The Bottom Line
How to Conquer Rising Food Costs
New cage laws in California have improved poultry farming from an ethical standpoint, but are also responsible for skyrocketing egg prices. Breakfast joints, understandably, have been hit hard by the change. Already-thin margins are being pushed close to zero, or perhaps even into the red for many mom-and-pop morning spots. Sadly, this is just part of the restaurant business, and the key is to take immediate action to resolve these types of issues without upsetting your customers. Easier said than done, but let’s discuss a few ideas to balance the books and still leave your patrons smiling.
In the case of rising ingredient costs, a quick fix that owners unfortunately use all too often is decreasing portion size. Smaller servings may bring margins closer to par, but incur an even greater cost to your restaurant by detracting from the guest experience. Your customers, and especially your repeat customers, will notice these changes immediately and will not tolerate leaving hungry. Also, looking at the issue in the longer-term, what happens when costs rise again? Will you shrink things down even further?
Increasing price is the other instinctive way to pass the problem down. Thankfully, more owners recognize that the vast majority of customers will look down on higher prices, regardless of the restaurant’s quality or their own financial status. The term is known as ‘price-sensitivity,’ and it can lead to uproars over hikes of less than $1 in a given menu item. Of course all menu prices increase over time with inflation, but sudden jumps are certain to drive away repeat visitors that you cannot afford to lose.
These two concepts fail because they lack subtlety. Successful owners will tackle the problem like an electrician takes on a new installation: Make big changes behind the scenes, hide the dirty work, and divert the customer’s attention to the bright light shining overhead. If done correctly, the following five solutions will keep patrons happy without them ever noticing the small patching on the walls:
Refine your ingredient mix
If egg costs are rising, you may want to use fewer eggs in your omelet. Maintain the omelet’s original size, however, with more additives that keep the overall item cost the same. Maybe it’s mixing a bit of milk into the eggs, or adding some extra tomatoes and peppers. Perhaps even a different cooking method to whip more air into the dish. In any case, you’re using more of a low-cost ingredient to make up for using less of a high-cost counterpart.
Change plate proportions
In the same way that you can use more of one ingredient, you can experiment with different balances across the plate. If you make a smaller omelet, two more slices of toast or a bigger helping of potatoes may be in order. Same concept applies: make up for the loss of one item by offering more of another, lower-cost item.
Cross-sell for cheaper
Another approach is to keep affected menu items the same and pair them with high-margin orders. Customers who order omelets could add a juice for half price, or a pastry for just $3. Even if your juice and pastry margins aren’t as high, you’re still selling them to people who never would have made those purchases in the first place. As long as the paired item keeps the total in the black, increased volume in these areas could be your saving grace.
Incentivize other items
You can always place your customers’ focus elsewhere on the menu. Train your service staff to promote pancakes, hashes and other specialties that don’t rely as much on eggs. Mark more of these items as ‘favorites’ or put a box around the entire category. Introduce new daily specials with ingredients that haven’t risen as much in cost.
Redesign your menu
More of a drastic option, but eliminating high-cost items altogether may be an appropriate option if they’re simply not making the restaurant money. Making a low-margin menu category smaller in comparison to other categories diverts the customer toward these higher-margin areas. Cutting down your omelet selection and fleshing out your pancake lineup, for example, could work so long as you’re not taking away any crowd favorites and your brand doesn’t revolve around omelets.
In any of these cases, keep everything in moderation. Just as customers will notice when you shrink your portions and raise your prices, they will notice if a dish is all starch and no protein. Maintaining your reputation and the trust of your loyalists is the most important item to consider in any restaurant endeavor, regardless of food costs.