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Can Restaurants Increase Their Menu Prices In Response To The Rising Food Cost?

Cafe Menu CoverOver the years, people have developed the habit of eating out.  When in the old days it had been a recreational activity, a way to deviate from the monotony of their daily lives, dining-out nowadays has become the way of life,  the norm more than the deviation.  One main reason for this is the fast-paced lifestyle that people now have.  With the upsurge of technology which gives people so many activities to choose from, less and less people are inclined to do house chores, of which cooking is included.

And since the restaurant market sensed this, the recent years found a certain boom in the business – giving people more and more choices and access to world cuisines. Whether it’s a way to celebrate their little milestones in life (birthdays, anniversaries,  promotions),  to extend goodwill and carry out company image management,  or simply just a way of treating themselves, our society continuously discover more reasons to dine-out  than to eat meals at home.

This trend might soon be tested, though.  With the rising cost of commodities like vegetables, cooking oil, cheese, beef, wheat, rice and almost all other menu ingredients, restaurants are slowly compelled to increase their menu prices.   Pork prices went up by 11.2%, poultry at 2.2%, bread and pasta went up by an astounding 23%, and potatoes at 21%.  Forecasts sound scary too – eggs are said to rise up to 17%, chicken and beef at 8%, milk and other dairy products at 5.5%.  Restaurateurs  did try to hold out as long as they can,  making do with narrow profit margins, trying their best not to scare off their patrons.  But with the steady rise of food costs, they might not be able to impede the increase of their menu prices any further.

Trying to reduce the impact to their already economy-battered customers, restaurants still try to maintain the dining-out lifestyle and attempt to cope with the increase in many ways.

Some restaurants restructure their menu pricing.  One restaurant used to charge $12.50 for three bowls of nachos, and since they needed to take measures to increase their profit margin, they changed the price to $9 per two bowls.  The 7% increase in price is not evident at a glance, and most customers do not notice at all.

Some prioritize their more-profitable menus in their product displays. Realizing that visual marketing tools influence customers when ordering, they prioritize the display of their cost-effective menus, making sure they are easily seen by the customers when giving their orders.  Self-service restaurants make use of attractive menu boards, while those that provide table service make use of catchy table signage’s or attractive menu covers featuring the food item.

A few focus on pricing architecture, where only a number of items on some   branches undergo price increase.   Starbucks and Wendy’s are reported to be doing this.

Several restaurants, like McDonald’s, plan to come up with new food items.  The customers don’t have a point of reference to compare the price of the new items and will take it as it is.

Capitalizing on the life-style change and eating-out psyche of the consumers, restaurants can in fact turn-around the food inflation occurrence as an advantage rather than a disadvantage.    Food analysts have predictions that the rising food cost would make consumers skip their visits to grocery stores and stop at restaurants more often.  Yes, restaurants can actually have their price increase—for as long as they are cautious and strategic in doing so.