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Originally Posted On: https://www.deliverect.com/en/blog/online-food-delivery/how-can-restaurant-brands-deal-with-menu-price-inflation
While the worst of the global pandemic may be behind us, restaurant owners continue to feel the pressure as they face staff shortages, health-related challenges, and soaring food and operating costs.
In 2023, US inflation moderated to 3.4%, a significant drop from its peak, reflecting a gradual stabilization after years of volatility. Similarly, in the UK, inflation eased, aligning with global economic adjustments. These shifts prompt businesses across all sectors to strategically reassess their offerings to adapt to ongoing economic conditions and consumer spending power changes.
But how should your restaurant tackle inflation without scaring away customers? Should you raise your prices? Or is there a better way to manage rising costs and pad your bottom line while taking a more customer-centric approach?
This article will discuss five tactics to navigate menu price inflation smartly and sustainably.
#1 Strategically raise prices
Raising menu prices is the most obvious way to cope with soaring food and operating costs. But blindly raising your prices can cost you customers and ruin your value proposition or even your brand reputation.
That’s why it is crucial to adjust your menu prices strategically while keeping the customer in mind.
When raising your prices, consider the following best practices:
- Make price raises over an extended period to spread the impact on customers. Two to four pricing rounds per year, each below a 2%-increase, are acceptable according to industry standards.
- Consider small price increases on top-selling items, such as your signature dishes, which customers will likely return for.
- Analyze your competitors’ price points to assess your value equation and keep it in line with similar restaurant brands.
- Adjust the descriptions of dishes you’ve repriced so customers can’t compare like-for-like, and emphasize the value and ingredients offered.
- Carefully monitor your guests’ behavior following pricing rounds, and make corrections immediately if you see a drop in orders for repriced items or dishes.
#2 Use menu engineering
In this uncertain economy, the cost of raw materials can change overnight due to supply chain disruptions and strains in global production. That’s why raising your menu prices can only take you so far.
A better strategy to maintain a profitable menu is to implement menu engineering. That means analyzing your offering based on data (including food cost) to ensure every item on your menu is cost-effective and popular with customers.
When you get this part of the engineering process right, you can decide which dishes to emphasize, which prices to increase, and which items to scratch off your menu. Optimizing your offering can also help you streamline kitchen operations!
Another integral part of menu engineering is reviewing your menu design. Even small changes can help attract customers to order specific dishes on the menu or entice them to select more cost-effective items like sides, drinks, or appetizers.
#3 Reduce food waste
Because raising prices is often the last resort for restaurant operators, many look into other tactics to improve food costs first. Fighting food waste is one surefire strategy to balance lower food costs and quality ingredients.
Begin by practicing better inventory control and shopping smart. For example, don’t buy expensive raw materials used only in a few dishes or garnish. Instead, look for ways to cross-utilize ingredients across your menu and increase your use of value-added products that can drive higher profits.
You can also try to schedule multiple smaller deliveries throughout the week instead of ordering one large batch for an entire week. This will ensure you don’t overorder ingredients.
Another way to reduce food waste is to adjust portion sizes. Before making these adjustments, you must understand which dishes have wiggle room. Look at customers’ plates returning to the kitchen. Are people eating the entire dish, or are there leftovers consistently?
Creating limited-time offers can also help prevent food waste. They enable you to use up expiring ingredients or raw materials that you expect to become much more expensive over the coming weeks.
Finally, correctly storing food can help you manage your food costs, avoiding steep price hikes that trickle down to consumers.
#4 Invest in your relationship with vendors
While vendors cannot control price fluctuations, they are aware of market trends and can, therefore, give you a heads-up when the prices of your ingredients are about to go up. That’s why restaurateurs always need to maintain good communication with vendors.
The sooner you know that prices are about to increase for specific ingredients, the sooner you can work on sourcing alternative raw materials and adjusting your menu accordingly. A slimmed-down or modified menu is always better than disappointing customers when they order their favorite only to find out it is out of stock.
#5 Increase off-premises orders
Another way to navigate menu price inflation is by encouraging customers to order food for delivery or takeout.
Offering online ordering options provides you with an additional revenue stream. More importantly, restaurants with an efficient system for taking and delivering online orders often find that off-premises orders are more cost-effective and profitable. That’s because it’s possible to automate the online order flow, saving you labor, time, and money.
Besides, today’s consumer is prepared to pay a premium for restaurant-quality food delivered to their doorstep. Therefore, if you slightly raise online menu prices, you probably won’t see much attrition.
When countering soaring food prices, always ensure customers get value for their money.
As you can see, there are many ways to combat menu price inflation while ensuring customers enjoy high-quality food at fair prices.
Menu engineering, preventing food waste, improving communication with vendors, and boosting online orders are all feasible tactics to maintain a healthy balance between your food cost and value equation.
Efficiently running your back-of-house operations is key to managing the ups and downs of today’s economy. Running a tight operational ship will also help you offset the impact of price inflation on your restaurant business as much as possible.
That’s where Deliverect comes in. Our restaurant management platform solution simplifies operators’ lives, enabling them to focus on creating an exceptional customer experience while we handle all things related to online ordering management.
Contact our industry experts today to see how Deliverect can help you improve operational efficiency as part of long-term success.
