Inflation and Restaurants: How to Respond

Mar 28, 2022

Last November, a report found that annual inflation of menu prices was higher than ever since 1982. Full-service restaurant prices rose 6 percent, and even limited-service restaurant prices rose a whopping 7.9 percent. This unprecedented case of inflation has been attributed to COVID and subsequent supply chain issues. In 2022, due to Russia’s invasion of Ukraine, oil and food prices are predicted to soar to new heights in the coming months. This is leaving restaurant owners asking: What gives?

The Dilemma

Restaurant owners can feel powerless in the face of inflation. It seems like a lose-lose scenario. Cutting corners or reducing quality is not an option when your restaurant known for providing great food and terrific service. Raising menu prices on customers who are already facing increased costs of gas and many other products seems less than ideal.  And laying off staff–when turnover is already too high–is the last thing a restaurant owner wants to do. Luckily, there are still a few outside-of-the-box solutions.


rising prices

Consider a Rebrand

Customers may be willing to pay more for food that they associate with a positive, healthy way of living. Chipotle made this commitment and rebranded itself as a “lifestyle” brand by touting higher-quality ingredients, encouraging sustainable farming practices, and offering vegan options. Chipotle has raised its prices many times in the past decade, and they openly plan to do it again this year. Since their customer base associates the brand with a lifestyle rather than the product itself, they will likely continue to thrive in the face of inflation.


Along with your rebrand, a powerful new logo can help emphasize your pivot. Consider McDonald’s groundbreaking rebrand in 2016. This turned their packaging into an understated advertisement in itself. Doing so, might have convinced customers to take them more seriously than they did when their packaging was bright red with a cheesy yellow “M” on it. Perhaps changes to your logo and menu could change how the community sees your restaurant, therefore changing what they are willing to pay for it.


Quality vs. Quantity

Switching to lower-quality products isn’t a great idea. However, studies have shown that lowering quantity (for example, giving five hush puppies instead of six) tends to bother customers less. If you find it necessary to cut corners in some way, this is the way to go, as long as it isn’t too drastic or noticeable.


Unlock Customer Loyalty with Monthly or Subscription Pricing

Changing your overall price structure is an excellent way to change a customer’s mindset about spending. If it makes sense for your business, you may want to consider different pricing tiers, as a monthly subscription. For example, Sweetgreen launched their Sweetpass at the top of this year to appeal to resolution-seekers. For $10, customers could get $3 off a salad every day. Is it worth it? That depends on how much a customer would typically go to Sweetgreen. Either way, it has customers seeing themselves as “members” of an exclusive club.


Furthermore, Panera’s Unlimited Sip Club has been hailed as “industry-disrupting”–for $8.99 a month, customers can get a free hot coffee, iced coffee, or hot tea everyday. The not-so-subtle result is that loyal Panera customers are now less likely than ever to stop into Starbucks or any other competitor for a full-price coffee. Even Circle K has a similar beverage subscription available for $5.99.


Additionally, this can work on a much more local level. Think of a local brewery with a mug club. Customers buy a mug for a high price point (often between 50 and 100 dollars) and then get cheap refills of that mug “for life.” This promotion encourages repeat visits, making customers feel they get a better return on their “investment.” While they’re in your establishment, they will buy food or perhaps even invite friends to join them. Even if you barely make a profit on the beer, you reap the benefits of customer loyalty in so many other ways.


Restaurant owners are nothing if not resilient. You have risen to the occasion in so many ways in the past two years. With some creativity, you can find ways to survive the inflation levels we are all facing.