In a pandemic market, customers might accept that price increases are on the cards, but that doesn’t mean restaurateurs can’t try and make these hikes more palatable. By Meg Crawford
The imperative for businesses to boost profit is greater than ever, and price hikes are not just tempting, but inevitable. It comes with a caveat though—don’t do it without careful prior analysis. With that in mind, three industry experts share their top tips for inflating prices without risking clientele.
1: Increase items with a lower mark-up
Increasing lower mark-up menu items is an option but don’t be tempted to do it across the board. “You’ve got to be careful increasing items where people know the price,” warns Francis Loughran, managing director of food and hospitality consulant, Future Food. “For instance, people know that coffee is a certain price because they buy it every day and they know it’s competitive. It’s better to bury a couple of dollars in items where people are not totally across the price and it’s not an everyday purchase. For example, a $10 sandwich becomes $11.”
That said, Mark Field, director and co-founder of food boutique consulting business Prof. Consulting Group, senses that a mark-up is possible right now, even on everyday consumables.
He gives the example of coughing up $5.50 recently for a 6am airport coffee. “I took a second to think, ‘That’s dearer than I remember paying for coffee at the airport’,” Field says. “Yes, it was a good coffee, and, yes, the service was what you’d normally get at the airport for that time in the morning. But what struck home was that if coffee needs to go up 10 per cent as a COVID tax so that they’re still in business and open at odd times the next time I’m at the airport, as a consumer, I understand that.”
Even so, Field warns proprietors against indiscriminate increases. “If someone took the attitude that, ‘The market is really challenging, we need to increase profitability, so let’s ramp up the cost of everything’, I don’t think that would resonate as well.”
2: Introduce portion options
While the natural tendency is to leverage profit against a reduction in portion size, it might be wiser to expand portion options. “I’m not an advocate for just making meal sizes smaller,” Field explains. “If you’ve got a favourite local cafe and you always pick the Wednesday night special, and you go back and it’s smaller, because they need to increase profitability, it’s brand damaging.”
Loughran agrees. “I think it’s much better to offer two options—a standard portion and a smaller portion,” he says. “These days, couples commonly share main courses. A lot of people don’t want big meals anymore. We’ve been educated on diet and portion size, and it’s perfectly okay to offer dual portion sizes and adjust the price accordingly.”
3: Introduce new products
Glen Bagnara, director of Launch Pad H and now co-owner of two new Melbourne venues—Hemingway’s Wine Room and Bar Bianco—acknowledges it’s risky to reduce portion size alone. He suggests a different tack again.
“You’re better off changing the entire product, rather than reducing the portion—especially if the ingredients have become too expensive, because regular clientele will be all over it. You may feel the heat from taking something off the menu if it’s someone’s favourite dish, but as long as you explain the rationale, most people are happy.”
4: Increase premium products or find a niche
The cost of ingredients has gone up across the board, especially when it comes to proteins. In response, Bagnara suggests that proprietors analyse their costs weekly to see where tweaks can be made, with a close eye on big-ticket items. “Say you charge $65 for a 200-gram wagyu rump. If you put that up to 68 bucks, the clientele who will buy it won’t blink an eyelid. So, just put the price up—you can’t carry that price increase.”
His next suggestion, made in the nicest possible way, is to mine niche markets. “It’s a really smart move to increase price with things like vegan and vegetarian dishes,” he notes. “You have a captive audience. They’re going to order regardless. Plus, they will understand that the price has gone up substantially because they’re going to see that in the supermarket.”
5: Be reasonable
Like Field, Loughran is convinced that customers understand the industry has suffered severely due to COVID-19. In turn, they’re willing to absorb increases, but there’s a limit.
“People acknowledge and accept that prices need to go up, so places can generate the revenue to keep open. By accepting that, you’re making a contribution to keeping a venue open as an employer and a loyal part of the community. However, the ability to structure pricing is contingent on it being reasonable. If a customer ever feels they’re being gouged, it leads to dissatisfaction. Pricing is a very sensitive topic.”