Feeling the pressure from rising restaurant overhead costs? Beyond rising ingredient costs as patrons demand clean and organic choices, many other business expenses are on the rise. Serving and cleaning supplies and other commodities cost more. Minimum wage is increasing at federal, state, and local levels. Real estate and rental costs are an increasing burden for in-demand locations—a growing challenge for established stores in newly-revitalized downtowns, for example.
Some restaurants, feeling the pressure, resort to adding service charges to customers’ bills to try to offset costs, but it’s a risky decision in a patron-driven dining culture. The need to reclaim revenue at a rate of 5-6% can result in significant sticker shock for customers. Regulars may take offense, but even new diners could be turned off by an unexpected fee. So rather than punishing patrons in order to improve the bottom line, consider these alternatives aimed not at reimbursing your restaurant from increased expenses, but at increasing profit and growing your business.
Encourage customers to add onto their meals or make higher-priced selections with inviting upsells. Pair not just one suggested bottle of wine, but two, with meals. If one is priced at $8, add another at $10. The small price jump suggests higher quality, yet worth the minor expense (encouraging a sale), whereas something like $14 next to $8 would encourage opting for the lower-priced choice (the 75% increase stands out more). That extra $2 certainly helps increase profits, and guests feel like they’ve received more value—certainly much more than if they found a service charge on the bill.
Now is a good time to thoroughly and deeply review your menu not only for items that don’t sell very well, but for those that have poor profit margins and don’t contribute as well to your overall offerings. Beware that you may have emotional attachment to some selections that really need to go; it’s tough, but will help your bottom line. One caveat: some low-profit items consistently contribute to selling other menu (such as a low-margin but popular appetizer that seems to patrons to buy a profitable entrée), so take upsells and natural pairings into consideration.
Give New Items a Trial Run
Even when reducing costs, a static menu—or one that’s been severely downsized—can hurt business (and tempt you to consider that service charge once again). So, continue to add new items, but introduce them on a trial basis. Limited-time specials motivate patrons to buy, and can also provide you, as the restauranteur, with valuable information:
- Is this new item popular? Does it sell well, and is it likely to continue to do so?
- Is the item profitable, with good margins, especially at the rate it sells?
It also gives you an easy out if the dish isn’t successful enough to remain on the menu.
Review all aspects of your business at every level. From staffing, to food and supply stocks, to business promotion, evaluate the profitability of your practices, training, and culture. Staff front-of-house and back-of-house to match customer volume, train staff to serve customers in a way that increases profitability (with great service, a sense of community, and appropriate upselling), and spend your promotional and advertising dollars wisely (you do need to spend—not promoting is not the best option, but understanding your audience and the data gleaned from your efforts will go a long way).
The bottom line can drive a lot of business decisions out of necessity. But if you focus on customer experience and profitability, you’ll discover there are excellent options that can both help you weather economic storms and spare your guests unwelcome service charges.
Thank you for reading this blog presented by Aprons and Smocks. Use the coupon code BLOG to receive 5% off of your next order.