Restaurant Industry Faces Challenges
The cost of dining out may increase as many restaurants consider raising prices to keep up with the inflated cost of food and drink. According to a recent survey, improving profitability is the main concern for restaurant operators next year.
Top Business Issues
Operators cited inflation, marketing, and hiring as their top three business issues. Nearly half of all restaurant decision-makers surveyed said they plan to increase menu prices if inflation continues to be a factor.
Impact of Inflation
The National Restaurant Association estimates that the average restaurant must increase its prices by 31% to maintain a 5% profit margin. Increasing menu prices is typically a last resort for restaurant operators, but with rising food and labor costs, their operating calculus has yet to add up.
Small Business Owners’ Concerns
Small business owners are concerned about the impact of inflation on their businesses. The basic math is that whatever product you have, you divide it by 0.3, and that’s what the product should cost to the consumer to operate at a healthy margin. If prices continue to rise, there will only be so much that the consumer will be willing to pay.
Challenges of Increasing Menu Prices
Increasing menu prices can pose an additional challenge when the business is new. It’s always a fine line, and it’s a game of chicken. Since opening a new restaurant, owners have noticed an increase in protein costs, which could spell bad news for cost-conscious guests.
Guest Satisfaction
Guest satisfaction is about more than just the food. As costs rise, restaurants face the challenge of adding value when menu prices go up. How do you make money, sell people something that is good for them, and that offers them value, even at a higher price?
Thinking Differently About Profit
After 30 years in the business, some restaurateurs have learned to think differently about profit. They think about margins rather than percentages, and their approach often means covering some of the costs to maintain the dining experience. At the end of the day, what restaurants are all about is taking care of people, feeding them, making them feel good, and making them feel good about spending money. That’s their job.
