Part one: QSRs Look Beyond Increased Prices to Address Inflation

Key Takeaways:

  • Quick-service restaurants (QSR) can address inflation with a combination of menu engineering and pricing
  • Consider product availability, and analyze your menu for what’s working and what isn’t
  • Instead of resizing, reconfigure and consider what works from market to market

Consider combining menu engineering with pricing

For operators and franchisors facing inflation levels that haven’t been seen in 40 years, you need solutions — ideally, ones that don’t send guests running to social media to complain that their favorite shake didn’t just shrink; it also increased in price.

Revenue Management Solutions (RMS) Senior Vice President of Consulting Services Richard Delvallée has some suggestions. Below, he shares some unexpected and perhaps overlooked ways that a one-two punch of menu engineering and pricing can help operators combat inflation.

Analyze your menu to discover what’s working and what’s not

For brands considering a menu change right now, RMS advises them to start by considering product availability. Factor in labor components like item complexity (“Can we make this with limited staff?”), and then compare items’ profitability to determine if each item should make the cut on the revised menu. In other words, shift consideration from “Can we do it?” to “Should we do it?”

Next, look within your menu to understand where customers are more likely to respond negatively to price changes. When we help our clients with menu engineering, we assess transaction-level data for opportunities to influence guest behavior positively.

Instead of resizing to reduce costs, reconfigure

It can be tempting to decrease portion size to save money, but doing so runs the risk of damaging your brand perception. One option is to refresh an item — that is, make slight changes to the recipe or name of a current item and introduce it as a different item.

A better idea might be to look at your menu (and yes, also your POS data) and see where you can introduce half-portions. This also provides an opportunity to release a “half-and-half” or “you pick two” concept, such as a half-soup and half-sandwich combo. Taking this approach allows you to stick with the price point for the current item while also giving your customers a “new” concept. 

Specific data points can inform menu changes

To find data-based opportunities for beneficial (and low-friction) menu changes, look at shifts in spend, then drill down to find any differences in check by revenue channel (such as delivery vs. drive-thru vs. takeout). If you’ve modified your menu — as brands nearly certainly have — look for anomalies in menu mix and item attachment. This can be an excellent spot to unearth data that can guide both menu development and marketing strategy.

Also, be aware of events that can prompt a price increase. Besides voluntary, planned modifications, external factors can drive change. We see these three most often:

  • Competition: A competitor raises (or lowers) prices.    
  • Inflation: National increases in prices for food away from home (FAFH) or food at home (FAH).
  • Labor cost: Responding to local factors, regulations or to meet market demand.

Cut costs with data

When restaurant brands use their POS data to guide them, they can make better business decisions. But to be effective, operators need to consider many factors, not just the here and now.

RMS recommends a data-driven approach, starting with an analysis of recent historical data by restaurant location, down to the item level. Consider that while a particular specialty beverage or dessert might perform great in the South, it might not work in the Northeast. Nuances are important, so while it’s useful to look broadly, it’s also critical to examine data at a granular level. What performs well in a particular region, state, city or even location could vary wildly. 

If you’re interested in learning more about menu engineering or pricing strategies that can help your brand succeed even in times of great inflation, RMS is here to help. We remain committed to equipping you with a path forward — informed by data. Contact us today.

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