Unfortunately, raising prices is never as simple as adding a few cents to each menu item. There are menu combinations to consider, as well as your regular customers. Herein lies the balancing act of maintaining clients while generating the necessary returns to stay afloat.
So, what's the best course of action? We break down what to think about while adjusting your prices.
Don't: Put off raising prices unless it's absolutely necessary.
Keeping an eye on the market, assessing your margins, and adjusting your prices accordingly has always been excellent business practice. However, given inflation and today's supply chain issues, it should now be a monthly, if not weekly, habit.
As a restauranteur and business owner, you should always be aware of the cost of goods.
The smaller the margins, the less space for error and the shorter time between sinking and swimming. If you notice that your food costs are rising above 30%, reconsider your menu
Don’t: Blindly raise menu prices across the board.
Menu management isn't a darts game. Throwing a few price spikes and seeing what sticks is not part of the approach. Rather, success comes from analyzing concrete facts - data that should already be at your disposal, such as your menu mix.
You should actually build a quadrant to look at what's popular and profitable vs what's not profitable and popular. Anything that is both unprofitable and unpopular must be removed from the menu.
From there, it’s about assessing those middle zone menu items. For dishes that are popular but not particularly profitable, or profitable but not really popular, what tweaks can you make to move them towards the profitable and popular quadrant?
This could include trimming an ounce or two off a main protein and complementing with a fashionable vegetable side dish. However, it may also imply boosting pricing, particularly for popular foods. Your tried-and-true dishes are frequently the best places to start when raising costs without losing consumers.
Customers are becoming more aware of the impact of the economy on the food they eat, and if you slightly raise the price of the most popular item, you're not likely to see much attrition from that.
Do: Monitor sales per item following a price increase.
If you raise the price of an item too much, sales may fall to the point that any benefit is lost. If, on the other hand, you aren't seeing much change in your clients' ordering habits, this could imply that there is still opportunity for future increases. Pay close attention to the data, and you'll be able to take the appropriate next steps.
If you start getting a lot of negative feedback from guests, now is a good moment to talk to them and ask: 'What would you pay if you thought $15 was too much for a burger?'
Asking staff for input will help you determine if you need to go back and find a better deal for your neighborhood or community.
If meeting your margins and pleasing your guests becomes too difficult, you'll most likely need to make some recipe changes. The idea is to make recipes at pricing your consumer base can accept, which may necessitate changing portion size and eliminating more expensive or single-use items.
Do: Inform clients about the reasons for pricing increases.
It's a well-known fact of course, that honesty is the best policy. If a guest enquires about the price, be open about the adjustments. Attempting to conceal price increases frequently backfires, producing a sense of mistrust among clients. However, you need not be concerned about incremental price rises; they are now more common than ever.
This does not necessary imply that you must make a public announcement. However, that is not always that bad of a process! A growing number of operators are using social media to express the truth of why rates must rise in order to survive.
Get your customer base on your side. You might wish to highlight the increase in labour as well as other cost-cutting techniques you've already tried, such as decreasing portion sizes.
This form of explanation enables you to provide customers with a deeper understanding of the difficulties you're experiencing. And for certain clients, even if only a handful, it may be the deciding factor in avoiding complaints.
Don't: Include additional fees on the check without a clear explanation.
Are you going to levy a surcharge instead of hiking individual menu prices? You must notify guests in advance.
People could regard you as potentially dishonest or greedy if you can't back up your charge.
You also run the danger of being sued. A Chicago-based restaurant chain is being sued by a man who claims he was not informed of a 3% extra fee before ordering. It happens!
It is better from the standpoint of customer relations to not only make the fee evident, but also to outline its intended functions. Include a summary on the check, table card, or near-register board.
Again, this informs customers about the genuine issues you're dealing with, whether it's that you're paying employees more, that your chicken costs have jumped by 70%, that your packaging prices have doubled, or all of the above. Direct reminders help individuals believe the news they are seeing.
Do: Prepare talking points for the front-of-house workers.
As with clients, educate your employees on why you're raising pricing and offer them permission to communicate that reasoning. You want them to confidently answer inquiries from clients who missed your signage, social media posts, or other clarifying messages.
It can be as simple as informing your team that it's safe to say, 'Yes, we did raise prices, and it's because our cost of goods has increased, and we want to ensure we still have great quality food for our guests.'"
Do: Time your price increases roll-outs strategically.
If you need to raise prices, you shouldn’t delay. But if you can tie it into a new menu rollout, as that’s and ideal time and process.
People are always enthusiastic about new items and products, so it becomes less about the price and more about what's new on the menu, which helps compensate for the initial costing shock.
When possible, schedule price roll-outs for a weekday to give employees time to adjust to the adjustments before busy weekend shifts arrive.
Takeaway Note
Avoid postponing price increases and instead monitor market trends regularly. Blindly raising prices across the board is not effective; analyze your menu mix to identify popular and profitable items while removing those that are neither. Make calculated tweaks to move items towards profitability and popularity. Monitor sales per item after price adjustments and gather feedback from customers and staff.
Transparently inform customers about the reasons for pricing increases, building trust and understanding. Avoid adding additional fees without clear explanations to maintain customer relations. Train your front-of-house staff to communicate pricing changes confidently. Whenever possible, tie price increases to new menu roll-outs to generate excitement. Timing price adjustments strategically, such as on weekdays, allows for smoother transitions.
By carefully navigating the process of adjusting prices, restaurants can maintain profitability and continue delivering quality food to their guests.