Think Subway foot-long sub meals, McDonald's Big Mac meals, and a Tim Horton's coffee. These flagship products feature prominently in mass market advertising. Second, about 20% of the items on an average QSR / fast casual restaurant menu are typically high-visibility convenience meals (bundles). We call these “Sun Products” because they get high consumer attention on your menu. There are two dynamics that make menu price increases financially risky.įirst, the tactics most restaurants use to determine where, and by how much, to raise prices are rudimentary. The menu is not properly segmented, transaction data is not analyzed to uncover pockets of value, the interrelationships between menu items are not well understood, and consumer reactions are not elicited as part of the decision-making process. These periodic price increase cycles - typically annual - are best described as management prayer sessions. The underlying cause of this “please give us more revenues without losing customers” hopefest is the inherent risk that increasing menu prices will result in guests fleeing. This is particularly true in the QSR / fast casual sector. The pressure to raise prices is significant and continuous. Most restaurant businesses, particularly in the multi-unit QSR / fast casual sector, must periodically raise prices to account for increased input costs, such as rising food prices, exchange rates, tariffs, minimum wage increases, and general operating costs. Menu Price Increases: A Huge Risk for Restaurants In this article I will discuss best practices for restaurants to periodically raise menu prices in order to maintain or increase profit margins, and avoid key areas of risk. Yet it is often delayed due to the potential for getting it wrong and losing customers. Increasing the prices on your menu is one of the most challenging and risky parts of running a successful restaurant business. All restaurants must do it in order to keep up with costs.
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