Menu pricing changes have always been one of the biggest bottom-line levers. So while mid-summer may feel like it’s awfully early to start thinking about a pricing strategy for 2019, the timing is actually perfect – especially if you want to make the most of your pricing initiatives during the era of consumer choice. Here’s why:
Labor Cost: Yes, commodity costs have been relatively subdued and that appears to be the outlook into next year. However, record low unemployment will continue to put the squeeze on an already tight labor market through the rest of 2018 and into 2019. This means more cost pressure on restaurants’ labor – and ultimately bottom – lines.
Delivery & Online Ordering: New order modes are becoming the cost of entry for restaurants as many markets are in hyper-competitive mode. As delivery and pre-ordering goes mainstream, the economics of being a restauranteur changing rapidly. It’s time to assess whether your brand can charge a premium for off-premise rather than absorbing the financial hit.
Timing is Everything: Don’t wait until January to roll out menu price increases. These increases are more likely to go without resistance during high spending seasons (prior to/during the holidays). If you wait until after the holidays you’ll be increasing your prices when your customers are just getting their credit card statements from the holiday season. They will be more aware of prices and more likely to react negatively. Signs suggest it’s going to be a big holiday season, so best to put your prices increases in place by late October/November.
If you haven’t started, it’s time to start planning your next price initiative. While you’re at it, assess whether your historical approach is working as it should. When executed well, pricing has the ability to impact the bottom line more powerfully than any other lever in your arsenal, but executed poorly it can do lasting damage to value perception and traffic counts.
This blog was written by Mike Lukianoff, Fishbowl’s Chief Analytics Officer. For more guidance on menu pricing changes, view our webinar: Identifying Y our Pricing Power: The Nuts and Bolts of Profitable Menu Pricing