5 Ways to Combat Rising Food Prices

The constant and painful rise in food prices makes it hard for a restaurant owner to think of anything else. The United States Department of Agriculture estimates that food prices increased by 7.8% in the last year. This makes a dent in your bottom line and forces you to consider alternatives to offset the additional expense. There is potential in many different areas to
lessen the pain especially as the price changes vary dramatically and customer psychology is lopsided and not rational.

You could of course punish your customers (I say punish because that will be how they see it). Rising your prices can be done without much thought and regard for customers, but in actuality it is a delicate process and can scare off customers. This can be a disaster if it is done abruptly, without giving customers forewarning or without training staff in a customer friendly explanation. But you have other choices, which you should consider before jacking up prices. These four strategies may lessen the damage that price increases have on your business.

  1. Shop Around
    If you haven’t spent time considering all your purchasing options, this is where you should start. It is easy to assume that ingredients from other sources and suppliers is of lower quality or of equal or higher price. This may be true, but don’t take the word of your current supplier’s rep. You have to put it to the test and make the necessary phone calls, especially as other suppliers may have incentives for you to switch. Although this is a frustrating process, you cannot know if there is a better deal out there if you don’t put in the time. You do have to take into account other factors besides quality and quantity however, such as service and reliability.
  2. Haggle with Suppliers and Buy in Bulk
    Sometimes, you can get the slightly prices reduced, especially if you own more than one restaurant. Still, by buying in bulk (and decreasing shipments), most restaurants can save money. This is all contingent upon storage space and how long the food keeps. Be realistic (and follow health codes) here and also provide the necessary buffer to keep everything running smoothly.
  3. Local Farmers
    This is not cheaper in nearly all cases, unless you are willing to take some risk. Essentially, the only method I see of lowering prices is by making a payment before harvest at a reduced price (a simple futures contract of sorts). Farmers, especially small ones, have to deal with fluctuations that attract them to minimizing risk. The problem is that you do not know what the harvest will offer months beforehand. While the quantity can be decided on beforehand, the quality of the produce cannot be guaranteed. So do not choose a random farmer and look for a best deal (do your research by asking around) blindly.  Also, farmers are only interested in this if there is an order of sufficient quantity so you need the ability to store your order.
  4. On the Plate

    a. Less Food – Because owners don’t want to bump up price and anger regular customers, they often resort to decreasing portions. Sometimes, it is dramatic. Other times, it is barely noticeable. Whether this decision is a wise choice or catastrophe depends on the restaurant. You must ask questions before you take this step like: Are the portions generous? Are the generous portions part of my brand? Will I leave customers hungry? What do my customers expect? Think about the psychology of your customers and how you can make it easy for them to adjust.b. More Filling Food – Some food just fills you up more and frequently the most filling foods are the cheapest item on the plate (many vegetables). It only speaks to reason that the proportion can be slightly shifted to favor these foods over more expensive ones, especially if it does little to alter the dish.

    c. Less Food Visually Enhanced – Owners should consider that food is visual too and that is normally how customers assess the size of the portion. That means that the arrangement can alter your customers’ experiences. You are not pulling a fast one, because this visual perception actually contributes to your customers’ satisfaction. The easiest way to accomplish this is actually changing your plates. It does not have to be dramatic as the food to plate ratio has an enormous effect on customers’ psychology. Let’s be clear, you are not selling a commodity but an experience (that includes the perception of food). For many restaurants, the last three techniques will reduce a restaurant’s contribution to the obesity crisis in America. It stands to reason that no dish should have a days’ worth of calories (otherwise, your hands are nearly as dirty as McDonalds).

    d. Bread – The complimentary bread (or chips) is so cheap (if you make your own that is) and when customers are waiting they can consume a lot, limiting their appetite. Of course, the bread has to taste good and be constantly refilled, but this is a technique to lower customers expectations and also keep them happy as they wait for their meal.

  5. Relabeling, Revamping or Replacing Menu Items
    Your menu isn’t the ten commandments. It isn’t written in stone. You can replace dishes (simply method) or repackage them at a slightly higher price or
    with a cheaper assortment of ingredients. Give yourself flexibility with interchangeable ingredients and decrease slightly the specificity of your menu. Even better is revamping some menu items with a different name and a somewhat different (hopefully improved) taste that has a higher price. Come on, you have made the salmon exactly the same way for 15 years, and it hasn’t created a fanatical following. If you earn the higher price, customers will definitely not fixate on it nearly as much. Of course, I don’t suggest doing everything at once, but having ⅓ the menu evolve over a year isn’t that big of a deal. An easy way to do it is introducing the dish as a special and then instituting it into the menu. Get creative.

What The Future Holds

The USDA predicts that the food price increase will slow down, so you may not have to go to your bag of tricks and ideas every few months and you can focus on other things. But don’t take it lying down. It is a reason to improve your business and maintain (or improve) customer satisfaction.