Trading Economics reports a 3.8% year-on-year increase in food prices in April 2022, largely driven by fish (5% from 4.3% in March 2022), meat (4.2% from 2.9%), and dairy (1.1% from 0.7%), among others. Supply chain dynamics have also changed due to the pandemic. They are still recovering and normalizing, making it a significant driver of inflation and higher food costs — fewer supplier choices leave less room for margin optimization and stabilized prices.
Despite the rising food prices, an important trend to consider is that diners in the Philippines love and are excited to eat out and celebrate the mobility that comes with less restrictions and lockdowns. With a hungry crowd eager to be fed, what are ways for food business owners to curb the effects of food inflation? Here are some of our tips.
Optimize Restaurant Operations
Despite the ebb and flow of food costs, restaurant sales and operations optimization is always a great way to mitigate potential disturbances in supply and keep customer acquisition costs at bay. If you cannot control your cost of goods sold (COGS), you can often control and influence other costs to keep your business in good shape. It also prevents a reactionary approach to running a food business and prepares you for long-term success.
1. Streamline your menu
Build a menu that supports your mains. Chef Brando Santos, the Senior Sous Chef of Unilever Food Solutions,
believes that food inflation is a normal occurrence in the food industry since limited supplies of raw materials mean higher costs. “One of the solutions we can optimize is a streamlined and efficient menu, focusing on items that are sustainable and readily sourced at competitive prices,” he says.
An ideal menu should amount to 40 items, desserts included. Operators should also make sure that the total food cost is no more than 35% of the restaurant expenses. However, this may vary per restaurant concept. The general rule of thumb is to review the menu bi-annually. Those that don’t sell much can be removed or changed. “Usually, a menu item should sell at least 10 items per day. Anything below 5 orders per day is shelved,” explains Chef Brando.
When designing a menu, make sure that cross-utilization of products and raw materials can realize a more efficient operation. Serving Plant-Based Burgers? You can also add Quesadilla with Plant-Based Meats and Plant-Based Fried Spring Rolls as the side dishes that also share the same core ingredient. The same goes with your sauces. It’s better to use ingredients that are versatile enough so you can use them in several different dishes.
3. Train and empower your employees to upsell and create connections with diners
There’s nothing better than receiving great service when dining out. Good servers
know how to recommend items on the menu, describe the deliciousness of the dishes in detail (and with enthusiasm), and upsell smaller plates that can increase the average order quantity per table. If a couple is on a date, suggest a dessert, and if a group of friends is rolling in right after the breakfast rush, offer a soup or salad as a starter.
2. Create volume-building promotions that are hard to turn down
Harp on the most popular and profitable dishes to bring attention to or
upsell other items on the menu, as long as the promotion itself encourages enough volume in your quantity of orders to offset the COGS of the promotion item. It’s common to set a minimum order quantity equivalent to or higher than your average check to ensure the profitability of the deal.
Fast food restaurants are very keen on offering family deals. Take chicken wings and donuts for example. The 12 pcs package is cheaper than the 4 pcs option. Meanwhile, buffet restaurants offer a discounted price or free-of-charge package if the customers come as a group of 10 or more. These are great examples to draw in big groups of people for restaurants.
4. Do price increases when necessary
Though this may be daunting for many business owners who have plenty of regular customers,
a price increase often signals a bigger shift in the industry. To ensure that you keep your business in a strong position when it comes to pricing, do a competitive scan to get a feel for the overall market trend, and it will often have tell-tale signs that can inform your next steps.
Around 91% of food business operators are reported to increase their menu prices at least once within six months. Although most price increases are limited to 10%, some opt to set it higher. You know your customers best, so always set the price based on your target market.
Chef Brando explains that customers will be shocked at first but will be receptive as they know the reality of food prices. “If you’ve developed a good relationship with your regular customers, the price increase will be a temporary discomfort to them. Rest assured they will come back, given that you provide good service and food qualities.”
Cost Reduction Strategies in Restaurants
Now that you’re armed with a great strategy for operational excellence, you can look at ways to reduce food costs that will save you big bucks in the long run without compromising food quality.
1. Continuously work on new supplier relations
Sometimes, a ₱1 reduction in food cost per item can be hundreds of thousands of pesos in savings a year,
especially when your daily volumes are high. Always keep an eye out for suppliers that pass quality standards for extra savings. Additionally, Chef Brando highlights the importance of maintaining a good relationship with existing suppliers to help keep competitive costs.
3. Choose seasoning or flavoring ingredients that are useful for multiple dishes
Make the most of your base seasonings. Choose key ingredients that are versatile
and can be used for sauces, broths, bastes, and more. There are plenty of options available, like Knorr Professional Beef Cubes Packs and Knorr Professional Pork Broth Base, that will help you get full meaty broth in only 5 minutes of preparation. They are also 90% cheaper when compared to preparing the broth from scratch.
2. Look at your sales trends and forecast for seasonality
Your point of sale (POS) is a great tool to do this. Always look at sales performance trends for
dishes that need constant supplies of ingredients, and plan ahead for high-sales days like Valentine’s Day, Mother’s Day, and the holiday season every fourth quarter of the year. Get ahead of your bulk purchases and stay on top of your inventory tracking so that you can maximize efficiency throughout peak weeks or months.
4. Empower and take care of your employees
Labor costs include more than hours of highly-skilled food professionals putting the work in.
They also include the many hours and resources spent training across different functions, whether front-of-house or back-of-house. Keep your labor costs at bay by taking good care of your team and minimizing turnover rates. Offer fair compensation and provide leadership and direction that empowers a team to enjoy their work and keep growing within their roles.
Tackling food inflation should be a team effort. When prices are high, ensure that your food quality and restaurant service stay at a high point. The last thing you want is to see your diners go and get disappointed.