8 Ways to Protect Restaurant Profits Despite Inflation

Rising inflation has a way of making life a little less fun for everyone.

According to the U.S. Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) for food has increased 10.4% over the last year. Food away from home, which includes full- and limited-service options, is up more than 8%.

Rising costs make everyone miserable, but it doesn’t have to be that way. For the savvy restaurateur, rising costs offer a unique opportunity to streamline operations across the board.


What is Inflation, Anyway?

Inflation occurs when the cost of goods and services rises, making your hard-earned dollars worth less. As prices go up, you and I pay more to get the same amount of product or spend the same amount but receive less.

When inflation rises, consumers typically have a few options to control spending:

  • Switch to cheaper products. This could mean switching to store-brand items as opposed to brand names.
  • Look for sales, promos, and discounts. What used to be a weekly purchase becomes an opportunity to stock up when prices drop.
  • Spend less money. When people tighten their belts, discretionary spending is among the first cuts. From impromptu casino trips to the once-a-week date night, fun becomes a luxury.

Consumers Aren’t the Only Ones Fighting Inflation

It costs money to run a restaurant, bar, or cafe. While some expenses are fixed, others constantly change.

From food and restaurant equipment to labor and operations, inflation creates a thick fog that clouds an operator’s vision and makes it tougher to plan. Unfortunately, the problem becomes even more stressful when consumers decide to cut restaurant spending out of their budgets.

To cope, restaurants have a few levers they can pull, but they tend to come at the expense of guests:

  • Raise prices. Restaurants rely on an intricate supply chain, just like any other industry. When owners pay more for ingredients and equipment, those costs are passed on to patrons.
  • Look for less expensive vendors. If you can find the same product for a lower price, why wouldn’t you take advantage? It requires some leg work, but everyone likes saving money!
  • Shrinkflation. If you haven’t heard of this term, don’t worry. When shrinkflation occurs, consumers get less of what they want but still pay the same price. It’s a sneaky move and tends to upset customers when they figure it out.
  • Invest in streamlining technologies/techniques. You’d be surprised how much waste happens in restaurants. From machine learning and AI solutions to simply staying busy during a shift, there are plenty of ways to be more productive and save money.

How Restaurants Can Handle Inflation WITHOUT RAISING PRICES or Compromising Quality

It sounds wild but stick with me. There are ways to fight inflation without immediately raising prices or upsetting guests.

Not every decision has to immediately attack pricing. In fact, there are quite a few creative ways to find savings without tacking 15% on every item.

Sometimes, all it takes is proactive planning and maintenance to rein in costs.

Cut Out Low-Performing Menu Items

You might love having duck l’orange on your menu, but you’re wasting money and inventory space if no one orders it.

Often called “dogs,” these are poor-selling menu items with low profit margins. Remove them from your menu and save cash on ingredients.


Restructure Your Menu

Few restaurants can pull off a 14-page menu, and you’re probably not one of them. Consider doing some menu pruning, then update your menu to position stars and workhorse items in areas where people will immediately see them.

Menu engineering is critical to running a restaurant, bar, or cafe. It prevents “dogs” from overstaying their welcome and gives you time to proactively keep “mystery” dishes from popping up.

Even better, small menus reduce ingredient costs because you aren’t spending money on items used in limited dishes.

Find Unique Substitute Ingredients

It’s no secret that certain ingredients cost more than others. While some people might see that as an issue, you can quickly turn inexpensive ingredients into a new dish!

It’s entirely possible to switch out the protein in almost any dish for a veggie and get a similar result. For example, let’s say you’ve got a popular fried and breaded shrimp dish that gets tossed in a spicy, creamy sauce. You could save money (and create a new vegetarian option) by replacing the shrimp with breaded and fried cauliflower florets.

Consider looking for seasonal ingredients to stand in for pricier out-of-season items. They can still taste great for less!


Invest in Tech to Streamline Your Business

Technology doesn’t have to be scary - it can actually be a force for good.

  • Text and email marketing tools help you promote specials to your audience, no matter where they are.
  • Inventory tracking and machine learning software are more accurate than humans and can prevent overordering.
  • Pay-at-table software cuts down on time wasted settling checks, freeing up servers to do other things.
  • Labor scheduling software maximizes efficiency and minimizes costs, ensuring the correct number of people are working every shift.

Try Dynamic Pricing

Think about the last time you went to your local fish market or favorite crustacean-themed chain seafood restaurant.

Both places utilize dynamic pricing tied directly to the market price of fish, lobster, and other foods.

You can take advantage of this pricing model by changing prices based on availability, scarcity, and season. Even better, you can implement price changes as often as you’d like, whether several times per year or multiple times per day.

PRO TIP: Dynamic pricing may not work for every restaurant. Table service concepts would either have to hide prices, which could upset patrons, or use digital menus. Dynamic pricing may be better for quick-service locations like bars and cafes because guests can order from digital menus at the counter.

Up Your Creative Marketing Game

Sure, you could throw a sandwich board out on the sidewalk to drum up traffic, but where’s the pizzazz?

Outside of the food you serve, marketing is the largest opportunity for your creativity to shine! Social media is a great free option to share updates, menu changes, and engage with your audience. Targeted ads can get your menu in front of customers at the right time.

If you can, form partnerships with local businesses and companies like hotels, schools, or hospitals to create promotions like a happy hour, late-night menu, or industry event.

And if you have a website, use it! Update your menu and hours whenever they change and don’t forget to take advantage of online search features like Google My Business.

Practice and Perfect the Upsell

How often have we heard the tired old fast-food line, “Would you like fries with that?”

It’s the classic upsell, but we’ve come a long way since then. Your point of sale crunches all your ordering data to help you determine what items are typically ordered together and when. Once your team knows what items are generally ordered together, they can start offering them to guests as a combo.

Want to help your staff even more with upsells? Consider placing specials and add-ons on the menu (or even on the table) where guests are most likely to see them.

server ordering

Become a Trendsetter

Most people don’t like doing, seeing, or eating the same things every day, so why should you?

Take some time to innovate and upgrade your menu. Maybe you change your menu with the seasons to use plentiful, readily available ingredients from local vendors.

While we’re talking about local vendors, don’t forget how important they can be to your business. Local farmers, butchers, and other suppliers can let you know what products are available, giving you a head start on your menu plan.

Don’t Let Inflation Deflate Your Mood

If there’s one positive we can take away from the current economic situation, it’s that it won’t last forever. Inflation also provides the necessary jolt some people need to finally take a good, hard look at how their business operates.

So before you go ahead and raise prices, take a minute to run through this checklist to see if you’ve missed anything. Sometimes, making several small, measured changes can make a huge difference to your bottom line.

Best yet? Your staff, patrons, and bottom line will thank you!