Like any other business, restaurants need to smartly price their offerings; balancing against what competitors are charging, the rising cost of food and labor, and when a customer will forgo a restaurant in favor of eating at home.

According to the reports in the Wall Street Journal, inflation sits at 8.2% in the United States, which is an all-time high in the last 40 years. After the pandemic, this is another big challenge that stands in the way of the restaurant industry. Rising costs are hurting profitability and forcing restaurants to look for innovative ways to navigate the road ahead.

Restaurants need to think of out-of-the-box ways to address increasing costs without shifting the full burden onto consumers through price increases.  While some prices may need to rise, here are some ideas that can help prevent customers from turning away.

Reengineer The Menu

Menu engineering is the process where dishes on the menu are analyzed based on profitability and popularity to ensure the best mix for your menu.  It is also a great way to keep costs under control, make sure the most profitable dishes are being offered and help you clarify upsell and cross-sell opportunities. By putting your dishes on a two-by-two matrix of profitability and popularity, it will become apparent what dishes to focus on and what you might want to remove from the menu.  After that is done, a review of the ingredients that go into a dish can result in cost-saving discoveries as well as lead to ideas to increase the average ticket size by cross-selling items that compliment a dish.

The design of the menu is also an important component to keep in mind.  The use of layouts/sequencing, color, pictures, and fonts can all contribute to and help draw a customer's attention and preference to order.  In setting up menus on third-party operating platforms, setting up dishes with upsells and cross-sells inside the dish is a proven method to increase ticket size

When it comes to maximizing sales and reducing costs, menu engineering is a very powerful tool and a starting point to enhance your sales and profitability at a dish level

Reduce Food Waste 

Reducing food waste is a good practice in terms of environmental sustainability as well as financial cost containment.  A key step to reducing food waste is smart inventory management - specifically buying proteins, vegetables and other ingredients in smaller quantities, ordered at more frequent intervals, to avoid spoilage.  It goes without saying the decorative garnish should be kept to a minimum or eliminated altogether.  The chef is the expert on what items can be substituted that are more cost-effective or have a longer shelf life to avoid waste and contain cost.

If you are faced with additional inventory, special offers/promotions can be done either in the restaurant or on your third-party delivery service platforms.  As a savvy move, a good quality appetizer or dessert can be added to an order as a gratis to delight and gain additional goodwill with customers.

Keep A Check On Operational Expenses

Apart from the cost of food management, operational expenses also need to be kept in check.The labor aspect of operations is definitely a challenge in this environment.  Difficulty in finding employees as well as the demand for higher wages make it difficult to not only staff the front and back of the house adequately but to also maintain reasonable profit margins.   The use of automation to eliminate routine or low value add tasks is a great way to free up labor to focus on more valuable areas of the business.  One example of a low-value task that should be automated is the manual input of third-party delivery orders that come in on a tablet or printer, by having them directly injected into your restaurant POS.

Vendor Management

No one likes to lose business and that includes your vendors.  In times like these, vendors are willing to discuss your account and offer some price concessions if it means retaining your business.  If you have a good relationship with the vendor, retention should be front of mind for them.  If you can't get price breaks on your existing business, it is smart to explore if the next tier of volume makes sense.  As a fallback, you might find a substitute an item for a more cost-effective alternative.

Increase Online Sales

Another way to combat the effect of inflation is to drive sales across channels.  Digital channels, especially with delivery service partners are a smart way to access incremental demand at a low cost to acquire a customer.  In many ways, a restaurant is a factory, and the busier the restaurant is, the more efficiently your inventory is being used and costs covered.  The incremental profit and volume can help put you over the top and fill in when the in-house, catering, or drive-through business might be lagging.  Additionally, customers ordering on delivery service platforms are more price elastic, so you can modify your pricing on these platforms to adjust for commissions.

Online ordering is one of the major streams of revenue as digital ordering has skyrocketed with no signs of slowing down. Third-party ordering apps constitute close to 30% of all restaurant orders.  With ItsaCheckmate, restaurants have witnessed a growth of 39% and reduced order errors by 85% within 2 months of using the technology. It assists in simplifying delivery operations and improves delivery ratings and most importantly automatically accepts and routes orders from 100+ ordering platforms directly into your existing POS.