Do you pass on inflation-induced price increases to your customer in the hospitality industry?

After nearly two years of lockdowns and corona measures, consumers are managing to find their way back to the hospitality industry. Unfortunately, inflation can now cause unpleasant surprises. Purchase prices, energy prices and personnel costs are skyrocketing. As a result, many hospitality entrepreneurs are forced to raise prices. Should you pass this price increase on to the customer?

What is inflation and how does it affect food prices?

Inflation means that the prices of goods and services rise. It means that consumers can buy less with a given amount of money than before. In February 2023, consumers spent as much as 18.4 percent more on groceries in stores than in February 2022 (CBS, 2023). Especially for fresh vegetables, you now pay substantially more. Unfortunately, restaurants also face rising purchase prices due to inflation. These include higher purchase prices for fresh vegetables, beer, fruit, potatoes, meat and coffee. Energy prices are also skyrocketing and staff are becoming increasingly expensive. As a result, prices in the hospitality industry are expected to rise about 8 percent this year.

Alternatives to passing on your restaurant price increase

Unfortunately, high inflation is also causing historically low consumer confidence. As a result, hospitality guests have a lower propensity to buy. If you are not careful, you risk driving customers away. So passing on inflation to customers is really a last resort. Ideally, you should first look for alternatives to passing on inflation catering. We list some alternatives for you.

1. Choose smaller portions and different ingredients

It is wise to regularly check the cost per serving. How much does it cost to prepare one dish? You may choose to make the portions a little smaller and serve other things around them. Has the price of a particular ingredient skyrocketed? See if you can use an alternative. It is also wise to limit the number of side dishes. Or put them separately on your menu at an additional cost

2. Customize your menu

Adjusting the menu can also lead to cost savings. That steak may be the most popular dish on the menu, but that does not necessarily mean it is also the most profitable dish. Even at El Mosquito restaurant, they have changed the menu. For example, there are now fewer fried tapas on the menu and more cold dishes. As a result, they save on oil and gas (HHN, 2022). You can also choose to downsize the menu. This means you need less staff and ingredients.

3. Restaurant sustainability

With rising energy prices, it makes sense to think about how to make your property more sustainable. This way, you will reduce your energy costs. Invest in energy-efficient equipment and LED lighting. Because did you know that LED lamps use up to 90 percent less power than incandescent lamps and 85 percent less than halogen lamps (Sligro, 2023). It is also advisable to attach jet regulators to faucets. You attach this regulator to the bottom of the faucet. The special nozzle sucks in air when the faucet is opened. This quickly saves thousands of liters of water on an annual basis.

4. Take advantage of analytical restaurant software

Restaurants that have a good overview of inventory can more easily cope with rising inflationary pressures. For example, they can see at a glance which products are close to their expiration date. This allows you to reduce food waste. CashDesk’ s restaurant POS system can help you do this. Furthermore, it is good to keep track of your statistics and improve them over and over again. Which products sell best and which dishes do not do as well? These kinds of questions are answered with CashDesk’s management report. Using this report, you can predict future sales. This allows you to make better decisions about your staff, menu and stocks.

Here’s how to adjust rates without losing customers for your restaurant

You’ve come to the conclusion that, despite the measures you’ve taken, you need to raise prices to stay healthy in business. Fortunately, you are not alone in this, as your competitors are also facing the same challenge. So you want to pass on inflation to the customer. But how do you ensure that for that customers keep coming after the price increase?

1. Inform guests of the price increase

If the prices of your meals have increased, neatly explain to customers why the increase was necessary. You may choose to inform customers about two weeks in advance of the impending price increase. You can do this in a variety of ways. For example, with flyers on the tables or at takeout. You can also post a message on social media. Explain briefly why the prices have gone up, for example, “Due to rising purchase costs from our supplier, we unfortunately have no choice but to increase our prices. We apologize for the inconvenience.”

2. Look critically at which price increases you really need to pass on

It is wise to figure out which price increases you really need to pass on to the customer one-to-one. Find a good balance in this. For example, the increase in energy costs is best divided over the number of guests or meals sold. You will have to increase the prices of beer, meat and fish to cover the higher purchase costs. But here too you have to find a good balance.

3. Be honest with customers

Regular customers will soon notice that the prices on the menu have increased. If the customer asks about it, be honest. Tell them that the restaurant price increase was necessary to keep the restaurant running. Most people do understand that everything is getting more expensive everywhere, including the restaurant industry.

4. Offer special deals or discounts to retain customers

To reduce the effect of soaring inflation on guests, you can offer special promotions to retain customers. For example, with a loyalty card or by giving visitors a discount on their next order. You can also let your guests bring in new customers. For example, by giving guests a unique code that they can hand out to their friends and family. Or let your guests share their best photos of your dishes on social media. You can reward the creator of the most beautiful photo each month with a voucher. A nice reward doesn’t always have to be financial. At Cappuccino Grand Café Lounge, they have created free playlists on Spotify. This allows customers to enjoy their favorite music from the coffee shop at home as well (Van Geloven, 2023).

Would you also like to use CashDesk ‘s delivery software in your restaurant? Then request a demo, or contact us!