By Bob Andersen, president at The Great Greek Mediterranean Grill
Price increases are happening across the board with almost all food ingredients, meats, seafood, paper products, restaurant equipment and distribution delivery costs. We’ve seen costs rise by as much as 35% on some items over the last nine months.
Price increases are systemic and far-reaching. Labor shortages and/or increases in labor costs, feed, fertilizers and fuel are running rampant through the supply chain. They’re being passed from suppliers to manufacturers, transportation companies and distributors, ultimately affecting every restaurant in some way.
No one — not operators, and certainly not customers — wants menu prices to go up to absorb these increases, and staffing cutbacks are not an option either. To come up with strategies for managing these increases, it has never been more important to measure the overall customer experience, ideal food costs, and labor and management efficiency rates.
How should restaurants respond? Here are some approaches for managing increases in food, supplies and employee costs:
Food: Changing the menu is the last choice of many difficult choices. When contemplating a decision to raise prices, operators should consider many factors beyond the cost increase. Simply passing on cost increases to the customer is very dangerous to a restaurant brand.
Menu price elasticity is as much a matter of the operator’s intuition as it is a scientific calculation. Start with the overall value your customer is experiencing, relative to other food choices in the trade area and market.
Another factor to consider is menu item sales and the effect that cost increases are having on the unit-level operating profits. In addition, the frequency of guest visits, average check and per-person average should be considered.
Supplies: It is always a good practice to consolidate paper items and printed material, no matter what the economic conditions. Today’s consumer places a high value on environmental sustainability and reduced waste, and with paper goods getting more and more costly, it only makes sense to consume them frugally. If this has not been evaluated by an operations team, it is a way to gain some savings.
Staffing: Operators must be creative and assertive in attracting, hiring, training and retaining team members. An emphasis on human factors such as work environment, advancement, flexible scheduling and competitive pay will go a long way to building a great team. Layoffs in this cycle are not a consideration.
The bottom line on your bottom line: 3 tips
Creativity and attention to detail can help you manage the ever-rising costs your restaurant is coping with from suppliers and other sources. Here are three essentials to keep in mind as you work out your strategy:
- Create more value in the overall customer experience.
- Explore areas to renegotiate contracts with vendors and margin schedules with distribution companies.
- Closely manage portioning, waste and high-value inventory.