How to mitigate the impact of food inflation and protect margins

With food being one of the many commodities to suffer recent inflationary pressures, owners of hospitality businesses are rightly looking at ways to mitigate the impacts, including on their bottom line.

With food inflation set to hit 7-8% this year, is there anything you can do to protect your margins? The answer is yes. Fortunately, there are a number of strategies you can employ.

With that in mind, we've collated and outlined some of the key methods for dealing with inflationary pressures below.


Look at Raising Prices

No customers enjoy a price rise, but it may be a necessary evil during periods of inflationary pressures. If you do decide to raise prices, make sure it's done tactfully so that you don't lose any customers.


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You can focus your price raises on the menu items that have been worse affected, or you can spread those increased costs across the entire menu so that customers don't feel like any particular dish has been unfairly targeted. There's no right or wrong approach, but a well-thought-out menu-wide price increase might not be as noticeable as a sudden price hike for certain meals.

Plus, you could also offer promotions and discounts on other menu items to encourage customers to try something new, which helps to take the focus off of the price.


Control Labor Costs

Given that food inflation is unavoidable, it might be best to look at other areas of your restaurant business to mitigate the impacts. Labor costs are one of the areas in which you remain in control, and with the latest technological advancements, there are now more efficient ways to manage your serving staff.

For example, implementing a QR-code-based self-service system eradicates the need for servers to visit every table to take orders, meaning you can operate with a smaller staff.

Even if a restaurant QR code menu is unsuitable for your particular establishment (e.g., fine dining), investing in mobile POS solutions allows servers to cover far more tables in far fewer visits, resulting in significant labor cost savings.


Build Up Multiple Sales Channels

If your restaurant is still dine-in only, then you're missing out on a lot of potential revenue. By building up multiple sales channels, you can diversify your income streams and hedge against the effects of food inflation (as well as other external factors).

For example, introducing a home delivery or curbside pickup service  broadens your customer base and gives you another avenue to explore should food inflation start to eat into your profit margins.

Even though dine-in customers continue to return after the COVID-19 pandemic, dining behaviors have permanently changed. Regardless of the effect food inflation is having on your restaurant, it's wise to have a delivery and takeaway offering in place.

The easiest way to implement these additional sales channels is via a restaurant online ordering system, which leading POS providers such as POSTRON can seamlessly set up and integrate into your existing website and/or app.


Better Manage Inventory

One of the best ways to deal with food inflation costs is to tackle them at the source. By better managing your inventory, you can cut down on food waste, automatically reducing overall food costs.

Technology can once again help here in the form of a comprehensive restaurant inventory management system that allows you to accurately calculate food costs as well as manage and monitor stock levels in real-time.


This kind of system quickly pays for itself as you'll be able to avoid over-ordering and incurring considerable food waste costs while also ensuring you never run out of crucial ingredients. In short, by ordering food more efficiently, you can insulate your restaurant business against the effects of food inflation (as well as other issues such as food shortages at critical periods such as weekends).


Turn New Customers into Return Customers

While all the methods above will help offset the effects of food inflation, the most effective strategy for increasing revenues and protecting profit margins is developing new customers into loyal repeat diners.

As a general rule of thumb, acquiring a new customer costs five times more than retaining an existing one. What's more, the average success rate of selling to a customer you already have is 60-70%, whereas that rate is only 5-20% for a new customer. So each new cocktail, daily special, or dessert you can upsell to an existing customer is that much more valuable.

Just increasing customer retention by 5% can increase profits anywhere from 25-95%, making this activity one of the most impactful things you can do for your restaurant business.

There are many ways to increase customer retention, but some of the best strategies include developing an extensive loyalty program. With customer data insights delivered by your POS solution, you can tailor the loyalty rewards to each individual diner, further incentivizing them to return.


You could also consider implementing automated email marketing campaigns that activate based on spending habits. With the information gathered from your POS data analytics, you can also personalize the promotions/offers you provide to each diner, further increasing the likelihood of them returning.


Food Inflation Doesn't Have to Be a Death Knell for Your Restaurant Business

By taking a proactive approach to food inflation, you can offset the effects on your business and use it as an opportunity to increase revenues and protect profit margins with the help of technology.

From automating food service and inventory management to increasing customer loyalty, there are many ways to stay one step ahead of food inflation and keep your restaurant business thriving for years to come.

At POSTRON, we are helping our customers through this inflationary period with industry-leading POS solutions. With QR code menus, online ordering systems, and real-time reporting on key metrics such as food costs, we have the tools you need to manage food inflation and keep your business running smoothly.

To learn more about how we can help your business thrive, why not speak to one of our representatives regarding a free demo of our cutting-edge products? 

If you’re happy with what you see, you can also gain $300 cash back on any new account you open. But you'll need to be quick; this offer is for a limited time only.

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