What exactly is inflation? Well, it is defined as the increase in prices and the fall in the purchasing power of money. In this article, we will cover the effects of inflation on your restaurant business, from food costs to the impact it might have on your customer base, and then list some ways you can handle these to lessen their overall effects.
How does it affect my restaurant’s business?
We all understand that inflation is inevitable and that its fallout affects both you and your customers. The biggest challenge for restaurant business owners is food price inflation. With inflation, food prices tend to increase, and businesses may not always have the ability to increase the price of their menu items at a similar rate. This can put a strain on your business because customers may no longer be willing to pay the prices you charge for your meals.
How to Prepare for Rising Food Prices in Your Restaurant
As a restaurant owner, you make numerous decisions and regulate several operations within your restaurant business—but you cannot control inflation. Inflation is a natural process that can be caused by hundreds of different circumstances within an economy.
While you can’t avoid inflation from impacting your restaurant, you can practise ways to be safe. This is how to save money on food costs. You should cut your restaurant’s costs in different ways. Here are some strategies to protect your restaurant from rising food costs.
1. Create a budget.
That is your proactive strategy toward achievement. That implies that everything in your budget is up for consideration. You make all reasonable efforts to reduce your prime cost to 55 percent or less (total cost of goods sold plus total labour cost). Your budget outlines the modifications you’ll need to make to meet these challenges.
2. Change your menu.
The menu should occasionally be changed, though, if a restaurant owner is looking for a new approach to adapt. This is a relatively simple method of introducing new or seasonal foods, which may assist in supporting adjusted prices. Perhaps you have an extremely well-liked product that you can combine with a less well-liked but higher-margin product to make a combination that you can charge more for.
3. Find better vendors and suppliers.
Find other alternatives with more affordable prices. Are there any unnecessary costs at your restaurant? Perhaps there are perishables that you frequently discard or pricey menu items that aren’t as well liked. It might be worthwhile to bargain with your current suppliers. And you might get a cheaper rate on the food supply.
4. Do you need to increase your prices?
According to a recent study, 47% of the business owners surveyed had increased their prices as a result of inflation. Increasing your menu prices can help you combat inflation, but doing so might damage customer loyalty.
5. Deploy an online ordering system.
Keeping up with the latest trends in restaurant management, you can consider deploying an online ordering system for restaurants. This eliminates the costs of conventional staffing and food ordering via phone. It can also help you keep customer loyalty intact while you make necessary price increases to combat inflation.
How to Calculate How Much Food Costs to Serve & Figure Out What’s the Cheapest Meat Option?
Making food cost calculations is important for your restaurant. This is due to the fact that it makes it easier for you to determine your restaurant’s profitability. It also assists you in determining the costs of your meals and beverages.
Your restaurant may be losing money if you don’t know exactly how much the food costs. It will be challenging for you to decide how much to charge for the food and drinks at your restaurant.
The food cost percentage is calculated by dividing the total revenue from a food item by the total cost of its ingredients.
You should check how much meat costs per pound. Let’s say you sell $1,000 worth of meat each month. However, you’ll need things like a bun, meat, cheese, etc. to make the meal. Your business spends $320 a month on these ingredients to prepare the dish.
- As a result, the recipe’s food cost percentage will be (320 ÷ 1000) x 100 %, or 32%.
- The food cost percentage reveals how much of your income goes toward purchasing the ingredients for that particular meal item.
- To get a sense of a food item’s profitability, this calculation is mostly done for informational purposes.
- It’s important to note that restaurants typically charge between 25% and 35% for food.
- To boost the profitability of your business, you must find measures to lower it if it is higher than 35%.
Inflation affects every item. Even if the cost of meat goes up, you can’t have only vegetarian customers in your restaurants, and so you cannot skip meat recipes from your menu, but you can figure out the cheapest meat option that is loved by many.
Which solution will work best for me and my specific needs?
As you can see, there are a variety of approaches and solutions to effectively combat the impacts of inflation and keep your restaurant moving in the right direction. We think the solutions offered will have a positive impact on your business in the future by balancing your needs as an owner with those of your clients.
FerryPal can help you create your own direct online ordering services, so you can keep up with the competition and provide your customers with the convenience they crave.
With FerryPal, you’ll get:
- a flexible and user-friendly online ordering system.
- a capability to accept orders around the clock, allowing customers to place orders whenever they are hungry.
- Integrated payment processing makes it simple and quick to get paid.
- Detailed orders and customer reports let you monitor your success and make adjustments.
And more!
Say goodbye to commissions and hello to more profits with FerryPal. Read more about the features of FerryPal. Download the PDF here.
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