How to increase restaurant sales in a cost of living crisis

How is inflation impacting hospitality businesses?

With an increased cost of living and inflation rising rapidly, our money is increasingly less valuable while everyday costs are more expensive.

For businesses in hospitality, they can expect to feel the pinch when it comes to:

1. Operational costs — Whether it’s buying fresh ingredients or paying your electricity bills, day-to-day running expenses are on the rise.
2. Fewer customers — With customers also cutting down on non-essential costs, this means fewer nights out and more cooking at home.
3. Supplier costs — While suppliers deal with rent hikes on storage facilities and the increasing cost of fuel, your delivery invoices are likely to go up too.

Having to spend more while also losing customers is understandably challenging, but there are strategies you can implement to arm yourself for the road ahead.

7 tips for tackling cost of living pressures

1. Conduct a financial health check

Analyse your most recent profit and loss statement and compare it to last year's reports. Pay close attention to your outgoings, like the cost of goods sold, rent, and wages. By taking the time to understand where inflation will hit you the hardest, you can decide if it's better to absorb rising costs or make adjustments to reduce your spending.

2. Evaluate menu pricing

While raising prices may be necessary for some, it’s a risky move that can scare away customers. Start by looking at what other similar restaurants are charging and how it’s impacting them. There is no 'one size fits all' solution and whatever you decide to do will depend on a range of factors like the financial health of your business, your customers and your supply chain.

3. Be transparent

Post-pandemic, consumer sentiments have shifted. Today, customers have a deeper awareness of industry challenges and are more likely to be understanding of changes and even willing to help.

In fact, 85% of Australians intend to buy from local businesses to help them recover from Covid. Whether it’s through conversations with your regulars or a note on your menu, transparency goes a long way.

4. Optimise your menu

Before you start re-engineering your menu, look at how it’s currently performing and use this knowledge to introduce more effective changes. We suggest the following:

• Craft a smaller menu — Streamline your menu by removing your least ordered and most time-consuming menu items. Plus, customers actually prefer a shorter menu as it indicates higher quality and makes ordering easier.
• Champion best-sellers — Focus on perfecting your dishes that already do well. Beyond better execution of the dish, ensure you’re marketing them properly e.g. put your most expensive items first and rewrite menu descriptions to emphasise value and quality.
• Sub out ingredients —Swap expensive ingredients for similar but more affordable substitutes and make the most of discounted seasonal produce.

5. Create cost-effective rosters

It’s normal for labour costs to make up around 20 to 35% of a hospitality business’s gross revenue. However, with the recent cost of living pressures, it’s likely minimum wages will get an above-average increase this year to compensate workers. [3]

Cutting labour costs is a balancing act as underpaying staff can leave you with an underperforming team. Rest assured there are still plenty of ways you can make your roster more efficient. Consider how many staff are needed each day, put your best workers on busy shifts and stagger their start times. With increasingly thin margins, making sure you’re never overspending on wages when you don’t have to is essential for staying afloat

6. Minimise waste

Identifying new areas where you can minimise waste is good for your pocket and the environment. Whether it’s ditching single-use plastic  or implementing strategies to cut down on food waste  — ultimately it’s about working smarter, not harder.

A great way to do this is by leveraging technology to solve areas of inefficiencies. While investing in new equipment may seem counterproductive, it can help you save both money and time long term. Think automated changes to rosters, greater insights from accurate reporting and less room for miscommunication or human error. Better yet, with these bases covered your team will have a greater capacity to offer a premium customer experience.

Build brand loyalty

Did you know 64% of people find customer experience more important than price?

While it’s reassuring to know customers are more likely to forgive price hikes if they’ve been treated well, this mentality extends far beyond just good customer service.

Brand loyalty is built on some form of emotional connection, and it’s what will make your customers choose you over others even if times are tough. In fact, because times are tough, it’s even more important to keep lines of communication open. We saw the power of this during the pandemic with more than three-quarters (78.6%) of businesses increasing their social media use to engage with customers.

By starting a dialogue, you can help them understand the new changes while acknowledging the pressures they’re facing too. Whether it’s via your social platforms or when they visit your venue, find ways to let them know you care and value their opinions.

Conclusion

While it looks like the hospitality industry won’t be out of the woods for a while, the pandemic proved agile and proactive business owners will always come out on top. Navigating inflation will look different for everyone but the tips provided in this article can arm owners with effective strategies to tackle cost of living challenges head-on.