Menu Price Increases & Your Restaurant

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Change can be difficult. No matter how seemingly daunting or inconsequential some changes may be, for most people, there’s always an adjustment period that takes place in order to make the transition as smooth as possible. Everyone has been through it; everyone handles it differently. The blunt fact here is that change has already, and will continue to affect the restaurant industry in the foreseeable future. With minimum wage increases sweeping the nation each year, taking new approaches to alleviate any deficit the increases may cause, is unavoidable. It’s how you handle your transition that will affect everyone in its path; let’s start with your guest loyalty.

We mentioned the following statement in our most recent article discussing best practices for managing a minimum wage increase: “There’s nothing worse and more confusing to your guest than flip-flopping on a decision.” I’d like to reiterate how incredibly important that notion is. Guest stickiness won’t happen through trying to please everyone… that’s simply not how it works. No matter what path you choose to take, there will absolutely be some unhappy campers. What’s important here is that you trust your way of thinking and back that philosophy up through staff buy-in. In the same sense that you’d never allow an incomplete or incorrect dish to be sent out with your name stamped on it, this should be no different.

There are few different routes that restaurants who have already been affected by a minimum wage increase have taken in order to mend the gap; surcharges and increasing menu prices. When you’re making the decision for your own operation it’s essential to ask yourself what impact your decision will make on the guest experience. Without guests and their loyalty, you have no restaurant. So what do you think? Will a surcharge negatively impact the guest experience as far as providing a value? There is no right or wrong answer here as it’s all a matter of opinion and what you see fit for YOUR operation. This could really go either way; since we are such a tip-oriented culture, and the expectation is to tip accordingly for great service, surcharges may be perceived that the restaurant is keeping the surcharge and not passing it along to the staff. Once again, this is where you can hop in and educate your guests about that surcharge and be fully transparent about where the money is going. If you tune into our webcast at the end of this month, we’ll actually dive right in and demonstrate the math and facts behind implementing a surcharge, and how we assist our clients in knowing whether or not adding that charge is right for them.

Now onto menu price increases. Let’s take a look back at the $18.00 burger and fries from our last article. In short, we made up 25% of the minimum wage increase through raising the price of one single item, by 28.5%. Does that increased menu item still provide a value to your guest now? Will it impede your ability to attract more guests daily or will it shoo your regulars to the burger joint around the corner? Well let me ask you this. Was this vast increase appropriate? Is that burger actually WORTH the extra money and what are you pairing it with now? Will you be serving truffle fries with the burger or has the burger gained value in other ways? It all depends people. It depends on if that burger was appropriately increased as an accurate reflection of ingredient costs or if you just picked a number from a hat and ran with it. You MUST know the math behind your increases to back the increased value you’re providing. If you don’t, that’s where you run into major trouble. There’s also the option, instead of solely elevating one item’s price, using smaller price increases across the entire menu. This option here is very similar to the last in that if it’s done consistently so that there is still perceived value across the board, you are less likely to damage your brand and deter guests from dining in your restaurant. I’ve said it before and I’ll say it again, consistency is key; educate your guests on your choices (albeit you make appropriate choices), and stay the course.