One of the greatest obstacles that foodservice operators face is the decision to raise menu prices. The fear of losing business is absolutely paralyzing for many. However, the cost of food continues to rise, as do insurance rates, wages, rents, and taxes. And, at some point, even the most careful of operators must pass this cost along to the customer.
Typically increasing menu prices is the last resort. Often something that is only considered when the checkbook balance is in the danger zone, sales are flat and there is no other solution on the horizon.
Yet, this can be a dangerous cycle. It is much more favourable to plan in advance for the typical rising costs associated with your foodservice operation. Overcoming the fear of lost business is the first step. It’s important not to box yourself into a corner where only substantial price increases will make a difference, otherwise you have set your customers up for sticker shock.
Instead consider regularly increasing some menu prices every quarter – the increase can be very small – nickels, dimes and quarters. Yet these small increases on a few menu items will allow you to stay below the radar – avoiding sticker shock, while helping you keep pace with your overall operating costs thereby avoiding the need to play catch-up later.
Quarterly menu pricing reviews need to part of your business culture. A common obstacle to this business practice is the high cost of reprinting menus or “menu handcuffs.” But there is a solution. Unlock the handcuffs by investing in menu covers instead of expensive printed menus. Menu inserts can be printed at a fraction of the cost of laminated menus. And, menu page printing can be accomplished by using a reputable menu design company that offers a nominal page rate or printing in-house with off-the-shelf software and a colour printer. Depending upon which option you choose the cost will range somewhere between 25 cents and $2.00 a page, which can more than be offset if you increase your menu prices.
For example, with gross sales of $250,000 a quarter, the quarterly price increases might amount to 1 percent of sales. If we need 200 new menus, and price increases are limited to one page of the menu and reprinting costs are $1.50 per page, the reprinting cost per quarter in this example would be $300.00 (200 x $1.50), our sales increase for the quarter would be $2,500.00 (.01 x $250,000), with profit improvement of $2,200.00 for the quarter ($2,500.00 - $300.00).
The $2,200.00 net improvement during the first quarter will likely more than offset any cost increases. In addition, these improvements have a cumulative effect on the bottom line.
The message: Establish a quarterly menu review routine. Increase selected item prices in small increments, avoid sticker shock, and stay profitable all year long! u
Contributed by Tepper Kalmar Associates, Operational Consulting and Training for the Foodservice Industry, Emeryville, CA. For further information, call 510-655-0936 or visit us on the web at www.restaurantprofitmakers.com We welcome Canadian inquiries.