Given the current state of the economy, should restaurants continue to increase prices or serve smaller portions? —Heather B.
To better understand the conundrum, let’s back up a few years. When the pandemic first appeared, some restaurants began levying surcharges on guest checks in order to subsidize credit card fees, increased food costs, to-go container costs, additional safety equipment costs, “health and wellness” charges, and so on. We’ve long opined that establishments should roll any and all incidentals into the menu pricing, rather than nickel-and-dime guests with a string of fees. (And in fact, due to consumer backlash, many establishments eliminated them.)
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When labor and food costs increased, most restaurants were forced to raise prices. As inflation soared, they reluctantly did so again. Recently, many operators felt they had reached the maximum prices that customers would be willing to pay and considered reducing portion sizes, as many retail products have done. (Others have reacted by reinstituting the fees noted above, in what’s now being called “fee-flation.”)
Today, we still contend that restaurant patrons are resigned to paying higher menu prices and willing to do so for the same quality and quantity. (They don’t like it but understand the reasons.)
We asked several St. Louis chefs and restaurant owners to weigh in:
Natasha Kwan, Frida’s, Diego’s Cantina, Station No. 3: “Raising prices is a difficult issue because you always risk losing a guest or one that may frequent less often. While we have toyed with raising prices…it’s still a hard decision. Serving smaller portions doesn’t interest us because we’ve spent so much time building our brands, and it might be more damaging than beneficial to the bottom line. Price increases seem to be on everyone’s lips. However, we saw the increases two years ago. Retailers have contractual pricing agreements, so many people didn’t see any increase for over a year. For example, a 40-pound case of chicken was $30 and has been $100-plus for two years. Limes range from $26–$105 per case, depending on the time of year. And this is just food! Disposables are exceptionally high, and because a to-go order uses up to $4 in disposable containers, we have considered adding a to-go fee. Until now, it’s been a cost that we just eat. Moving to a cheaper product, such as styrofoam, is out of the question. Coupled with increased labor costs—yikes! We haven’t raised our prices yet. I compare distributor prices weekly and have a spreadsheet to chart them prior to making my orders.”
Brant Baldanza, OG Hospitality Group: “This has been a topic almost weekly at our admin meetings. Just like “Joe Public” is feeling the rise in price these days, the restaurant bottom line has felt it, too. We are paying 25–30 percent more for staff and just as much of an increase, if not more, for food and supplies in the restaurants compared to pre-COVID costs in 2019. That being said, we all agree at OG family of restaurants that the size of the dish needs to stay the same as our guests expect from previous visits and move the price up to fit inside our metrics. We would rather our guests understand the “holy shit” moment of inflation is affecting all of us than the “holy shit” moment that they just got ripped off by leaving half their meal in the kitchen.”
Tony Nguyen, snō: “I feel strongly that no one should leave my restaurant feeling hungry or cheated. If menu prices must be increased to accomplish that, so be it.”
Phil Le, Saucy Porka: “I believe raising prices accordingly makes the most sense. Unfortunately, we have to maintain margins that won’t jeopardize the quality and value of our food. There are still major supply chain issues, and we’re still struggling with sourcing products as simple as cornstarch and canned corn. Perception of a dish is still very important. As a guest dining out, I would rather pay a little more to get a full meal.”
Chris LaRocca, Crushed Red, Culinary Architects: “Never reduce your portion. Charge what you have to, but don’t mess with the portion sizes. It will blow up in your face.”
We also queried a few members of SLM’s dining team:
Holly Fann: “Increasing prices is the only option here. Attempting to reduce food cost with smaller portion sizes might help the profit margin ever so slightly on some dishes, but adversely altering the quality of what a restaurant puts out is never the answer. Transparency is key. Customers are more willing to acquiesce to unpleasant changes if they feel they are being treated with honesty, and being open about menu price increases is far more honest and upfront than making changes behind the scenes.”
Dave Lowry: “Restaurants ought to consider a third option, which is to adjust menus. ‘Exotic’ ingredients, ‘locally sourced’ foods, and other boutique affectations might need to go. Instead of focusing so furiously on getting the latest hot item, why not concentrate on more affordable options? A good restaurant, with some obvious exceptions, should be able to put out a great menu using ingredients available at a local grocery store. Yes, some international cuisine may require ingredients that are not as readily available in St. Louis and potentially more expensive. But many restaurants should look on this current economic situation as a challenge… Portions and prices can remain steady. Maybe it’s the attitude of too many kitchens that needs adjusting.”
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