Restaurant Pricing Strategy to Get More Bang for the Buck
If I had a dollar for every restaurant owner who is looking for a restaurant pricing strategy to get more bang for their buck, I would be worth a ton of money! Why? Because everyone ties making money with increased sales and the easiest way to increase your sales is to raise your prices. But there’s a limit to how much you can raise your prices. Or is there? Click below to watch this video to get a restaurant pricing strategy to get more bang for the buck, or keep scrolling to read more.
Raising your prices can be scary. I've talked to restaurant owners on almost a weekly basis on a discovery call or a coaching member, and they tell me they haven't raised their prices in one or two years, maybe even longer, because they're afraid. They're afraid What if they raise their prices, their customers won’t come back.
It's fear, sometimes driven by something internal. They don't feel like they deserve to make the money. Sometimes they feel like they can't charge that much. They look at how low the food cost is and don’t feel like it’s right to price it higher. But they ignore the fact that you have something like chicken wings that are running at a 34-38 percent food cost. And if they don't understand menu mix and that every time you sell an item, it's not that specific item that makes you money, it's the whole menu. Your menu is the lifeblood of the business. It has to pay for the rent, the utilities, the payroll and everything else.
You have to get it out of your head that raising prices is scary because most of the time, when you raise prices, nobody says a word.
The next thing is there's definitely a limit to how much you can raise your prices. You have to know your market. You have to know your price points. You have to know the quality of product. You're selling the style of service you have. The problem is most restaurant owners don't even get close to finding out what the limit of their pricing is because that fear stops them.
The key is to stop thinking about price. Focus on service.
I’ve been recommending this book for years, and I swear I don’t make a dime, but it’s the best book I’ve ever read on service. It’s by John R. DiJulius and it’s called Secret Service. Now, John DiJulius is a service expert. He does seminars, workshops, training materials, coaching groups, the whole bit. He’s at the guru status. He started with hair salons and $100 haircuts. He tells the story that a $15 haircut place opens up.
What would an independent restaurant owner tend to do when they have a concept like a Cheddar's or some lower priced chain open up across the street? They tend to get fearful, like, oh, my gosh, I'm going to need to lower my prices to compete with them. They're going to steal my business.
See, John DiJulius says with WOW customer service, you make pricing irrelevant. His solution to the $15 haircut place was to put up a banner in front of his place that said, “We fix $15 haircuts.” It's brilliant because in his business, customer service is the priority. He has a list of non-negotiables of what people have to do, or if they don't do it, they will not work there. For example, when a guest is or patron is 3 feet away from any stylist, they must stop what they're doing, smile and say, “How are you today? Is there anything I can help you with?” Those are the non-negotiables. He offers examples in the book for restaurants, too. The point being if your customer/guest feels like they’re being offered great service that they can’t get at the cheaper place, price isn’t the issue.
You have to feel comfortable raising your prices because ultimately, if 25 percent of your customers don't come back, you will make more money. But the fear of raising prices, making change stops most restaurant owners. They fear customer pushback. But I would say it's safe to say that if you don't get some sort of pushback from your customers, you haven't figured out where your restaurant pricing can go. Then you can say you know the limit of your customer. Without knowing that, you're leaving profitability and cash flow on the table.
So, stop focusing on price and start focusing on hospitality like John DiJulius talks about with WOW customer service. Don't compete on a $12 versus a $10 burger. Compete on the experience and you’ll have a restaurant pricing strategy to get more bang for the buck.
If you would like to learn how to own a restaurant that doesn't depend on you to be successful, watch this free video course that teaches you three key principles to running a successful restaurant.
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