Restaurants cannot absorb rising food and energy costs for ever. But if you’re going to raise menu prices, how should you do it? These tips will help ….

Within the global food and beverage industry, margins are under greater pressure than ever. Just take the UK for example. In a new survey across 8,200 venues by UK Hospitality, businesses have been facing average rises of:

•  41% in energy bills
• 19% in labour costs
• 17% in food prices
• 14% in drinks prices
• 21% in insurance costs

Something had to give … and it has

In response to inflation, price rises of 11% on average are planned by restaurants over the next few months. But some operators will go further — with 15% anticipating hikes of over 20%.

As every savvy operator knows, increasing prices is a tightrope walk, as you try to balance the need to make a profit, while still attracting customers who are feeling the pinch themselves.

So how can tech help? Here are three tactics that can help massively …

1) Get your menu in great shape first — before raising prices

Even if you’re committed to raising prices, it’s vital to understand the cost of every dish and its margin, factoring in the shifting costs of ingredients, wastage and production time. Otherwise, some items might still be costing you money, even if you increase their price by 10-15%. You may be better raising prices higher or scrapping some dishes completely.

With Next-Gen restaurant tech, it’s simple to rank every menu item according to profitability and demand. As well as seeing margins of each dish, you can also pinpoint your best-sellers. For example, you may also discover that 25% of menu items are yielding 80% of your turnover, but 60% of items account for just 5% of turnover.

Poorly-performing, unpopular dishes may be strong candidates for the axe. Customers won’t notice if they vanish. With the rise in ingredients costs, meagre margins could have disappeared with some of them. Such dishes are also costing you in terms of prep time, inventory expenditure, waste — and the lost opportunity of adding a replacement dish. It’s time to act.

With the tweaks we’ve just suggested, you may have moved the needle on margin by 5% already.  Much better to get your menu in great shape before raising prices.

2) Consider raising prices in a tactical way

Simply raising prices across your menu at all your locations by 10-15% may work well, though it’s a fairly blunt tool. With the best restaurant tech, you can inject some nuance and be more experimental in how you increase prices. Here’s what we mean:

• Test the water: Before adopting prices across your chain, test out your new prices at one (fairly typical) venue. Use your tech to instantly compare sales with the previous month (and with your other venues). Discover which menu items took a hit and which maintained demand. Tweak the prices again before rolling them out across your chain at the click of button.
• Work with demand: With Next-Gen restaurant tech, menu prices can change with times of the day. For example, if demand is huge at lunchtime but you’re struggling some evenings, then raise prices for one but be far more cautious with the other, respectively. The latest tech lets you change prices and offers through the day, switching service modes in a click.
• Revisit delivered food prices: Most likely, delivered food prices will be the most sensitive of all — as customers dining at home will compare “like-for-like items”, as they see it. Again, some price experimentation and before/after comparisons are worthwhile. A tailored offering is another option, so your delivery menu is only packed with high-margin dishes.

3) If you’re raising your prices, raise your game too

Customers will be more likely to stomach prices rises if they believe they’re getting better value for money at the same time — in other words, a better, all-round dining experience.

The most obvious positive change that customers will notice and appreciate is Smart Table Service. In essence, your waiting staff are equipped with a handheld device with an ordering app and integrated payments. Customers get served faster, orders are taken accurately and payments are processed quickly. The overall service and brand promise is delivered efficiently.

Crucially, orders are sent to the kitchen in a single click, so chefs typically have around 8-10 minutes extra to prepare food — and dishes arrive faster with customers. Waiting staff can avoid endlessly returning to the terminal and kitchen, so they are more attentive, typically having 20% more time to spend with guests.

Guests can leave when they want as well — without stressful delays. Waiting staff don’t need to go hunting for a card reader or queue at the terminal. They can take the payment on the same device.

There are other ways you can raise your game too. It’s possible to use the latest restaurant tech to build a valuable customer database that remembers people’s birthdays and other special occasions, their favourite table and dining preferences. You can stay connected with customers via your news updates, special offers and also offer them loyalty programmes with “club membership” and discounts that reward loyalty.

Ultimately, they get a more personalised experience, even if it costs them slightly more. Fortunately, today’s tech can help you to up your game significantly, while protecting your margins.