According to a Consumer Index Report summary from May 2021, inflation across all items has risen to 4.2% over the last 12 months, which is the largest increase since 2008. ¹ As food prices surge in the U.S, food manufacturers and restaurants are increasing prices, trimming their costs and using various other tactics to offset heightened expenses. Restaurant owners are weary of increasing prices for fear of turning customers away. While increasing menu prices is one way to adjust during the inflation period, there are several other tactics that can be considered as well.
Before you start to make changes to your menu, be sure to conduct an audit. Take notes on important factors such as sales, costs, resources allocated to each individual dish, customer sentiment about each dish and evaluate this against profit margins. From here you can make adjustments accordingly.
Go through each item on your menu. What dishes were sold the most? What are your most popular menu items? Which are not doing well?
What are your cost for ingredients, how much time does it take to prepare, and how much of the dish is gone to waste afterwards? It is important to have a system to monitor these factors.
What are the resources and how much time does it require for your dishes to be made? Ideally dishes should use different spaces in the kitchen to make workflow efficient. Do you have sufficient equipment?
Order or list your items out based on popularity or by how much was sold in the past year. Ideally, the more popular items should give you your highest profits. Look at online reviews for feedback. Here you can gain some insights on what customers prefer or what works well for your core customer base.
Remove dishes that aren’t very popular as well as give you low-profit margins. Use marketing tactics to push the less popular, high-profit items. Where are these located on your menu? Do you see a correlation? How can you better promote these items if you truly believe in their value? Encourage your staff to recommend the high profit items that haven't been selling.
There has been a large rise in the price of chicken this past year, especially chicken wings. Instead of wings some food service operators served tenders instead. Slightly tweak other menu items that have gotten too costly. To prevent problems in the future, replace inflation susceptible food items with more steady and secure ones. For example frozen seafood and produce are less prone to inflation because they are not tied to a contract.
Consider purchasing foods that only require heating because they are already completed with the necessary prep work. This also helps keep your product consistent. For example, purchase chicken fillets that are already cut as you like, and seasoned and breaded. There are many options to choose from that cut down on resources such as produce that is pre-cut and pre-washed to save prep time. Ask your sales representative on your options for value-added foods.
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Look back at your menu review. First, which items get wasted? Cut back on portions on these dishes. A key component to portion control is training your cooks to weigh or measure the food that is put on the plates. Make sure portions are consistent each time. Food presentation makes a difference in perceived value. Garnish the dish in a way that fills the plate without adding extra food. For example, add several celery sticks to the wing platter to fill the empty space. Lastly, find small ways to cut back on the amount of food in a way that is not very noticeable. For example, slice your tomatoes or sausage thinner in the dish.
Many food service operators are afraid to increase prices for fear of turning away customers. This can make the difference in making your restaurant profitable, so don't ignore the option. If you decide to raise prices, calculate exactly how much more you need to increase the price to be at your minimum profit margin. Every restaurant is different and one profit margin does not apply to every business. It is recommended to be transparent and not try to hide the change. Customers for the most part understand and appreciate the honesty. They understand we are in a inflationary period of time and you have taken a hit as well.
Use a solid online presence to drive traffic. Did you know that 82% of customers in 2020 order food from a restaurant website or app? ² Make it easy to find information about your business such as address, phone number and menu. If you have an online ordering button on your site, place it front and center on your site's page. Having a strong online ordering system will reduce the amount of profit given to third parties. Optimize your digital footprint by being on all platforms and posting accurate, quality information about your restaurant. Showcase your dining experience by sharing customer posts of their great time at your place (with their permission of course).
You can control some costs by using software to monitor shifts and preventing inaccuracy when it comes to paying wages based on time worked during shifts. An organized scheduling system can also reduce errors in overstaffing on a certain shift. To cut back on cooks needed, make prep work as efficient as possible. Do you have sufficient equipment to maximize efficiency? As mentioned earlier, the use of value-added or ready-to-cook products allows for faster prep times as well.
A profitable restaurant usually produces a 28%-35% food cost.³ Keep a solid and consistent inventory tracking system. Track your costs on a weekly basis at the least. Order from your vendor as accurately as you can. Try hard not to overorder food that goes to waste easily.
Food Cost Percentage = (Beginning Inventory + Purchases – Ending Inventory) ÷ Food Sales
Find the balance between serving your customers high-quality food while keeping costs down. If your restaurant is known for amazing pizza sauce, do not switch up your ingredients used because customers will notice. You can choose to cut back on quality when it comes to product not directly associated with your core business.
¹ Consumer Price Index Summary June 10 2021, US Bureau of Labor Statistics [https://www.bls.gov/news.release/cpi.nr0.htm]
² What Your Restaurant Online Ordering Tool Really Costs You, Toast [https://pos.toasttab.com/blog/the-true-cost-of-online-ordering]
³ Restaurant Accounting: For Profit's Sake, Inventory Your Food Cost! Restaurant Report [https://www.restaurantreport.com/features/ft_inventory.html]
