5 Ways Restaurants can Boost Profit in Inflation

Inflation is on every restaurant operator’s mind in 2022.

From higher costs to slimmer profit margins, and price-conscious consumers, it’s easy to wonder: how are other restaurants dealing with all these?

More than 66% of restaurants have experienced a decrease in sales due to inflation, according to a survey from Seated.

76% of restaurants surveyed by Seated said they have increased menu prices to offset inflation. 35% have offered more discounts and promotions, 33% have reduced operating hours, 31% have reduced staff or removed lower-margin menu items.

A survey from Alignable found that 72% of restaurant owners said they will go out of business if inflation doesn’t moderate.

If you’re a restaurant owner & your business is not affected by inflation, your restaurant is probably in space. Week on week, you see your Profit margin sliced by the incessant increase in the cost of goods.

You’re constantly forced to increase the price of your items to keep up with your margins. Over & over, this cycle continues.

Aside from the cost of purchasing food and beverage from suppliers, restaurants must factor in labor costs, food waste, and other operating costs.

Some restaurants don’t have an efficient procurement software system in place, meaning they don’t have full visibility over their waste and expenditure.

This results in the restaurant having to estimate when it comes to these figures, leading to inaccurate food reporting.

Without full visibility over your expenditure, it can be very hard to pinpoint where exactly the price increases are coming from. Meaning it’s even harder to come up with a good solution for this problem.

What can you do as a restaurant owner or operator to combat the effects of Inflation?

How can you avoid losing your customers to their Next Best Alternatives?

Next Best Alternatives (NBA) are other products or services your customer can afford to settle for if they can no longer buy from you which is their First choice due to one reason or the other.

5 Ways to start Increasing your Profit Margin

1. Leverage Technology

An effective procurement software can help you compare prices & quality of supplies from various vendors to ensure you’re buying at the best prices while maintaining quality. 

Omni-sales channels can be deployed to help restaurants capture sales from various channels, and streamline the ordering process.

One of my favorites is the Cart abandonment technology that allows restaurant owners or operators to capture sales that would have been lost.

This procedure requires little resources as it can be automated to help you capture & convert lost customers & sales which can help you boost revenue significantly with minimal resources.

Restaurant managers would need to focus on reducing waste at the production level. With food costs estimated at 28-35 percent of restaurant sales according to ReFED, tackling food waste can make a difference.

Value-based inventory insights can help restaurant managers control waste, rising costs, and manage profitability.

2. By all means, Initiate Loyalty Programs

Loyalty programs can help reduce customers’ groans to your price increase & help reduce the chances of them not buying from you.

Specials like happy hours and other incentives are more valuable than ever for bringing customers in and turning them into loyal, returning customers.

Leveraging a modern loyalty program is one of the most popular strategies for successful restaurant operators, and is a great way to keep people coming back.

McDonald’s CEO Chris Kempczinski said during his company’s Q2 earnings, “There are now nearly 22 million U.S. loyalty members since the program launched last year and it has consistently driven more frequent visits and incremental sales.”

Such programs could provide a stronger value proposition by offering targeted promotions to drive traffic despite higher menu prices.

3. Increase Menu Prices

I bet you’re probably doing this already.

While increasing prices might work for the moment, you’re going to reach a threshold in which you can no longer increase your price enough to sustain your profit margin as the price of goods keeps going up, and the likelihood that your customers will turn to the NBA.

As food producers raise prices, restaurants are passing the increase to consumers for the most part, rather than having them chip away at profit margins.

Analysts say consumers could begin pulling back on spending and shifting their shopping habits because of lingering high prices.

Restaurants may then have to come to terms with shrinking profit margins as more costs are absorbed and consumers potentially curtail spending on meals at home and at restaurants.

Price increase should be avoided as the only means by which you intend to increase or normalize your profit as a restaurant owner or operator.

4. Introduce new revenue streams

Direct online ordering continues to surge in popularity as a lower-cost alternative to solely relying on 3rd party marketplaces (not to mention that direct ordering platforms give you a valuable opportunity to collect customer email addresses for marketing purposes.

Some ideas you can consider;

  • Catering Services for Special Events
  • Meal Kits by Delivery
  • Restaurant Gift Cards
  • Meal Subscription Boxes
  • Meal delivery
  • Low-cost marketing (Direct sales technique).

Introducing new revenue streams can help you carve a less competitive market for your restaurant & increase revenue as your restaurant will have multiple sources for generating revenue.

You’ll find out that some ideas you try out will be very cost-effective & would give you a boost to increasing profit.

5. Make A Plan and Be Intentional

At the end of the day, every restaurant owner or operator needs to think about which of these strategies makes the most sense for their business.

While no two approaches will be quite the same, being intentional with your strategy and thinking through how each decision, from implementing the right technology to increasing prices to initiating loyalty programs, will impact your customers is key to avoiding negative effects down the road.

If you want support with creating & implementing a plan on effective ways to stay on top of inflation, pls reach out to me for a straight-to-the-point consultation & customized approach for your business.


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