Price Raising Strategies

“Success often comes to those who have the aptitude to see way down the road.” Laing Burns Jr., author.

I want to revisit a topic that I covered in an earlier edition – raising menu prices. I know that previously I shared why it is important to raise prices in light of the current supply markets, but I didn’t really explore any suggestions on how to do this effectively without alienating your customer base. I would like to take a little time to discuss some strategies for raising menu pricing.

In a recent issue of R&I magazine, they interviewed a number of successful operators about this topic, and I found a couple of ideas that made a lot of sense that I thought worthy of sharing with you. A couple that jumped out at me were “pick two combos” and “the value added concept.” These two in particular seem to have found a way to raise prices while disguising them with menu changes to cover up what they were truly doing - raising prices.

“Pick Two Combos,” in this concept the operator gives the patron the opportunity to pick two (duh) items and pair them together for a value added meal. The operators shrunk portion sizes and allowed customers to feel that they had control over their pairing and left them feeling like they received a better value for their dollars. By pairing low cost menu options in smaller portions, the customer gets to pick two items from a specified menu and receive a perceived higher value for their expenditure. Pairing a half sandwich and a bowl of soup or a small salad allows consumers to walk away full and satisfied while leaving profits in the portions for the operators. This is an easy way to disguise profitable menu ideas as value added options for consumers.

“The Value Added Concept” will allow operators to upgrade their menu selections and split the difference in cost with the consumer. One example that I particularly liked is upgrading a hamburger from regular ground beef with Angus beef. The cost of an 8z burger will climb from $0.72 to $1.20, but with Angus on the menu, you can charge more than the $0.48 increase in the cost of the raw materials. You could take your burger from $5.99 to $6.99 and no one would bat an eye because of the perceived increase in value of the item. In this example the consumer sees (and tastes) an upgrade in the quality of the meat, and the operator raises the price more than the minimum to offset the rise in cost of the raw materials. This results in greater profitability for the operator, while leaving the consumer feeling like they received an added value for their meal dollars. Another example of this could be executed by upgrading your fish selections on the menu. Consumers want value in exchange for their dollars, and offering a better quality fish on the menu allows you to charge more for the entrée, thereby disguising a menu price increase as a value upgrade.

The “value added concept” is in stark contrast to a maneuver that I have seen many businesses make that will eventually lead to their failure. This is what I call the “Shoot Yourself in the Foot Method.” In this method, operators either hold or raise their prices while lowering the quality of the food they are bringing in the back door. This may lead to an immediate lift in profitability, but it will eventually lead to an empty restaurant as diners begin to refer to the business as the “place I used to go to get a good meal.” Consumers are smarter than you may think, you might be able to fool them once or twice, but they eventually catch on to this move and will move on to other establishments.

The key to successfully raising your menu prices is to offer your patrons a better perceived value for their money. If you can effectively execute that, then you can alleviate any worries you might have that your consumers think that you are taking advantage of them. Your patrons stay happy, and your bank account stays full!