Food costs have been rising for a while now — blame it on advertising that just don’t give any chill. Keeping the restaurant business afloat in the market has become the biggest challenge for food companies.
Restaurant owners are now facing the worst brunt of inflation, as an upsurge in food prices directly increases the cost of raw materials. As a result, restaurants are witnessing already thin profit margins getting more tenuous.
So, how do you think you can make your business lucrative? How can you attract customers when food cost is skyrocketing? The answer is simple — evolution. Several ways can help your restaurant cut costs and maintain healthy profit margins.
Your strategies to cut costs will indicate that your restaurant doesn't slip behind the competition.
Keep reading the article to get some hacks that will help your restaurant sustain hard times and maintain a consistent revenue stream in the long haul.
The covid-19 pandemic has undoubtedly shaken the food industry, forcing 9.7% of independent restaurants to close doors permanently in 2020.
The recent biggest challenge faced by restaurant owners is food prices rising. And the reports released by the official authorities prove the extent of price inflation affecting the food industry.
As per the report of the Consumer Price Index, there is a hike in grocery prices from 2021 to 2022. Cereal prices increased by 15%, whereas the price of eggs is 33% higher than in 2021.
In a recent report, the New York Times exposed the impacts of rising food prices on restaurants. The report highlights the inflation in food ingredient prices, especially for Good Food on Montford.
Canola oil prices increased from $22 to $57 from 2019 to 2022, whereas Scallops and Gochujang stood at $37 and $29.
Food costs and occupancy labor are expected to stay high in 2022 and beyond, indicating that restaurants need to pivot to technologies to stay afloat.
But before we move to the hacks, here is something for you. Below we have collated a list of reasons contributing to food prices rising worldwide.
Ukraine is one of the largest suppliers of sunflower oil, wheat, and other food. Around ⅓ of the world's wheat and barley comes from Ukraine and Russia.
Nevertheless, Ukraine's exports and agricultural production have massively suffered due to its conflict with Russia.
This eventually leads to supply shortages and high prices in other countries where Ukraine exports the raw materials.
As per the market data, the cargo exports of Ukraine saw a 92% YOY decline, supporting the imbalance between supply and demand.
The war between Ukraine and Russia affected other food industry aspects, such as fertilizer and gas prices. According to Morgan Stanley, the region produces and exports over 25% of global fertilizers worldwide.
American Farm Bureau data indicates that the conflict is the primary reason for high gas and energy prices contributing to rising food prices.
Since the covid-19 outbreak, the global food chain supply has been dealing with disruptions. From processing to production to retail, every aspect of the supply chain has seen the seismic impacts of the virus.
The two major countries — the US and Europe — are impacted negatively by the bird flu outbreak. The infection has affected over 38.01 million birds, including chicken breeds.
This makes it hard for restaurants to purchase chicken at the same price and serve their customers.
More than 65% of customers feel a considerable rise in restaurant meal prices. This directly impacts the restaurant's profitability, as consumers intend to dine at home.
Thankfully, some solutions can help restaurant owners outlive the challenges and social and economic impacts.
Undoubtedly, the rising food pricing can make you anxious about how to offer exceptional service at minimal costs.
Nevertheless, the good news is that some considerations can help you float your boat and thrive during high inflation.
Understanding the market trends and adapting to the changes can help tackle the high prices and gain customers. It's something that will help you establish a successful business venture.
Want to know more? Check out our tips to deal with rising food prices and stand head and shoulders above the competition.
Also, you can ensure that the end consumer doesn't feel dismayed when they deal with you.
Do you know the similarity between toddlers and expenses? Leave them alone, and they'll indeed run amok. That's why monitoring the restaurant's metrics becomes one of the critical things to cut down costs.
You need to monitor the food cost and the goods sale report to understand the restaurant cost breakdown. Daily/weekly reports on food costs are a goldmine for restaurants that help forecast sales and reduce resource wastage.
With actionable insights, you can cut short your menu to deliver smooth customer service. A small menu can help you improve profit margins and save your failing business during inflation.
Technology has been instrumental in helping restaurant owners overcome the current challenges and prepare for the future.
There is no better time than to integrate tools right now. Digital solutions like pre-ordering systems enable customers to book their food in advance. And it benefits the restaurants, too, by minimizing food wastage.
For restaurant owners, using this advanced technology is a win-win situation. Integrating technology can help cut down the cost of in-house operations, serve customers better, and boost sales.
Limiting food expenses starts with computing food and inventory costs. Keeping an inventory track includes monitoring purchased, used, and retained ingredients.
Analyzing the inventory will help you efficiently manage resources and ensure that your business runs without any hurdles. In addition, it will help you serve more customers, increase revenue, and keep up with the digital generation.
Cutting labor costs can help reduce the soaring food prices for your restaurants and customers. One of the best ways to do more with fewer resources is by using virtual POS and contactless QR code menus.
By integrating advanced technology, you can serve more customers with fewer employees. In addition, menu management and streamlined order & checkout process can contribute to a price reduction and seamless customer service.
Consumers are inclined towards purchasing discounted items as compared to regular ones. In fact, a customer is likely to buy family meals that can feed four or five members.
Therefore, you need to think strategically and increase the profit margin by offering family meal kits on your restaurant's menu.
👉 Also Read: The Great Menu Hack For Budget-Conscious Customers
One cannot deny the fact that customers prefer rewards and exceptional service. And a loyalty program is all you need to attract and retain customers.
With increasing food prices, many independent restaurants are jumping into the bandwagon of creating exceptional customer experiences with coupons and rewards.
Amid ongoing food price inflation, food companies like Feedwell Kitchen and Bakery have adopted an intelligent strategy. The company shared the necessary calculations that led to high restaurant prices with their customers.
The unique approach helped the food company to instill trust and strengthen customer relationships. And this is what loyal customers appreciate!
Instead of making them feel betrayed by increasing prices or trimming the menu, communicate with consumers. Send updates about the price changes via newsletters or posts on social media accounts.
If you still haven't created a perfect strategy to reduce food prices, now is the time to prepare a plan. Not only will it help you drive customers to your business, but it will also help you build a lucrative business with high retention rates and loyal customers.
RestoLabs is an exclusive online ordering system for restaurants with advanced features. You can access insightful restaurant data to manage inventory and scale your business.
The coupon builder and integrated reward program help restaurants increase customer engagement during price inflation by creating loyalty programs.
So, what else are you waiting for? Start the free trial of the online ordering system today and explore its advanced features!