When it comes to finding solutions to challenges caused by inflation, restaurateurs often take the traditional route of either raising menu prices or reducing food costs. However, alternative strategies exist that are well worth exploring, as Bastien Blanc, CEO and board member at TroKadero Hospitality Global, explains.

It goes without saying that rising inflation directly impacts a restaurant’s bottom line. Increased costs for ingredients, labor and utilities squeeze profit margins which can put businesses at risk. This leaves restaurateurs with two primary options:

• raise menu prices – this approach allows restaurants to maintain profitability by passing on increased costs to customers. However, it risks alienating price-sensitive diners and impacting customer satisfaction.
• reduce food costs – which involves implementing cost-cutting measures to offset rising prices. However, it requires careful analysis and strategic implementation to avoid compromising food quality.

Categorization with care

Given that both of these options have downsides, it’s well worth exploring other opportunities. One option is classifying menu items for accurate price adjustments, or, as it is termed, ‘menu engineering.’

Not all menu items should be treated equally when adjusting prices. Restaurants can categorize items based on various elements, such as profitability. This enables them to identify high-profit margin items and those with lower margins, but also take account of their popularity. In this way, there is scope to analyze customer demand and identify best-selling items. Critically, businesses also need to take account of how price increases will impact customers’ perception of value in terms of the offering.

Based on these criteria, restaurants have several options available to them. They can:

• increase prices on high-profit, highdemand items. Customers are more likely to accept price increases for popular dishes.
• slightly increase prices on high-profit, lowdemand items. This can improve profitability without significantly impacting sales.
• consider value offers. Offering discounts on less profitable items to increase their appeal is one idea.
• remove low-profit, low-demand items. It can make sense to remove items that are not contributing significantly to revenue.

Creative cost-reduction ideas

If you are fortunate enough to have a menu of items that are mostly well-liked, then reducing food costs is a must. Restaurants have a variety of tools available that can help them to effectively achieve this aim. These include:

going back to basics – recipe cards provide a detailed breakdown of the cost of each ingredient in a recipe. This information is crucial for identifying areas where costs can be reduced. Cross-utilization of items can also help. Additionally, a key item tracker monitoring the usage of high-cost ingredients is a useful tool, helping to Identify potential waste and possible theft.

• kitchen waste sheets – these documents track food waste. Analyzing waste data helps to pinpoint areas for improvement, such as portion control and food storage.
• inventory management systems – implementing a robust inventory system helps to track stock levels, minimize waste and prevent spoilage.
• employee training – providing kitchen staff with training at a professional level on food handling, storage and portion control techniques can be instrumental in minimizing waste and maximizing ingredient utilization.

Building strong relationships with vendors is undoubtedly another investment, paving the way for you to negotiate volume discounts and look at substituting alternative ingredients to help combat rising costs.

Take it to the team

Time and time again, we see evidence that it’s the people on the ground that come up with the best ideas, which brings me to my final word of advice: building a system to combat inflation has to be done with your team. Communicating openly and transparently about the challenges inflation presents and the strategies being considered to address them will empower your team to contribute and encourage them to provide input. Be sure to reward your team members for identifying and implementing cost-saving measures. After all, they are helping the business to find that all-importance balance between tackling inflation, while maintaining profitability and customer satisfaction.