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IT IS TIME TO RAISE MENU PRICES!

Nov 2, 2014
Article #268
Author: Mel Jones

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For more than 22 years I practiced finance for fortune 20 companies from Nestle Food to Universal Music Group as a CFO for that group.  In my career, I had to watch the macro-trends in the industry to anticipate changes and prepare for them. 

There is a change occurring in our economy now that opens the door to restaurant owners raising prices. Let's call it the perfect weather is coming.  Chipolte recently increased prices for the first time in many years. And their same store sales where up 20% quarter over quarter after the price increase.  What does that tell you about price increases!  They don't scare away customers. 

Exactly what it this perfect weather is as follows:

1. CONSUMER CONFIDENCE UP - The economy is progressively getting stronger albeit it has been six years in the making.  People are getting jobs.  The stock market is strong. The consumers are as optimistic as they've been in years.  When consumers are optimistic, they tend to spend more. So why not spend more on eating out.

2. MORE DISPOSABLE INCOME - Taking of spending more, the fall of the oil prices has shifted more disposable income to the consumer.  When the consumer has more disposable income, they become less sensitive to price changes. 

3. FOOD AND LABOR COSTS UP: The restaurant owner in the past few years has taken it in the chin with regards to food and labor costs increases. Because of the bad economy, they've hesitated on increasing prices and their profits have suffered as a result. The consumer knows this and it provides the perfect backdrop to rationalize to the customers why prices have increased.  They’ll accept it.  Oh, they'll always be the one or two who will grumble, but they will soon find all restaurants jumping on the price increase wagon. 

So it's time to consider increasing your prices and helping your business. 

To read more about creating a great menu, please see this great article by Lorri Mealey: http://restaurants.about.com/od/menu/a/10-Things-You-Should-Know-About-Restaurant-Menus.htm?nl=1

                                                                                                                                                                                                                                                      

Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry.  Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer.  Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world.  There he participated in more than $11.5 billion of merger and acquisition transactions.  He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University.  Give Mel a call at 480.274.7000 or e-mail him at [email protected]taurants.com if you have any questions. 

 

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