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Is Selling Branded Merch at Cost the Recipe for Restaurant Marketing Success?

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Is Selling Branded Merch at Cost the Recipe for Restaurant Marketing Success?

any of Kat Carlson’s clients are local bars and restaurants selling branded t-shirts and hats.

“The way one tiny bar blows through swag – it’s like selling ice cubes to a penguin. She’ll pick up an order from me on Friday and message me Sunday that she’s sold out, particularly when we design something new. That speaks volumes about the community she’s built – and we even see her merch all over the world!”
Kat Carlson, owner of Hey Kat

The surge in popularity of restaurant and bar swag occurred during the 2020 lockdowns. Many establishments, facing a sudden income drop, turned to selling branded and limited-edition merch as a supplementary income stream. The trend has evolved beyond mere financial recovery, with “restaurant swag” now representing a unique and impactful form of brand promotion.

Like Hey Kat, print shop A&P Master Images, fulfilling online store orders for local restaurants like Lafa Mediterranean by Zeina’s in New Hartford, NY, creates merch-for-purchase that complements the staff’s passion for their work. According to CEO Howard Potter, the merch serves as a 24/7 promotion, pushing the restaurant’s brand into the public eye and creating a secondary source of revenue with the online store.

Post-pandemic, a new question has popped up: Should restaurants and other hospitality establishments sell their swag at cost, rather than trying to make a profit? Industry pros offer compelling reasons why transforming customers into walking billboards through budget-friendly merch could be the essential ingredient for restaurants seeking to enhance their brand visibility.

“I tell a lot of restaurants, ‘Sell your shirts at cost.’ This swag is a walking billboard, and anytime somebody’s paying to market your business, you’re winning.”
Zach Dewhurst, owner of Columbus Promos

Why Customers Want Restaurant Swag

Consumers definitely don’t shy away from buying merch from their favorite eateries and bars for a couple of key reasons:

  • Branded merchandise offers customers an extra way to show support. Whether it’s a logoed t-shirt, sweatshirt or hat, it provides customers another means to back the restaurants, bars, coffee houses and other eateries they love to frequent.
  • “These smaller businesses are often home-grown, mom-and-pop places, so once the local community gets behind them, it makes it easier to sell merchandise,” Potter says. “Consumers are proud to support smaller establishments.”
  • Customers really want to buy merch, just like at a concert or museum, because they’re major fans. People love repping their favorite hangouts, which is why those who’ve never even visited the location recognize Katz’s Delicatessen’s tote bag in New York City or t-shirts from The Greene Turtle in Ocean City, MD.

Selling Swag at Cost vs. Trying to Make a Profit

Potter advises his restaurant clients to make a profit on the swag they sell, but never mark up the product more than 40% to 60%. “It’s paid-for advertising by your customers, which keeps your brand out there at zero cost to you,” he says. “The product lasts longer than radio or TV ads, and your establishment will make money from repeat and new customers.” Potter says marking the shirts up too much means they won’t move.

“Since you want to sell branded merch in volume, you’re better off selling 100 t-shirts and making $5 each vs. selling 25 tees and making $10 from each sale.”
Howard Potter, CEO of A&P Master Images
Photo submitted by A&P Master Images

In the first example, a restaurant makes less profit per shirt, but in the end sells more tees and the brand gets out there 75 more times than in the second example. “You’ve netted more off of volume and ‘making less’ actually yields more all the way around,” he says.

Pros of selling swag at cost:

While selling t-shirt swag at cost may not generate direct revenue from the merch itself, the indirect benefits of marketing, brand loyalty and community engagement can contribute significantly to a restaurant’s overall success – since patrons wearing swag out and about act as mobile billboards, reaching people who may not have previously known about the establishment.

Plus, while a restaurant might not make a profit on the merch itself, the long-term marketing benefits can outweigh the initial cost. As far as promotional strategies go, a branded t-shirt emerges as a potent tool for brand exposure. According to a study done by ASI Central, t-shirts can generate an average of around 3,400 impressions and stick around for a minimum of 14 months. If a restaurant spends $10 on a shirt that it sells at cost, the impressive cost per impression is less than three-tenths of a cent – and gets 3,400 pairs of eyes on its branding.

For example, getting as much merch out there as possible builds:

  • Brand loyalty: Selling shirts at cost can create a connection with patrons, and an association with a positive dining experience. An emotional connection turns into repeat business and word-of-mouth recommendations.
  • Community engagement: When people wear branded tees repping a local establishment, it creates a sense of community beyond the physical space of the eatery or bar.
  • Credibility: Branded merch signals to newcomers that an establishment has a strong brand identity and patrons are happy to associate themselves with it.
  • Differentiation: For restaurants, breweries or coffee shops with loads of competitors, lots of patrons wearing branded tees can create a recognizable identity, leading to new customers deciding to try out the location.
  • Social media: Since customers love to share their experiences with businesses online, if they include a photo of themselves in a branded tee, it adds to the positive social proof.

The downside:

While selling t-shirts and other swag can be a great way to build brand awareness and promote a restaurant, if you sell at cost, you could be missing out on potential revenue if patrons are willing to pay a higher price to wear the brand. Plus, if customers are used to paying a certain price point for apparel in other contexts, undercharging can send the message that the merch is of lower quality or not as valuable.

Low-cost merch that’s not commensurate with the cost of a meal at an establishment could also create a discrepancy in how customers view the overall value of that eatery establishment. The other issue with selling items at cost is that a restaurant may not see the value in spending marketing dollars or upfront labor to invest in merch that won’t turn any type of profit.

“A restaurant’s decision to sell branded merch should be based on their demographic and how they want people to perceive them. For example, breweries more often have branded merch for sale than a dim-lit steakhouse.
Retail’s always a tough thing to predict, so this is a great opportunity for decorators to become more immersed in local establishments to get a sense of their ecosystem to help generate more deliberate merch ideas.”
Lucas Guariglia, CEO and co-founder of Rowboat Creative

Pros of selling swag at a profit:

A restaurant located in a resort town or major vacation destination, or a long-standing bar in a college town, most likely could sell merch at a decent profit, since the items carry a higher perceived value for patrons. Tourists visiting a Hard Rock Cafe location anywhere in the world will shell out more money than they’d normally pay for a t-shirt or hat at retail just to boast visiting a location in Honolulu or Dublin.

“Retail-pointed and for-profit merch should correlate with the aesthetic and story of the restaurant. For example, a decorator could produce higher-end unique merch for very upscale restaurants and hospitality groups. The merch items embody the vibe and quality of the establishment and are sold in a more upscale manner than just t-shirts pinned to the wall when you walk in.”
Lucas Guariglia, CEO and co-founder of Rowboat Creative

The downside:

If you try to make a higher profit on your swag, customers may balk at some point depending on whether you’re pushing the price point out of their comfort zone and market rates. While some high-profile restaurants or destination location clubs or bars could make branded merch into a profitable venture, it simply won’t work for every type of establishment. A local diner pricing t-shirts at $50 most likely won’t move them, since the demand for them at that price point just isn’t there.

A good way to gauge interest is to ask customers if they’d be interested in buying branded merchandise, and if so, what types of items and at what cost range. If an establishment goes that route, it’s easier decide what types of branded merch is worth the time to order, create and display. Finding the space to showcase the merch can also be problematic for smaller locations, so seeing what’s possible for the physical location or online can help in deciding what to sell and how to price it.

The Happy Medium

Decorators seem to agree that setting a price that restaurant or bar patrons will readily pay that gives a small profit to the establishment is a smart way to go.

“We create a price point that not only provides enough profit for my business, but also leaves room for the eatery or bar to make some profit. When folks purchase those products, we can tell them they’re actually supporting two local small businesses at once. Ultimately, though, it’s not up to decorator to decide whether restaurants ‘should’ be making a profit on their merchandise.”
Kat Carlson, owner of Hey Kat

However, this is definitely something to think about when consulting hospitality businesses. Advising them on the different ways they can use the decorated merch could open up their minds to new possibilities for both them and you.

For one, they’ll be able to see how important branded merch could become within their marketing strategy. The other benefit is that you’ll potentially now end up being a partner of sorts in their business – working together on the best strategy to either increase profits or more brand awareness. More importantly though, in both cases, these kinds of conversations can always lead to more decorated apparel orders for you to fulfill.

Feb 11, 2024