How to Navigate Food Inflation as a Restaurant Owner
Rising Food Inflation Doesn’t Mean You Should Raise Your Prices
If you find yourself asking:
- How can I maintain profits?
- How can I keep my customers?
- How can my restaurant survive?
This guide is for you.
Current State of Food Inflation
The Consumer Price Index (CPI) for all food increased by 0.3 percent from June 2024 to July 2024, with food prices being 2.2 percent higher than in July 2023. As inflation continues to rise, many restaurants are quick to respond by raising their menu prices. However, increasing prices to maintain profits is like putting a band-aid on a leaking pipe – it may work temporarily, but it doesn’t solve the problem in the long run.
In uncertain economic times, consumers are increasingly frustrated with rising costs, and they are becoming more selective about where they spend their money. For example, in 2024, McDonalds sales fell globally and missed quarterly profit estimates for the first time in years due to higher prices. If customers are turning away from a giant like McDonald's because of pricing, what’s to say they won’t do the same at your restaurant?
The current market has become highly competitive. Quick-service restaurants (QSRs) like McDonald's are now contending not only with fast-casual players like Five Guys but also with casual sit-down restaurants like Applebee's that offer similar items, such as burgers. As a result, customers are reconsidering their choices and are often willing to spend a few extra dollars for higher quality and dining experience.
For example, the price of a Big Mac meal in 2024 is $7.29, nearly $10 with tax and add-ons. Meanwhile, an Applebee’s classic burger is priced at $10.99. Customers are increasingly opting to spend slightly more for better quality, larger portions, and a more pleasant dining environment.
While food inflation may be eating into your profits, alienating your existing customers with higher prices can be detrimental in the long run. Studies show it costs 5 times more to acquire a new customer than to retain an existing one. Instead of resorting to a “quick fix” by raising prices, it’s time to dig deeper and focus on what truly drives your business: customer loyalty.
How to Keep Customers Coming Back:
Build Loyalty, Not Prices
Your existing customers are the key to sustaining and growing your profits. So, how do you keep them coming back? Here are a few proven strategies:
1. Incentivize Repeat Purchases with Loyalty Programs
Loyalty programs are one of the most effective ways to encourage repeat business. According to a study by Bain & Company, customers who belong to loyalty programs spend 67% more than non-members.
If your business doesn’t have a loyalty program yet, you could be missing out on some serious profits. Just look at big names like Chick-fil-A and Starbucks—their loyalty programs are a huge part of their success. It’s all about making your customers feel valued and giving them a reason to stick around!
This is where ZBS’s customizable loyalty program can make a difference. You don’t need to spend a ton of time or money to have a loyalty program that rivals the big players. With our program, you can create rewards that truly connect with your customers—whether it’s earning points for every dollar they spend, unlocking exclusive discounts, or giving your regulars those extra-special perks they’ll love. It’s all about making your customers feel appreciated and keeping them coming back for more!
A loyalty program can take many forms:
- Points-Based Rewards: Customers earn points for every purchase, which can be redeemed for discounts, free items, or special offers. This method is simple and effective for driving repeat business.
- Tiered Rewards: Create levels within your loyalty program that provide more benefits as customers spend more. This not only incentivizes spending but also gives your most loyal customers exclusive perks.
- Referral Rewards: Encourage customers to refer friends or family members by offering both parties a reward. This builds a network of loyal customers who feel valued and appreciated.
2. Implement Commission-Free Online Ordering
Offer customers a seamless online ordering experience that saves both you and them money. With ZBS’s commission-free online ordering system, you can set up an online ordering platform directly on your website, avoiding the high fees charged by third-party platforms. Did you know that roughly 40% of customers prefer to order directly from restaurant websites? Not only does this increase your profit margins, but it also enhances the customer experience by providing a direct connection to your restaurant.
Online ordering has become a critical revenue stream for many restaurants, especially in the wake of the COVID-19 pandemic. Third-party platforms, while convenient, often take a significant percentage of each sale, eating into your margins.
By implementing a commission-free system:
- You Control the Customer Experience: A direct ordering platform allows you to maintain branding, control menu presentation, and offer unique promotions.
- Higher Margins: Without commission fees, you retain a larger portion of each sale, which can offset the rising cost of ingredients.
- Data Collection: Direct ordering enables you to gather valuable customer data, such as order frequency and preferences, which can be used to personalize marketing efforts.
3. Leverage Direct Email and Text Marketing Campaigns
Stay connected with your customers through personalized email and text marketing campaigns. Email marketing for restaurants has an ROI of 4400% – every dollar spent can yield up to $44 in return. Additionally, 50% of diners prefer to hear from restaurants via email. Use ZBS’s marketing tools to send special offers, discounts, and personalized messages directly to your customers. By keeping them informed and engaged, you'll increase the likelihood of repeat visits.
Best Practices for Email and Text Marketing:
- Segment Your Audience: Different customer segments respond better to tailored messages. Consider segmenting by frequency of visits, average spend, or food preferences.
- Personalize Content: Use customer data to create personalized messages. For example, offer a discount on a customer’s favorite dish or send a birthday greeting with a special offer.
- Create Urgency: Encourage immediate action by incorporating limited-time offers or exclusive deals.
- Track and Adjust: Use analytics to measure open rates, click-through rates, and conversion rates. Adjust your campaigns based on what works best for your audience.
4. Build a Strong Online Reputation with Customer Reviews
Encourage your satisfied customers to leave positive reviews online. A strong reputation can attract new customers while reinforcing trust among existing ones.
How to Encourage Customer Reviews:
- Ask for Feedback: Directly ask customers for reviews, especially after a positive experience. You can do this through email, text, or receipts.
- Make It Easy: Provide links to your review pages (Google, Yelp, TripAdvisor) on your website, in emails, and on social media.
5. Offer Exclusive Promotions
Instead of blanket price increases, consider offering targeted in-house promotions. Use ZBS’s intuitive point-of-sale (POS) systems to easily set up and manage promotions like “Buy One, Get One Free” deals, limited-time discounts, or special offers for loyalty program members. This approach allows you to create excitement and drive traffic to your restaurant without alienating your core customer base.
Types of In-House Promotions:
- Happy Hour Specials: Offer discounted drinks or appetizers during slower periods to boost traffic.
- Daily or Weekly Specials: Highlight a specific menu item each day or week at a discounted price.
- Event-Based Promotions: Celebrate birthdays, holidays, sports events, or local happenings with themed promotions.
Think Long-Term! Invest in Customer Relationships, Not Short-Term Price Hikes
Raising prices to counteract food inflation might seem like a good idea at first. However, as soon as customers start turning away due to higher prices, your profits will suffer even more. Don’t sacrifice long-term gains for short-term wins.
Instead, focus on building lasting relationships with your customers. Make them feel valued, appreciated, and rewarded for their loyalty. This will not only help you maintain your existing customer base but also attract new customers through word-of-mouth and positive reviews.
Why Customer Loyalty Matters More Than Ever
Building customer loyalty is not just about providing discounts or promotions; it’s about creating an emotional connection between your brand and your customers. When customers feel valued and understood, they are more likely to return, even when competitors offer lower prices.
Loyal customers are also more likely to:
- Spend More: Loyal customers tend to spend more per visit than new customers.
- Promote Your Brand: Satisfied customers are more likely to refer friends and family, becoming advocates for your brand.
- Forgive Mistakes: Loyal customers are more forgiving when mistakes happen, as they have built a relationship of trust with your brand.
Use the Right Tools to Build Loyalty and Retain Customers
In a challenging market, customer retention is key to success. By leveraging tools like ZBS’s loyalty program, commission-free online ordering, and built-in marketing features, you can keep your customers happy and coming back for more – without having to raise your prices. Don't lose your customers or profits. Build loyalty to help win your customers back and keep them.
ZBS offers all these tools to help you retain loyal customers at little cost.
