.00. Note medium isn't really fairly priced based on volume, but I still sold a lot of mediums just because that is what people tend to order when they are not sure what size they want. That is called "central tendancy" and it is something I learned in a statistics class somewhere. People usually choose an option in the middle when being surveyed, so I figured it would apply to concessions too. Seems to work. When somebody ordered a medium my margin was actually higher per volume of drink because of this. Anyway, the large is priced only a small amount above the medium to get people to upsize. Many fast food places use a similar strategy I think. Soda COGS is certainly well below 30% as well.
Now, candy is difficult to price at 30% COGS. You will end up with old candy you have to throw out and some unhappy customers if you try to price it that way. I charged $1 for all my candy. I didn't stock traditional theater candies or theater sizes, just the most popular regular sized candy bars, M&Ms, and Skittles. Some people asked for other things, but again I kept inventory costs down by offering fewer products. Most people simply choose from what you have if they want candy anyway. They don't really care that you don't have a specialty candy when they can get a more common item for $1. I usually paid 55 to 60 cents per candy bar, so the margin was reasonable. Candy is normally a small seller compared to popcorn and soda anyway. It is stocked as a convenience to the customer, not as a big money maker, so that is why I did what I did.
When I priced other items like hot dogs, I placed more emphasis on the 30% rule. That brought my price up to $1.50 for a hot dog and $2.00 for a hot link on a bun. We also sold other hot foods, but nothing above $2.50. I kept none of these hot food items hot. We cooked to order with special equipment. No roller grills or the like in our place. That eliminated a lot of spoilage.
My overall percap averaged around $2.50, so I wasn't far behind those national chains BWT mentioned. Keeping prices low keeps customers happier, and, in my thinking, coming back more often. That's how I set my prices in Checotah, OK. Does that apply in small town California? You decide.
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