The rate of inflation for restaurant input costs are near an all-time high.
Sysco, US Foods and PFG, the “Big Three” of restaurant suppliers, reported that yearly inflation has reached 13%. For some items it is closer to 50%. Meanwhile, chain restaurant menu price increases have been around 8%.
For most individual restaurants, who traditionally do a poor job of managing their Cost of Goods Sold (COGS), menu increases have lagged even further. What can independent operators do to fight out of control inflation?
Step 1: Pay attention. Data is king. You need to know your costs, and you need to know them at all times. Pay attention to your invoices and constantly update your financial statements. After you have done that, it is time to tackle the problem.
Step 2: Raise prices. Do not hesitate. Every one of your customers knows we are in an inflationary environment, and you can assume that those customers want you to survive. The excuse of “If I raise prices, I will lose customers” is false. If you don’t raise prices, you will lose your business.
Step 3: Take a deep dive into your menu. Analyze everything. You will find that by removing a few items or changing some ingredients, you can save a ton of money on input costs.
How much should I raise my prices? Should I cut corners? How do I change my menu? If you are worried about increasing COGS, you are not alone. The SBDC can provide you the tools to help combat inflation. Learn more about our confidential, no-cost restaurant consulting and take our self-assessment.
