Page 44 - GS140601
P. 44
Education
StreetSmarts SM
Pizza pies and basis points
By Tom Waters and Ben Abel Archduke Ferdinand. War had been declared, and prices
Bank Associates Merchant Services across the board were about to drop.
t was the spring of 2012, and financial turmoil Upon seeing the lowered price in the morning, 2 Bros.
roiled the world. U.K. unemployment reached a Pizza immediately lowered its prices to $0.75 a slice.
17-year high. Greece, with mounting fiscal woes, Unwilling to be undercut, Bombay Fast Food matched
I accepted a bailout contingent on strict austerity the price. Pies went from $8 to $5.99. The two slices and a
measures. And, more locally, a vicious economic conflict drink special went from $2.75 to $2.25.
was gearing up in the streets of New York City. It wasn't
really the "streets of New York City"; it was a two-block The owners of both establishments claimed the other was
strip, or 528 feet of concrete. Over a period of several trying to put them out of business, but both refused to
months, 6th Ave. between 37th and 39th streets would back down. Mr. Kumar of Bombay Fast Food was quoted
see a price war of such intensity that veterans of it would as saying, "We may go to 50 cents. … I want to beat him."
be telling the story for years to come. Mr. Halali, one of the owners of 2 Bros. Pizza, said to the
press, "We might go to free pizza soon." At this point
It all started with slices of pizza being sold for $1.50 by neither party was making a profit on its slices; they were
Bombay Fast Food. Things were fine until Joey's Pepperoni both simply undercutting the competition in a constant
Pizza opened by the corner of 39th Street and offered effort to take their customers.
slices for only $1. This initial transgression opened the How does it happen?
door to the ensuing conflict. Bombay Fast Food quickly
lowered its price to $1, matching the new contender. The Does any of this sound familiar? While we can assume a
air was tense with conflict. Both parties waited to see large cross section of The Green Sheet readership does not
what the other would do. Until, a few months later, a new partake in dough kneading or mozzarella sprinkling, we
player entered the pizza market: 2 Bros. Pizza. The new think most of us know a thing or two about dwindling
entrant opened next door to Bombay Fast Food, the two prices. During our time in the merchant services business,
businesses separated by only a stairwell. it has become common to see statements indicating
a merchant is paying interchange plus 5 basis points
There was stability for the first few months until March and $0.05. Pricing that was once reserved for clients
2012 when, during the night, Bombay Fast Food lowered processing in the $100,000+ range has filtered down to
its price to $0.79. Underlying hostility rolled over into merchants doing a mere $10,000 to $20,000 in monthly
outright conflict. Those perilous shots had been fired at transactions.
44
StreetSmarts SM
Pizza pies and basis points
By Tom Waters and Ben Abel Archduke Ferdinand. War had been declared, and prices
Bank Associates Merchant Services across the board were about to drop.
t was the spring of 2012, and financial turmoil Upon seeing the lowered price in the morning, 2 Bros.
roiled the world. U.K. unemployment reached a Pizza immediately lowered its prices to $0.75 a slice.
17-year high. Greece, with mounting fiscal woes, Unwilling to be undercut, Bombay Fast Food matched
I accepted a bailout contingent on strict austerity the price. Pies went from $8 to $5.99. The two slices and a
measures. And, more locally, a vicious economic conflict drink special went from $2.75 to $2.25.
was gearing up in the streets of New York City. It wasn't
really the "streets of New York City"; it was a two-block The owners of both establishments claimed the other was
strip, or 528 feet of concrete. Over a period of several trying to put them out of business, but both refused to
months, 6th Ave. between 37th and 39th streets would back down. Mr. Kumar of Bombay Fast Food was quoted
see a price war of such intensity that veterans of it would as saying, "We may go to 50 cents. … I want to beat him."
be telling the story for years to come. Mr. Halali, one of the owners of 2 Bros. Pizza, said to the
press, "We might go to free pizza soon." At this point
It all started with slices of pizza being sold for $1.50 by neither party was making a profit on its slices; they were
Bombay Fast Food. Things were fine until Joey's Pepperoni both simply undercutting the competition in a constant
Pizza opened by the corner of 39th Street and offered effort to take their customers.
slices for only $1. This initial transgression opened the How does it happen?
door to the ensuing conflict. Bombay Fast Food quickly
lowered its price to $1, matching the new contender. The Does any of this sound familiar? While we can assume a
air was tense with conflict. Both parties waited to see large cross section of The Green Sheet readership does not
what the other would do. Until, a few months later, a new partake in dough kneading or mozzarella sprinkling, we
player entered the pizza market: 2 Bros. Pizza. The new think most of us know a thing or two about dwindling
entrant opened next door to Bombay Fast Food, the two prices. During our time in the merchant services business,
businesses separated by only a stairwell. it has become common to see statements indicating
a merchant is paying interchange plus 5 basis points
There was stability for the first few months until March and $0.05. Pricing that was once reserved for clients
2012 when, during the night, Bombay Fast Food lowered processing in the $100,000+ range has filtered down to
its price to $0.79. Underlying hostility rolled over into merchants doing a mere $10,000 to $20,000 in monthly
outright conflict. Those perilous shots had been fired at transactions.
44
