Is There a Right Way to Raise Prices?

Due to numerous factors including inflation and supply change issues many owners and operators have been faced with the tough decision about how and when to raise prices. Is there an effective way to raise prices? How do restaurants raise prices without alienating guests?

As prices rise throughout the industry, restaurants should maintain their food cost and food cost to gross revenue in order to maintain profits. Many restaurants will need to use lower cost food items or raise menu pricing. Also important to note, ensuring that managing labor costs is a key element to a thriving restaurant. 

Out of the box solutions such as prep efficiency, staggered scheduling and ensuring that we do not replace processed food items with unprocessed items can ensure restaurants are keeping their costs as low as possible. 

One way to maximize pricing efficiency is to raise standard menu prices but keep specials priced low, offering something of value to guests that are seeking lower cost food options. 

Another way to introduce price increases is to introduce new elements to the menu.  New and exciting items make it harder to discern specific price increases. Think about resizing menu items down, especially if you notice consistent food waste from a specific item. There may be an opportunity to cut the size of the portion and the price simultaneously while increasing profit margin. If certain guests miss the larger size, provide an option to upsize for a premium.

Here are some strategies to lower food cost and profit margins:

• Minimize the cost increase by doing the following:
• Purchasing smarter. If you haven’t been pricing out your list lately, get some new bids.
• Avoid certain products and substitute with less expensive ones.  
• Add more inexpensive items to a composed dish – a little less protein, a bit more greens.
• Shorten the menu, allowing for less waste, less purchasing and less labor.
• Check your competitor’s pricing. It’s easier to charge more when everyone else is (and they are).
• Be ready with messaging for when a diner points it out. Be honest and transparent (but do not advertise it). Everyone knows prices have gone up, it’s not a surprise. They see it when they go to the grocery store or when they go to your competitor. It’s reasonable to say “All our costs have gone up. We had no choice. I’m sure you understand”. Some will not but most will. Ask them if it’s more expensive for them at the grocery store.
• Be reasonable in your increases and stand by your decisions. The alternative is not a good one (losing money and putting your restaurant at risk). 

Remember, anything you do will give you both champions and critics. However, open communication and transparency of costs and changes is an integral first step. Stick to data and stats, offer concrete examples (i.e. butter was x amount on this date and is x amount now). Acknowledge your guests choice to choose your restaurant and show appreciation for their anticipated understanding. Above all else, protect your team and equip them with as much literacy as you can so they can provide guests with confident knowledge of price increases and reasons why. After all, they’re the ones who will hear about it the most.