To Raise or Not to Raise?

Restaurant Advice & Experiences
July 1, 2017

Perhaps surprisingly, restaurants tended to avoided price increases in 2012. Price increases are often necessary — as time passes, the price of ingredients goes up, minimum wage changes, rent changes, etc. Inflation happens. But restaurants, led by major chains, tried to avoid noticeable price increases in 2012 for one obvious reason: customers right now are value hungry.

Just as the poor economy has hit restaurants hard, so has it affected the consumer. Restaurateurs who keep tabs on their customers have probably noticed that people are eating out less, being more frugal about ordering when they do eat out, and making other dining choices based more on their wallets and less on their stomachs. If it sounds all too practical, well it is. But that’s what the times call for.

So how do you navigate the difficult balance of raising prices to meet costs and keeping the value that makes you competitive and appealing to customers?

Simple, or at least sort of. In 2012, restaurants with steady business were able to balance raising their prices less than the predicted inflation with remaining competitive enough to increase sales. Inflation on commodity prices in 2012 was predicted at 1.7 and 2 percent, depending on the source, while annualized price increases for chain restaurants were between 1 and 1.5 percent. However, with 3-4 percent growth in sales, the difference in price was made up for by increased business.

I can’t say for sure whether your business will increase just because you hold back on increasing prices, but if you look at your books and see some wiggle room, it might be a thing worth considering. Can you offset price increases with popularity and steady business? Only you can now, and it’s something you’ll have to pay attention to — but to me, the moral’s simple: there’s more to consider than simple inflation-matching. Think about it!

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