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How to Increase Your Restaurant Profits Without Raising Prices

We’ve had quite a year or two. We came out of unprecedented closures and social distancing only to be greeted by a disrupted supply chain that led to changing menu items at a moment’s notice. When the time emerged to open doors and welcome our long-awaited customers, we found that the dwindling labor pool preferred to swim elsewhere. 

Rising food and labor costs left us rethinking our menu strategy, and reducing our offerings while increasing our prices to maintain profit. As a result, restaurant prices continued on an upward trajectory and currently show an 8% increase over the past year.

Our guests understood, to a point. But that point may be about to break. With inflation holding steady, our clients are starting to edge back a bit, looking for value in this tenuous time. 

Technomic recently reported on restaurants’ steady price increases and consumers’ reactions. As they see it, the tipping point has been reached, with traffic slowing and customers unlikely to accept continued price hikes. According to Technomic’s research on consumer price sensitivity, the average price for an entrée at quick-service restaurants is about eight cents higher than the price point customers consider too expensive. This is a scenario that holds for other restaurant categories as well. 

In March 2022, traffic started dropping off, with July seeing -4.4%, the lowest year-over-year traffic decline in 2022. According to NPD, rising prices have had the greatest impact on lower-income households and those with kids. This translates to the need to take a good look at your value and how you compare to your surrounding competitors.

Surveying Your Surroundings

At EMERGING, we partner with leading restaurants and entertainment concepts, supporting them in their expansion plans, supply chain disruptions, and labor shortages. As you know, it’s been a busy few years trying to stay ahead of the next landslide. 

As inflation, labor, and supply chain issues continued, our clients came to us with the question on everyone’s mind, how much can we raise our prices without affecting our traffic? They wanted to find that fine line—charging enough to maintain profit margins without driving their brand-loyal customers away, impacting sales and repeat business. 

To help with that rising dilemma, we developed F&B Insights. One of the segments in this division gives our clients the ability to raise profits with AI-driven menu pricing. We continually keep track of and record changing restaurant menu prices across the nation so that our clients can price particular items based on the venues near them, an approach that ensures they don’t affect demand. 

Alternatives to Price Hikes

David Portalatin, the NPD food industry advisor, stated, “This is when operators need to demonstrate their value to consumers struggling with inflation and be solutions-oriented to help consumers meet needs across life stages.” 

So, how can you increase needed revenue without menu price hikes? One approach is increasing the average check size without raising core menu prices. This approach requires a knowledgeable and well-trained staff capable of upselling and cross-selling by making recommendations that enhance your customers’ experience while increasing the average check size. Upselling encourages guests to try a high-end product, while cross-selling entails suggesting adding something to their order, such as an appetizer, dessert, or side dish. 

One hands-on training tool that’s easy to implement is Tipzyy, an innovative web app that trains servers about brands and beverages and promotes high-margin products. It integrates with the POS system, enabling you to keep track of sales, run contests, and reward the leaders who earn cash rewards through Venmo and PayPal. 

Other methods for increasing revenue include reviewing your portion sizes and recipes. Take stock of how much food is thrown away and what’s left on your customers’ plates. This gives you an idea of what items you can make small changes to that will go unnoticed by your guests. And, as always, make sure you’re rewarding your loyal customers. 

FAQS

What can a restaurant do to generate more revenue? 

Besides charging customers more or increasing their check sizes, you can bring more people through your door and turn them into brand-loyal guests. One way to increase customers is by establishing a local presence and becoming a restaurant known for supporting the community. Optimizing and becoming active on social media can also help get the word out as well as sending guests targeted offers. 

How can you increase menu prices without alienating your customers?

First, survey the competition and know what your competitors are charging. This will help you stay abreast of current market trends. You can also gain insights from vendors who have a strong pulse on costs and pricing.

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