As a restaurant owner or manager, it’s important to find the right balance between boosting profits and keeping customers happy.
Setting menu prices that optimize your margins without driving customers away requires a careful balance. We all know that this can be a hard task to achieve and many restaurant operators find themselves asking the question ‘how can I confidently boost my margins without deterring customers?’.
In this blog, we’ll explore how restaurants can confidently improve their menu margins without fear of losing customers.
What problems are restaurants facing when improving their menu margins?
Restaurants are facing an array of problems regarding improving their menu margins, such as:
Knowing how to improve menu margins
It can be difficult to know how to improve menu margins, especially if you’re not using any guest experience insights to help you make informed decisions. In the hospitality industry there are always opportunities to improve, but taking the leap to increase menu margins can be daunting due to fear of the potential loss of diners. However, when accurate customer sentiment insights are used to make changes to your menu, like dish items, ingredient substitutions and price increases, restaurants are more likely to appeal to their audience to gain and retain their customers.
Not knowing how customers will react to menu changes, especially price increases can be worrying. At the end of the day, if you have created lasting relationships and great experiences with your customers, you’re likely to see them returning regardless of price increases.
Fluctuating ingredient costs
Keeping up with changing ingredient costs can be difficult, especially in recent years. Ingredient costs vary due to a range of factors like the weather, supply chain issues and global market fluctuations. This can make it difficult to set menu prices that adapt to the market and ensure profitability.
Yumpingo’s CEO, George Wetz believes that people are already learning to expect dynamic pricing fluctuations in different industries. When looking at the music industry we’re seeing customers stay loyal despite price increases. For example, Beyonce and Taylor Swift tickets increased by up to 800%, yet fans still purchased tickets.
“This tells us one thing, that customers are already on that journey of expectation around seeing their favorite brands increase (or decrease) pricing according to economic changes.”
If you’re continually delivering excellent experiences and creating a loyal audience, you’re likely to see customers continuing to dine with you.
While wholesale prices are fast to adapt to economic changes, menu prices are a lot less reactive and tend to take 6 months after the economic change has hit to make adaptations. This can take even longer for price decreases.
We understand that many restaurant owners and managers fear their customer's reactions to price increases, but we can help you combat this. Through gaining access to quality guest sentiment data, with a granular breakdown and actionable insights we can help you make pricing changes with confidence.
When you use our Customer Experience Management Platform, we can help you gain an NPS (Net Promoter Score) by asking your guests for detailed menu item feedback. When you obtain this information it can help you manage the price elasticity of a menu and how it impacts the frequency of an item being ordered.
To learn more about how we can help you manage price elasticity, read our blog.
Another way to manage changing ingredient prices is to track all of your costs, including labor, overhead expenses and any other costs associated with running your restaurant. By understanding your costs, you’ll be able to calculate a minimum price you can sell your dishes at that makes you a profit.
It’s also important to look at the prices your competitors are setting for the same dish, as you don’t want to set prices significantly higher than other restaurants in your area. This can cause a decrease in footfall to your venue.
Maintaining positive supplier relationships
Maintaining supplier relationships can be difficult. Your restaurants rely on suppliers to provide quality ingredients promptly that improve the taste of your dishes. Creating and maintaining these relationships can be difficult as it involves negotiating stable prices, communicating effectively about food quality expectations and addressing issues quickly.
When positive supplier relationships are fostered, they can play a pivotal role in ensuring consistent menu prices and quality, while enhancing overall dining experiences.
Keeping up with customer preferences
Customer preferences tend to change rapidly based on factors like dietary trends, cultural influences and changing expectations. Adapting to these shifts can be difficult as they change quickly and often require menu adjustments, supplier changes and consistently staying up to date with trends and expectations.
However, despite it being important to cater to changing preferences and trends, restaurants need to make sure that they find the right balance between making changes and keeping consistent. You’ll also need to ensure your menu aligns with your core values and retains and attracts new customers.
How can restaurants solve menu margin issues?
Ask for customer feedback
Requesting customer feedback is a great way to understand whether the portion sizes, dish quality and prices are meeting your diner’s expectations. Understanding which dishes are performing well and which aren’t, allows you to remove underperforming dishes or adapt ingredients to help improve menu margins.
Having access to an abundance of data allows restaurants to make informed decisions about menu pricing and adjustments to ingredients and portion control that almost guarantees positive customer experiences.
Using feedback to align your menu with customer preferences and making price changes that meet your customers’ expectations can help you improve profits and customer experiences. This in turn can foster positive customer relationships that keep them returning.
Establish strong relationships with suppliers
Establishing strong relationships with clients can help restaurants improve their menu margins. Creating strong relationships with reliable suppliers enables you to negotiate stable pricing contracts that help you combat fluctuating ingredient prices. This makes it easier to set consistent menu prices and control overall costs better, contributing toward enhanced menu margins.
Good supplier relationships also often lead to better quality ingredients that can enhance the overall dining experience you provide.
At Yumpingo we can help you test new suppliers' products on your guests and rapidly understand how they affect sentiment and profitability.
A major UK group used two onion ring suppliers across different brands. Using direct guest feedback they found that one product had significantly higher guest happiness scores and therefore rolled it out to all restaurants.
Within a week the scores on those dishes increased by 20%.
Analyse competitor's menu dishes and prices
Analyzing your competitor's menu prices allows you to make price increases that strike a balance between being profitable and staying competitive. Doing your research can stop you from setting your prices significantly higher than other restaurants in your area leading to customers being deterred.
Implement portion control measures
Implementing portion control measures and training your staff on how to be consistent with their portion sizes can help you boost your menu margins. Regularly serving the same portions means the right amount of ingredients are used, helping you avoid food waste and ensure you purchase the right quantity of ingredients.
Training staff to provide the right portion sizes minimizes the chances of errors being made helping you avoid the quality of your dishes being compromised. This helps you control costs, boost profit margins and repeatedly provide high-quality customer service.
How Yumpingo can solve menu margin issues
Our Customer Experience Management Platform gives restaurants the ability to adjust prices while monitoring their guest sentiment.
Changes can be implemented in selected restaurants and tested for a week to help you determine whether to undertake a full roll-out.
Tracking guest sentiment enables you to put prices back down once the economic situation improves, helping you build a competitive advantage.
Many restaurants are reluctant to implement pricing differences across various restaurant locations without understanding how customers will react.
In the US the price of Big Macs vary among different regions, where they currently range between $3.49 and $8.09. This is primarily based on financial factors, but many restaurants understandably want to focus on customer reactions.
Yumpingo's 2022 UK research revealed varying value perceptions across regions, not solely tied to economic factors. Combining financial data with customer sentiment insights allows for more effective decision-making regarding regional pricing adjustments.
Portions and value perception
Effective portion management and presentation can greatly impact value perception and guest sentiment in restaurants. Our sentiment data offers valuable insights for optimizing portion sizes and dish presentation, ultimately enhancing guest satisfaction. For example, one UK client found that serving tortilla chips in a pot led to lower perceived value compared to the same quantity on a plate. Similarly, presenting spring rolls on a bed of lettuce increased customer sentiment.
Ultimately sentiment data sheds light on portion control and plating variations across restaurant locations, allowing for improved control and decision-making.
Simplifying your menus and recipes can result in your team producing better meals, improving customer satisfaction and reducing food waste while increasing profit margins. At Yumpingo, we help you do this! For example, one of our major UK clients reduced the size of their menu by 25% over twelve months. This led to a decrease in food costs, more efficient BOH labor, and their NPS score improving by 11 points.
This highlights that simplifying menu items has an impact that enables back of house teams to effectively deliver the ideas of the creative teams to a quality that improves customer experiences.
Implementing a Customer Experience Management Solution
Customer Experience Management Software allows you to gather in-depth insights into your dish and customer satisfaction levels, helping you make informed decisions.
At Yumpingo, our Customer Experience Management Platform allows you to improve menu profitability and guest satisfaction by leveraging your dish level sentiment data alongside your sales data.
Working with our professional services team we can also help you do this by:
- De-risking menu pricing changes based on menu price elasticity and macro-economic market conditions.
- Optimizing your PMIX to help decrease food costs and encourage guests to order high satisfaction and highly profitable dishes.
- Developing or improving menu price tiering across your restaurant group.
Our ability to help you make pricing adjustments, by monitoring guest sentiment to see how customers are reacting to price increases.
For example, we helped one of our clients facing a price increase from their french fry supplier test two alternate suppliers to see if they could cut down costs while maintaining quality. They found that one was less expensive and resulted in higher guest happiness. Within a month they gathered enough data to be confident in their decision to switch, which saved them millions in annual costs.
How does our Customer Experience Management Service work?
Our software allows you to collect guest sentiment from anywhere at any time. We capture experiences across table service, counter service, self-service, takeaway, delivery and retail via QR codes, post-dine emails or devices. These methods use Smart Surveys to uncover the ‘why’ of customer satisfaction. This is a highly engaging 1-minute survey that gathers real-time customer feedback for all of your restaurant locations across every menu item. Our data is then used to provide Smart Actions that highlight simple improvements you can make to improve guest satisfaction levels.
In addition, we also have an in-house consultancy team that will work hand in hand with you to identify your needs, then utilize our tools and programs to help drive your business forward.
How Yumpingo can help you grow your satisfaction levels
We work with you to improve your satisfaction levels by increasing your NPS (Net Promoter Scores) by providing insights and suggestions that improve your business processes and customer experiences.
When clients choose to improve their satisfaction growth with us and action their objectives, they see an increase of +13 NPS points as well as a 20% boost in sales. Objectives could include tasks like adapting or changing menu items or optimizing team training. By focussing on the things you can fix easily, you’ll notice customer satisfaction levels grow rapidly, helping you get more diners through the door.
We’re so confident in our satisfaction growth program that we guarantee to grow your NPS in just 60 days or your money back!
We have limited slots for our Customer Satisfaction service, so get in touch with us to see how we can help.
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