Restaurants continue to struggle during the pandemic, faced with increasingly rising costs in addition to staffing and health-related challenges. Demand far exceeds supply as supply chain issues continue to back up our ports. Fuel prices have gone up almost 100% in the last year.
Food prices have risen dramatically over the last 18 months. Most operators have probably raised prices once, if not two or three times, to keep up with these costs. And of course, this trickles down to the consumer.
All of this is particularly challenging for the independent restaurant owner and operator, whether you are running one or two locations or a small local chain. I know because I’m one myself. We don’t have the resources or the purchasing muscle of the larger corporate chains.
But what we do have is an unprecedented level of consumer goodwill, more than I have seen at any other point in my 30-plus-year career in restaurant operations. People will normally put up some resistance when prices increase, whether during their visit or simply by not coming back. But that is not what is happening.
Most customers today understand and are sympathetic to the problems that the smaller, independent restaurants are facing. They appreciate the experience of dining out on a different level than they did two years ago. They read the news, and they see other restaurants closing their doors because of the pandemic.
So this is a unique opportunity. If ever there was going to be a time when your customers are forgiving of, and even expect, a rise in menu prices, this is that time. They want their local restaurants to succeed, but that does not mean that you can just mark everything up 5%, 10%, 15% or more and call it a day. The key is to not just raise your menu prices but also to make sure you are operating smartly behind the scenes to minimize the effect of those increases on the business and guests.
There are two steps that we as operators can take right now to protect our margins in the face of rising food costs and menu prices:
- Be flexible and look for alternatives. There is an old-school philosophy that if you run out of an item or change a menu item, then you are giving up. That is not really the case—especially today. You are not giving up if you are trying to operate more efficiently and intelligently. If you are serving a filet mignon that costs $50 a pound before it’s even butchered, there are a lot of alternatives that could be just as well-received, are not as expensive and can generate goodwill with customers.
Or take crabmeat: It is exorbitantly expensive right now, if you can get it at all. An option could be to change from jumbo lump to lump crabmeat. You are still using 100% crabmeat and serving a great, high-quality product.
If customers know that you are doing all that you can to minimize the hit on their wallets without resorting to serving an inferior product, they are going to continue to reward you with their business.
- Establish or maintain a good line of communication with vendors. This is essential. In this climate, you want to have a little bit of a heads-up when prices are about to go up so that you can act nimbly and make any necessary menu changes beforehand. The more advance notice you have, the quicker you can act to source that alternative cut of meat or whatever it is and avoid an interruption. It is far better to offer a slightly revised menu item than to have to apologize for not having a customer’s favorite.
In short, what you do behind the scenes is just as important, if not more so, as whatever markups you end up adding to your menu. The more work done to offset the impact of price increases on customers and the business, the better equipped you will be to weather the inevitable ups and downs of this unique moment and continue to operate efficiently and effectively.
Lee Schulman is a 30-year restaurant operations veteran, owner and operator of Old Vinings Inn and founder of Panacea Management Group (PMG) Consulting, which offers consultations in menu research and development, service auditing and training, and restaurant operations procedures and systems. He also holds a degree in food systems, economics and management from Michigan State University and attended the Pennsylvania Culinary Institute. For more information, please visit pmgconsulting.us.