According to the 12-month percentage of change in the consumer price index, which measures the monthly inflation rate for goods and services in the United States, prices in March 2023 had risen by five percent compared to March 2022.

The inflation globally is expected to fall to 6.6% in 2023 and 4.3% in 2024, still above pre-pandemic levels.

So now comes the question of how to keep your restaurant business profitable during this time. There is nothing to panic but you need to be smart enough to make the first moves, so you beat the competition and thrive during these times.

We often notice many restaurants making the mistake of increasing their menu prices by 4-5% right away instead of closely analyzing different factors that go on to determine your menu pricing.

Two very important factors that need to be closely monitored during these times are the Cost of Goods Sold (CoGs) and the overhead expenses. These two tend to increase during inflation and eat up your profits.

The ideal food cost percentage for restaurants needs to be between 28%-35%.

If not taken care of, there are high chances that your working capital will see a drastic downturn and your margins will shrink.

So today we are bringing you 10 strategies that you can pick and start adopting to fight the change and keep growing during these times.

How to Fight the Inflation Change and keep Your Restaurant Profitable

1) Simplify your menu

The first place to start with would be to refine your entire menu. Again, we are not asking you to increase your prices nor are we saying to keep all the prices as they are.

You need to carefully analyze what is working for your restaurant and customers and change your menu accordingly.

If combo meals are not a big part of your menu, it would be nice to start incorporating them in your new menu.

Their ticket size is high, and you will get more people to come in with those options.

2) Limit your promotional offers

Often, if you have stocked your menu with a lot of promotions, it is going to confuse your customers and they might even miss out on your highest-selling promotion or an offer that could have benefited them.

It is tempting to clutter your menu with a lot of offers with a feeling that it will get you more orders but ‘Less is More’ for this situation and it could help you avoid ‘decision fatigue’ for your customers.

The average order time also reduces, which indirectly helps you serve more orders in a day.

So, you could reduce your offers to two at the most. Thay way, more people will have a clear understanding on what to order.

Make sure to highlight these offers on your digital menu boards properly. With eye-popping graphics, bold colors and a clear message, you can drive more sales.

3) Go strategic with pricing

Just because everything has moved towards a more expensive, does not mean that you should adopt the same strategy for your restaurant menu as well

However, it would be good to maintain menu items that are not significantly impacted by inflation as-is so that customers do not notice it. These adjustments must be minute and reasonable.

You can also go on to decrease your portion size a bit if not more to handle the inflation.

4) Use digital menu boards

Though digital menu boards have touched the restaurant industry in a positive way, it so happens that there are still a lot of them that are using paper menus.

Let’s say you change your menu every season because most of the ingredients on your menu board are seasonal or probably a menu changes every season works best in your favor. You have no option but to change your menu in the situation.

While the paper menus are of no use once they are used, a digital menu board can be used for years.

So, in the long run, irrespective of the recession or any other state of the economy, digital menu board will be an ideal choice compared to paper menus.

5) Make creative ingredient substitutions

During inflation, the prices of essential ingredients can increase significantly, making it difficult for restaurants and food businesses to maintain their profit margins.

To tackle this issue, a smart strategy is to find cost-effective substitutes for these important ingredients without compromising the taste and quality of the food.

You could go for cheaper cuts of ground meat instead of expensive cuts of meat.

You can also go on to add plant-based options instead of some animal-based options. Beans, lentils, Tofu or even Tempeh are very good replacements in your meat-based dishes.

You can also go on to try different cooking styles on your menu like roasting, grilling or smoking to give more flavor and depth to your dishes.

It would also be wise to experiment a bit and substitute rice and pasta with cheaper grains like quinoa, farro, and bulgur.

Chicken thighs can be used with chicken breasts, chuck roast instead of sirloin steak, use plain yogurt instead of sour cream, or use apple cider vinegar instead of balsamic vinegar.

These strategic cuts and adjustments can help you curb the heat of inflation in a profitable way.

6) Ensure minimal waste of food

source: discovermagazine.com

About one third of the food produced globally goes to waste. With the rising costs of ingredients, it is prudent that restaurants ought to find innovative ways to reduce food waste without compromising food quality.

The first step to this endeavor is to make a food waste audit. Start keeping track of your food waste every day for a month. Make a list of all the ingredients that are a major part of the waste. This will help you focus on the food items that require attention for this purpose.

You cannot do much for the section of item that needs to be let go or done with but often in hurry or in pressure to serve your waiting customers on time, the restaurant staff doesn’t realize the proportion of food waste they are into.

It is also wise to follow the strategy of First In, First Out (FIFO) so you can avoid wasting food ingredients that have gone into expiry.

Some leftover items can also be utilized as a better alternative if you have leftover vegetable scraps, they can be used to make flavorful broth. A sweet sauce or jam can be made from overripe fruits.

You can also train your staff to keep track of their food waste and minimize it without compromising on the quality of the food served to the end customer.

7) Leverage on online delivery service

Takeout and delivery are very important for restaurants to increase their sales and expand their customer base. Adding to that, they also help in optimizing the costs to improve profitability.

They save on utility expenses and potentially get more orders as opposed to staying limited to only one area or section of a city.

The delivery platforms also help restaurants know which item is in most demand, so they can stock the inventory accordingly and also make needed profitable revisions to their menu.

Restaurants can also adjust their menu prices in real time based on demand to stay competitive and earn more profits.

Delivery services can prove to be a useful strategy for restaurants to tackle inflation and remain competitive in the market.

By partnering with delivery service providers and utilizing data analytics, restaurants can boost their sales, optimize their menu offerings, and keep their prices stable despite economic changes.

8) Renavigate your supply chain

The first step to start out for this is to access your current supply chain. Make a list of all your ingredients, their suppliers and the costs associated with them.

Search for local suppliers for the same ingredients and compare the prices. If local suppliers offer you less pricing owing to the low transportation cost, you can go for that.

If there is no major change, you can go try finding cheaper but quality substitutes for some of your ingredients as well.

You could also opt for more diversification in your supply chain. Change only a few suppliers as you need instead of going on a total revamp of all the old suppliers for local ones.

Make sure to build strong working relationships with your suppliers during tough times, you get a step ahead of your competition.

9) Create a unique brand image

Restaurants could use this time to work on their brand image like working on unique brand logo, fonts and creating unique designs that represent restaurant values and personality.

To stand out in the competition, restaurants can also highlight what ingredients, dishes, and cooking styles make them stand out among the competition.

By offering menu items that are unique, signature dishes, or food created from locally sourced ingredients, restaurants can go on to create memorable food experiences that can create a lifetime of loyal customers.

Another thing to focus on is to offer amazing customer experiences by training your staff to offer timely and quality customer service.

10) Use data to define marketing strategies

Segmenting your customer base is a crucial step in developing effective marketing campaigns for your restaurant.

By analyzing data on customer behavior and preferences, such as spending habits and age, you can create targeted marketing campaigns that are more likely to resonate with your target audience. This can lead to higher engagement rates and ultimately, more sales.

Personalized marketing campaigns can also help you build stronger relationships with your customers. By tailoring your messaging and promotions to individual customers, you can make them feel more valued and increase their loyalty to your brand. This can lead to repeat business and positive word-of-mouth referrals.

Social media is also a powerful tool for engaging with potential customers and promoting your restaurant. By actively engaging with your followers, sharing relevant content, and running targeted advertising campaigns, you can increase your brand’s visibility and pull more footfalls to your restaurant.

Overall, leveraging data to inform your marketing strategies can help you make more informed decisions and achieve better results for your restaurant.