The smart way to raise restaurant menu prices
Restaurants continue to struggle during the pandemic, facing rising costs on top of staffing and health issues. Demand far exceeds supply as supply chain issues continue to disrupt our ports. Fuel prices have increased almost 100% over the past year.
Food prices have increased significantly over the past 18 months. Most operators have probably increased prices once, or even twice or three times, to meet these costs. And of course, this trickles down to the consumer.
All of this is especially difficult for the independent restaurant owner and operator, whether you operate one or two establishments or a small local chain. I know this because I am one myself. We don’t have the resources or the buying power of the big corporate chains.
But what we have is an unprecedented level of consumer goodwill, more than I’ve seen at any other time in my 30+ year career in restaurant operations. People will normally put up some resistance when prices rise, either when visiting or simply not returning. But that’s not what’s happening.
Today, most customers understand and are sensitive to the issues facing small independent restaurants. They enjoy the dining experience on another level than two years ago. They read the news and see other restaurants closing because of the pandemic.
It is therefore a unique opportunity. If ever there was a time when your customers would forgive, and even expect menu prices to go up, it’s that time. They want their local restaurants to succeed, but that doesn’t mean you can mark everything up 5%, 10%, 15% or more and shut it all down. The key is not only to increase your menu prices, but also to ensure that you are working smartly behind the scenes to minimize the effect of those increases on the business and customers.
As operators, we can take two steps now to protect our margins from rising food costs and menu prices:
- Be flexible and look for alternatives. There’s an old-fashioned philosophy that if you miss an item or change a menu item, you give up. This is not really the case, especially today. You don’t give up if you try to operate more efficiently and intelligently. If you’re serving a filet mignon that costs $50 a pound before it’s even been butchered, there are plenty of alternatives that might be just as welcome, less expensive, and can generate goodwill with customers.
Or get crabmeat: it’s exorbitant these days, if you can get it. One option might be to switch from a jumbo piece to a piece of crabmeat. You always use 100% crabmeat and serve an excellent, high quality product.
If customers know you’re doing everything you can to minimize the impact on their wallet without resorting to an inferior product, they’ll continue to reward you with their business.
- Establish or maintain a good line of communication with sellers. What is essential. In this climate, you want a bit of notice when prices are about to rise so you can act with agility and make any necessary menu changes beforehand. The more advance warning you have, the quicker you can act to get that other cut of meat or whatever and avoid an interruption. It’s far better to offer a slightly revised menu item than to have to apologize for not having a customer’s favorite.
In short, what you do behind the scenes is just as important, if not more so, than the annotations you end up adding to your menu. The more you work to offset the impact of price increases on customers and the business, the better equipped you will be to weather the inevitable ups and downs of this unique time and continue operating efficiently.
Lee Schulman is a 30-year veteran of restaurant operations, owner and operator of Old Vinings Inn and founder of Panacea Management Group (PMG) Consulting, which offers consultation in menu research and development, auditing and training. services, and restaurant operating procedures and systems. He also holds degrees in food systems, economics, and management from Michigan State University and attended the Pennsylvania Culinary Institute. For more information, please visit pmgconsulting.us.