Restaurant management continues to struggle with inflation due to the rising costs of operations and food, which has led to a decrease in actual profit margins. In this article, we share the best way for restaurant management to deal with inflation.

 

How does inflation affect restaurant management?

 

Restaurants feel the pressure of economic crises that loom on the horizon and affect prices, especially with the energy crisis and fuel shortage and their high prices, which leads to the accumulation of supply chains and indicates a deep recession. Restaurant management is forced to pay more for production, packaging, and employee salaries.

 

For example, Saudi Arabia experienced a 7% increase in inflation in 2023, the highest rate since 1982. However, economists expect that 2024 will bring moderate growth of 3%.

 

Therefore, restaurant managers hope to absorb the increasing costs by passing them onto consumers and raising their prices. They see this as their only option, which puts their sales at risk and shakes consumer confidence in them. On the other hand, customers face significant pressure due to the continuous rise in prices, which may lead them to reduce their food consumption and change their purchasing behavior.

 

In this regard, a question arises: Is it necessary for restaurants to raise their prices to survive this economic crisis? Although raising prices is the last resort for restaurant owners, it is very difficult to compete with larger retail chains in terms of price. The goal is not to scare them, but each brand’s position is different from the others, and they are the ones who know their customers better than others. Therefore, there is no one solution that fits everyone.

 

But there are some steps you can take to measure and analyze the actual situation:

 

Take a look at your competitors’ prices and analyze the numbers by analyzing the cost of goods sold and menu engineering. And don’t forget that timing is key in this case. If you plan to increase prices at the same time you need to pay your suppliers, you will need to act quickly to avoid shocking customers with price increases. You can:

 

Change menu items so that customers cannot compare them to your competitors.

Try new menu items as frequent special offers and only offer popular and profitable items.

Rewrite your menu descriptions to reflect the value and quality of your offering.

Offer organizers a treat during the holidays, such as a free drink or dessert, to avoid any disappointment they may have.