10 Tips for Restaurants to Navigate Food Inflation

A quick trip to the wholesalers or a glance at your latest supplier invoice is all you need to know prices remain stubbornly and painfully high.

With hospitality costs soaring 26% in the last two years, restaurateurs are under more pressure than ever.

What is inflation and how is it affecting your business on your costs and pricing strategies is crucial in navigating these challenging economic times.

What is the current UK food inflation rate?

Prices of food and non-alcoholic drinks have risen at the fastest rate in 45 years in the last 12 months, up 19.2%. Restaurants and cafes have experienced inflation of around 10.4% on average.

While you can’t fix food price inflation, you can navigate your way through, secure business continuity and protect your margins.

Take a look at our top tips for keeping your profits up and your customers happy.

Ten tips to survive rising food prices

1. Review your menu

Make the most of the sales reports in your point-of-sale system to figure out what’s not selling and take it out of your menu. There’s no point in incurring costs for slow sellers and by removing them, you’ll get rid of unnecessary labour and raw ingredients costs associated with that dish. Instead, keep the most popular items in there and promote them to your customers through social media, your website and marketing.

Download free menu templates >

2. Organise your supply chain

Use Square’s inventory management software to optimise your supply chain operations. You can use it to track and compare vendors’ performance and prices to make sure you’re getting the best deal. If you use a lot of fresh produce, research what’s available locally – you might find it far cheaper just a few miles down the road, supporting local, plus you can leverage the local angle when it comes to your marketing efforts.

3. Streamline your operations

If you give your customers a great experience, you have a better chance of retaining them, so it’s a good idea to make the whole process as seamless as possible. An all-in-one POS system like Square will let you keep all your menu items in one place, allow staff to input orders from handheld devices accurately and take payments on the go with mobile terminals.

4. Choose more affordable ingredients

Conduct an audit of the most expensive items you buy and look at cheaper alternatives. Provided you’re not compromising on quality, you can maintain tasty dishes and reduce your cost of goods. Consider slightly reducing portion sizes too – American Airlines famously saved £32,000 a year by removing just one olive from each salad in first class.

5. Cut food waste

Look at how much food waste your business produces; are you throwing away more than you think? If you find a lot of food is going in the bin, you’re effectively binning profits too. Use your inventory management system to avoid overstocking, make sure you store food correctly and track stock and use-by-dates.

6. Adjust your operating hours

Analyse your sales data to discover your busiest and most profitable times. There’s no point staying open late into the afternoon if you run a cafe which does 90% of its trade before 2 pm. In fact, it may put you at a loss.

7. Use food tech to leverage loyal customers

With food prices soaring, now is not the time to cut back on your marketing. In fact, it’s more important than ever that you keep in touch with your customers and encourage them to visit but you don’t have to spend a fortune. Use automated email marketing to send out special offers, or create loyalty programmes and tell people about promotional events.

8. Be unique

If you can stand out from the crowd using less common ingredients or particular local delicacies, then your customers are less likely to be driven by price. Instead, they’ll be more inclined to visit because you’re offering something no one else does.

9. Remove unnecessary expenses

Assess what you use and where you could make savings to improve cashflow. The chances are there are things that add little or no value to your business that you could easily cut out without it having an adverse impact.

10. If you have to raise prices, make them smaller and more frequent

Naturally, it can be a worry if you do have to increase your prices – will your customers stay loyal? Will it put them off visiting? Will your profits drop? But if you have to put them up there are things you can do to mitigate the impact.

• Don’t make the prices hikes too large

• Make sure your rises are similar to the competition

• Make changes little and often

• Monitor any adjustments such as the drop in covers or smaller average order values and how it affects your bottom line. Your restaurant POS system can give you all the information you need to keep tabs on the metrics.

There’s no question times are tough and with food prices rising, all industries are feeling the pinch. But with the right technology supporting your business you can weather the current inflation storm and come out the other side fighting. And who knows, if you treat any price increases strategically you could even increase your profits too.