Food Business School 36: Republished → The final hurdle for the recovery of the restaurant industry is the "Spring 2022 Price Hike"!

Republished: A Quick Reference Table for Menu Price Increases Necessary for Restaurants

Base color blue... It is predicted that price hikes will succeed if there is product strength.

〃 yellow... In addition to product strength, you need at least one more factor such as customer service, store appeal, or the owner's charm.
I think it will be a bit difficult without at least one more.

〃 red... Actually, I want to raise prices by 7-8% to prepare for the future.
Introducing new menu items or modifying existing ones is necessary.

By now,
food ingredient prices are rising every 3 to 4 months throughout the year.

From a restaurant's perspective,
■ 1. In this era of cutthroat competition, raising menu prices is something you "don't want to do."
However, purchase prices have risen to such a desperate level that you have no choice but to steel yourself and ask the world, "The restaurant cannot survive without these new prices!"

When I looked at the various ranges of price increases,
in many cases, the upper limit of a single price increase is around 10%!

Please understand that this comes from the empirical rule that over 80% of customers will continue to use the service regardless.
* If you are too afraid to do even this, your profitability will deteriorate every six months.

■ 2. No matter how sharply prices soar, if you raise prices all at once by 25% or 30%,
many customers will stop ordering or stop coming to the store.
To prevent that, if prices go up by 25%,

it is necessary to devise a way to "raise prices in two stages."

When raising menu prices in two stages,

① Think about making the first increase about 60% of the final increase, and the second about 40%!
② Once you raise prices, leave a "minimum of 6 months" between the next price increase!

If there is a further increase in costs from the time of the previous price hike when you make the second price hike, you need to adjust the price to absorb it again.
However, from a customer's psychological perspective, a larger second increase than the first is likely to cause a stronger sense of aversion.

I foresee that the restaurant industry will recover its performance after passing through three milestones in the future.

1. After the New Year in the "December-January period" 70% recovery

This is because the government (which issues restaurant guidelines for public servants) and large companies/financial institutions seem to consider the end of the New Year as the cutoff for tacitly approved year-end parties (20 people or fewer, or dispersed use for larger groups, first party only).
If a new 6th wave of COVID-19 occurs during that time, it will become difficult.

2. After the winter in the "March-April period" 85% recovery

Taking into account the end of winter, the third vaccination, and the spread of preventive and mitigating pills,
I predict that a full-scale industry recovery will begin from this period.
However,
what stands in the way here is
the "rise in basic food ingredient prices and the high price of crude oil."

This period of sales growth is a chance for a price increase.
If you don't raise them,
there is a risk that profits will be halved due to the chain of price hikes after spring.

3. Next is the "July period" after the rainy season ends: 90% recovery

We predict that the recovery trend will strengthen further from the June period.
However, from a global perspective, for vaccination rates in developing countries to go from 10% to 60%-80%,
it will take the period from the summer to the autumn of 2022,
and I believe it will be impossible without the cooperation of developed countries and international organizations.

It is not certain what kind of changes the lifting of entry restrictions will bring,
but as an overall trend, I have determined that there is no doubt that fiscal year 2022 will be the year of recovery from COVID-19.

By all means,
please proactively consider raising your menu prices next spring.
Raising prices will increase your ability to survive.

And there are only a few months from deciding to implementing it.
That includes the year-end and New Year period (effectively one month).
An early decision and early preparationare necessary for success.

(End)