Raise Prices on the Restaurant Menu — or Not?

Food cost inflation cannot help but show up on your menu. Guests shop at chain grocery stores and fill up their cars with gas. When inflation hits a country, prices go up everywhere, including in foodservice. The question is not whether to raise prices or not. The question is how loyal your audience is to your brand and how satisfied they are with the quality of your food. How strong and active your competitors are in the market right now. What alternatives your guest has and where they can switch to.

Restaurant marketing is pure math. If your discount or loyalty program is working well, and if more than 50 percent of your traffic comes from club members, you can accurately segment your guests by gender, age, socioeconomic profile, and visit frequency. This data is critical both for menu price positioning and assortment strategy, as well as for price increases, item rotation, and launching promotional offers.

A foodservice operation does not operate in a vacuum. Ten years ago, the competitor to an Italian restaurant was another Italian restaurant in your city. Today, at different times of the day or week, the competitor to an Italian restaurant can be McDonald’s or instant ramen from the nearest supermarket. The average person eats out once per day, and all market players compete for that daily budget.

The guest’s visit motivation is the key to managing check–guest–hour metrics, as well as demand and supply. Visit drivers may include “foot traffic on the way to work,” “proximity to the office,” “best latte in the area,” “largest lunch portions,” and many others.

A weekly baseline ABC analysis using the Sokiryansky methodology will show whether you are hitting your guests’ price and assortment expectations. A quantitative ABC, where Group A represents 50 percent of items sold, Group B 30 percent, and Group C 20 percent, clearly demonstrates whether guests are comfortable with your pricing.

Next, it is essential to compare monthly, within your à la carte menu, the planned average check per guest versus the actual average check. The planned average check is calculated as the arithmetic mean of the three average prices across the following categories: salads, soups, and entrées. This represents the amount a guest is expected to pay for a full meal according to your concept. Compare that planned average check with the actual average check from your POS system. If the actual check is lower than planned, you are missing your target audience. It means guests perceive your pricing as too high, and a menu price increase may lead to a loss of up to 50 percent of your traffic.

Therefore, you need three numbers. First, monthly repeat visit frequency per guest, based on your loyalty or rewards program analytics. Second, the conclusions from your quantitative ABC analysis. Third, the correlation between planned and actual average check, excluding alcohol.

If the results across these three metrics are acceptable, raise prices decisively by 10–15 percent. Gradual “tail trimming” in small increments typically generates guest frustration. Selectively increasing prices by 3–5 percent on individual items will not materially impact your P&L and will not offset overall cost inflation.

The conclusion is clear: analytical marketing is a core business process in the restaurant industry. It is the thermometer that measures the operational temperature of your restaurant. You should generate up to 30 marketing reports on a weekly and monthly basis. Then pricing management moves out of the realm of guesswork and becomes a structured, measurable, and fully controllable business process.

Raise Prices on the Restaurant Menu — or Not? Arm yourself with check up figures.