There’s plenty of pressure on restaurant prices lately, whether from the increased competition for labor, shortages of key ingredients, or other demands. How have you responded? According to recent research from Fitch Ratings, pent-up demand and fiscal stimulus have driven a recovery in restaurant sales in recent months – and that has enabled restaurants to pass increasing costs on to customers. Plenty of businesses have needed to (think of the restaurants who specialize in chicken wings), but others have hesitated due to the strains of the pandemic on customers in the past year. Where is the line for your customers when it comes to food prices – and what might you do to help smooth it out? Start by analyzing your menu and identifying your most costly and difficult-to-source items. Where might a less expensive or easier-to-source item be substituted? In cases where you need to keep a more expensive item on the menu, where can you incrementally boost the price of another item to help make up for the higher cost? Also consider the demographics of your customer base. According to recent consumer research from RMS cited in Nation’s Restaurant News, most respondents said upticks in food costs, the minimum wage and safety precautions justify price increases at restaurants – with Baby Boomers being most receptive to higher menu prices. Finally, you could consider adding an overall service charge to each order – with a brief, carefully worded message on the menu explaining why you need to do it – and how it ensures your restaurant can sustain itself and take care of employees.
Other than labor, the top challenges for restaurant operators right now are escalating food costs and short supplies, according to recent commentary from Larry Reinstein, industry consultant and president of LJR Hospitality Ventures. (And of course, labor shortages can impact both costs and supplies.) When you look at your operation, where might there be room to flex when the foods you are known to offer are priced out of your budget or are simply unavailable? First, consider what dishes and ingredients on your menu are more variable and adaptable. You may be able to be more flexible with ingredients than you think. Case in point: When Wingstop, which literally has chicken wings in its name, had to keep business going amid a wing shortage in recent months, it offered the alternative of chicken thighs, the National Restaurant Association reports. For every dish you serve, consider how you might reinvent it without a perceived loss of value for the guest – or if you should temporarily replace it until cost and supply challenges shake out. Of course, you may have some room to raise your prices – media reports are spreading the word to consumers that they have not been paying sustainable prices for restaurant food in recent years. But if you must raise prices, look for other ways to elevate the experience you’re providing guests – particularly if you’re already short-staffed and out of popular menu items. This is where the human side of the restaurant business has an opportunity to demonstrate its worth.