Perfect Timing and Best Ways to Raise Prices on Your Restaurant’s Menu

At some point, every restaurant owner must make the difficult decision to raise menu prices. Whether it’s because of inflation, wage increases, food price increases or a combination of all three, pricing needs to be adjusted periodically to keep the restaurant up and running.

There are several factors that will come into play when determining when to raise prices in a restaurant. Consider the following before raising your prices:

1. Food costs fluctuate throughout the year, but certain events can cause bigger price spikes. As a general rule of thumb, restaurant owners aim for food costs to account for 33% of menu prices. Run the numbers whenever food prices increase and periodically to ensure your costs are in line with your percentage goals.
2. As the cost of living increases, so must the wages you pay your workers. Wage increases will keep your valued employees around, but you must be able to cover these increased costs. Raising menu prices is the best way to do that.
3. If diners are paying considerably more to eat at competing restaurants, it may be time to raise your prices. Customers are always looking for a good bargain, but if your prices are too low compared to the competition, they may assume that your food is poor quality.

Raising your prices to be more in line with the competition will increase your bottom line and put you in a better position to compete with other restaurants in your are

Simply put, if you’re barely generating enough cash flow to get by, it’s probably a good time to raise prices. The key most important thing is to figure out how to raise prices on the menu without scaring off customers.

• Offer Seasonal Dishes. Changing your menu periodically throughout the year allows you to adjust pricing without customers even realizing it. Next season, you can offer the same dishes at a higher price without shocking or turning off customers.
• Percentages. When raising prices, many restaurant owners go the percentage route. To find the right percentage, consider your food costs. Remember — you want your costs to be in the neighborhood of 30–35%. Additionally, you want to consider margins. With both of these factors in mind, you can make reasonable adjustments to your menu prices as food costs increase.

What percentage should you raise menu prices in case of wage increase?

Some restaurant owners take a simpler approach and match labor costs with menu costs. If labor costs go up 2%, they raise menu prices by 2%. This is one direct and effective strategy, but you can take a different approach if you’re worried about sticker shock.

Start by looking at transactional data to get a better understanding of your customers. Which items commonly sell together? How does demand change over time?

Once you have a better understanding of customer behavior, you can begin building margin over the long-term. Rather than raising all of your prices at once, you can do so thoughtfully and selectively.

Rising food and labor costs will undoubtedly force you to raise menu prices at some point. How you approach the increase is important. Big restaurant chains have the luxury of being able to raise prices across the board, as their customer base is so large. But for smaller restaurants, taking a more strategic and thoughtful approach to price increases can help maintain profits and a loyal customer base.

Source: https://mcdonaldpaper.com/blog/how-to-raise-menu-prices-and-when-you-should-do-it