top of page

Why should you Increase your Prices Now?

Updated: Jun 21, 2020

When was the last time you increase your prices? If it’s been more than a year, then consider increasing it now. Get that project started this week!

Here are 3 reasons why you should increase your prices. These are realities that your staff and customers don’t know about:

1. There is inflation, and the cost of food increases year after year.

Inflation is a general increase in prices and fall in the purchasing value of money.

Check you for food bill, your invoices, and look at those numbers. It's a fact, there is inflation.

2. In this industry, to get high-quality candidates to apply to work for our restaurants, we need to be able to pay employees competitively.

Pay your people more. Instead of an average 10$-11$ hourly rate, if you could offer 12$-14$ per hour to get highly competitive employees, do it.

Remember, your employees are your company's most important assets.

3. The property taxes continue to increase year after year. If you are leasing, it’s directly passed through from your landlord to you.

The property taxes continue to grow yearly, which means that your lease for your restaurant becomes higher too.

Those are some of the realities and difficulties that restaurant owners are facing now.

One of the best ways to combat those is to raise our prices.

But of course, it takes thorough research and effective strategy before we can do this. We don’t want our customers to get upset, or worse, abandon us, right?



So what happens when you increase your prices?

1. Your gross sales will increase.

Obviously, increasing your prices will generate more income.

2. Your labor percentage will reduce since it is proportional to your sales.

Your labor percentage will reduce because your labor percentage and the salary that you pay for employees will increase.

The labor percentage is a percentage of your gross sales. So when the gross sales become higher, your labor percentage goes down.

3. Your food cost percentage will reduce since it is proportional to your sales.

Your food cost will reduce because it is proportional to your gross sales. When you increase your prices, you increase your gross sales.

Because you can lower the two big variable cost percentages (labor percentage and food cost percentage), you can increase your profit margin percentage.

One thing you must know is that franchise restaurants like McDonald's, Chick fil A, etc. increase their prices every year.

Some of them do it on a flat rate like 2 % across every item on their menu, or sometimes they do it on individual menus.

All restaurants deal with inflation and other financial challenges, no matter how big or small they are. Those that are mentioned are the fundamental reasons why they raise their prices.


Listen to the podcast:

Download 52 ideas for 52 weeks of the year to market your restaurant  

The Ultimate Restaurant Marketing Guide

Tune in and Subscribe to the Show




bottom of page