QSR May 2022

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raising prices, if not this year, then the next,” adds MaeveWebster, president of Vermont-based Menu Matters, a menu and strategic consulting firm. The issue then becomes, can quick-serves do so and not alienate customers? Thus far, most experts suggest the best menu-pricing philoso phy may to be to refrain from across-the-board or frequent price hikes, instead choosing more strategic increases. At the same time, they say guests have been largely tolerant of restaurateurs’ need to escalate prices. “People have been more understanding than they’ve ever been,” says Jim Balis, managing director, Strategic Operations Group for CapitalSpring, which provides structured financing for the restaurant industry. Consumers are even willing to tip at fast casual and quick-service units. Observers also note some restaurants are making portions smaller as opposed to raising pricingmultiple times, although that tactic is just as visible to customers as raising prices. The trick going forward, asWebster suggests, is pricingmenus in a way that will address the various cost increases facing oper ators without turning off so-far patient customers. And experts agree the key is a balancing act to protect margins without being hidebound. “Operators need to be more flexible in terms of profit-margin objectives,” Cook says, admitting that’s easier said than done. While maintaining margins is the goal, eventually those may need to be relaxed or customers will feel exploited. He suggests a three-pronged restaurant menu-pricing strat egy that focuses on controlling costs—including through kitchen

tain items “have very good price value, so guests realize the price increase is not going to be a showstopper,” Cook says. Alerting guests to items with perceived value is just as important. Izzo echoed the call to use technology advances to offset labor cost pressures, ranging from separate make-lines for digital orders in the kitchen to kiosks and QR code contactless ordering in the lobby. And “bots” can take orders in drive-thru lanes. He is another proponent of gathering data to help make good menu pricing decisions, not only which items—particularly high profit ones—can carry price increases, but also how to market those as value propositions. “Every restaurant is trying to figure out the elasticity on price and howmuch of an increase it can take without losing customers,” he says. “Data will help. You must realize your costs and under stand your customers and their requirements. Determining that sweet spot is important.” Any pricing strategy should consider a discounting plan where it makes sense, Balis says, such as pricing a premium, limited-time offer higher but also offering it as part of a discount concept, such as a bundle—making sure all of thosemaintain acceptablemargins. After considering specific menu pricing, “the next step is to look at the revenue channel,” he says. “You may want to price dif ferently across the channels,” such as charging separately mobile or drive-thru service than for dining in. With an investment portfolio that covers some 3,000 restau rants, mostly limited-service, CapitalSpring works with all kinds of owners—chains, franchises, and independents. While some are adamant on certain pricing issues, others are more flexible toward regional pressures.

“A lot of times the brand will give you liberty on pricing, but, say, if there’s an LTO, you have to abide by their pricing,” Balis says. Webster advises operators to be honest with customers, but refrain from countless price hikes, because guests “will lack confidence” in the brand. “They won’t knowwhat to expect in terms of what they may be paying.” The pandemic also has changed the way peo ple view a value proposition. “It’s not so much the cost, but what am I getting for it,” she says. Value can be enhanced not just by low prices or deep dis counts, but by other factors, including hospitality, loyalty benefits, and ease of ordering.

While automation can save costs, hospitality is still important, including at limited-service restau rants. Several experts pointed to the Chick-fil-A’s success with stationing friendly employees in its drive-thru lanes to take face-to-face orders, a tactic some oth ers followed. “It’s demonstrating that you appreciate guests when they visit,” Webster adds. She cautions against relying so much on technol ogy that it removes the human touch. “Otherwise, you are nothing more than a higher-level vending machine.” q

SEVERAL EXPERTS POINTED TO THE CHICK-FIL-A’S SUCCESS WITH STATIONING FRIENDLY EMPLOYEES IN ITS DRIVE-THRU LANES TO TAKE FACE-TO-FACE ORDERS, A TACTIC SOME OTHERS FOLLOWED.

technology advances; ramping up data collection related to pric ing and value; and communicating a brand’s value to guests. Taking a “deep dive” of transactional data over recent years will provide necessary quantitative information, he adds, and an analysis of consumers’ attitudes regarding the value of products will let an operator know if an item has a “good perceived value and a chance to do a price increase.” Having data also allows restaurants to let consumers know cer

BarneyWolf is a regular contributor to Food News Media and is based in Ohio.

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MAY 2022 | QSR | www.qsrmagazine.com