Episode Transcript
[00:00:00] Hey restaurant owners. I'm going to tell you something crazy. I'm going to tell you the craziest thing you can do that will actually work to make a more profitable, sustainable business. The absolute craziest thing you can do and you should be doing. Ready?
[00:00:13] You should be raising your prices every single month. Sound crazy cool? Let's get into it, let's talk about it.
[00:00:21] There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.
[00:00:52] Hey everyone, thanks for tuning in. My name is Chip Close. This is the Restaurant Strategy podcast. We put out two episodes every single week. Operations on Mondays, marketing on Thursdays. As you know, I wrote a book called the Restaurant Marketing Mindset. I run a membership site called Restaurant Foundations. I give talks all over the world and I run a group coaching program. It's called the P3 mastermind where I work with independent restaurant owners and operators, people who are looking to grow but struggle with profitability. If that sounds like you, if you are stuck in single digit profits and you're ready for 15, 20% or more, then set up a call. Restaurantstrategypodcast.com Schedule There is no pressure. We bring on about 10 to 15 new members every single month. It's an incredible community. If not you, it will be someone else. But my question is, why not you? If you are ready to make a consistent predictable 20% to the bottom line and you figure out what your top line is and you do the math in your head and you figure out what 20% would mean in your bank account, meaning in your personal checking account this year. That's the power of the work we do. RestaurantStrategyPodcast.com Schedule grab time on the calendar. You'll chat me or someone from my team, we'll ask you some questions, you'll ask us some questions and let's see if you're a good fit again. Restaurantstrategypodcast.com schedule and yes, that link is in the show notes.
[00:02:13] Now what's the food cost on your third best selling entree? You don't know. With Margin Edge you could know instantly. Margin Edge is a complete restaurant management software that I recommend. I have been recommending to all of my P3 members. If you are looking to improve profitability, this is the program for you. With Margin Edge. You just snap pictures of your invoices and you get Real time data for all areas of your business. You can see plate costs in real time. You get a daily P and L, your inventory count sheets are automatically updated. It saves you a ton of time and it lets you make really informed real time decisions. My client, Gather Brewing, they started using Margin edge and within one month their food costs went from 38% to 28%. You do the math, that is meaningful savings. There's a reason I recommend Margin Edge to so many of the P3 members. It's because it works. I know it works. I've seen it work. If you're interested in learning more or if you want to see how Gather brewing went from 38 to 28% food costs, head over to Marginedge.com chip. There's this incredible video that they filmed. Again, margin edge.com chip watch the video. Grab time, set up a call. That link is always in the show notes.
[00:03:30] Now let's talk about this. One of the words I hate, one of the phrases I hate most when it comes to our industry is this idea of razor thin profit margins. This idea that we hang on, right? That we're like some bug hanging onto the windshield just trying to make a little bit of money from our business, which is insane. There are tons of ways to make money. There's tons of ways to make a living and support your family. Right? If this way, if running a restaurant is too hard, if you're not making enough from this, then stop, stop doing it.
[00:04:02] Now I'm gonna, I'm gonna, I'm gonna assume that if you're still with me and if you're still insisting on running a restaurant, then you're pretty good at it. You love what you do. You've got great passion for what you do. Great. So then let's figure out a way to make money from your restaurant. For the record, I run something, it's a group coaching program called the P3 mastermind where you can, you can click the link down below. If you wanna learn more about that program, go watch, watch a quick video grab time with me or someone from my team and learn about that. But the whole goal of that is to help independent restaurant owners increase the profitability of their restaurants to make more from the thing that they're already so good at. Right? I believe we should be targeting a consistent, predictable 20% profit every single month. It's absolutely possible. And if you're a quick service, fast casual concept, that number is more like 25 or 30%. The very best quick service concepts out there make between I'll say 22 and 28% every month. The very, very, very best, right? We're talking like a Panda Express does 30 operating profit every single month at every single unit. My point is, it's absolutely possible to make money. And you shouldn't feel bad about wanting to make money from the thing that you're already so good at. Feed a lot of people, you provide a lot of jobs, you generate sales tax revenue for your state. There's lots of things you do, right? You support your landlord, you support all of your vendors, your buffeters, the. The farmers, the company where you get your paper goods, all of that. There's an ecosystem around you, right? And so it's okay when all those people are making money. It's okay to say, well, why not me? Why can't I make money? Right? So this idea, the razor thin profit margins, right? The fact that we're barely slicing off enough for us at the end of the day is ridiculous. And so I want to get rid of it. The two biggest things that stand in our way from being profitable, right, Are cogs and labor together. Cost of goods sold and labor equals something called prime cost, right? Prime cost needs to be below 60% in order for you to make a serious amount of money, right? The reason we spend so much time in the program that I run on the podcast here on this channel, the reason we spend so much time talking about prime cost is because those are two big controllables in our business, right? And in business, we control the controllables. Let me explain what I mean, right? Cost of goods sold. In essence, in theory, we get to control what products we buy, who we buy them from, how much we pay for them, how much we portion out, and ultimately what we charge the consumer for those products, right? So cost of goods sold is a controllable. Same thing with labor. We get to determine who we hire, how much we pay them, how much we schedule them.
[00:06:35] So cogs and labor are two big controllables in our business. And we talk about raising menu prices every single month, which is something you should do. That has everything to do with managing our cogs number, right? So let's get into it. Yes. Do I believe you should raise your prices every single month? I absolutely do. If you're sitting here looking at me and going like, that's crazy, I'm never going to do it. Let's take a step back.
[00:06:58] If you are a massive chain or a restaurant group, I'm guessing that you've got pretty good purchasing power. So you're already getting Pretty good rates on your, on the food that you buy. I'm guessing you're, you're locking in certain items. You get really beautiful, like handcrafted menus that are like laminated. You get them from some printing company. They're very expensive to reproduce. So if you're listening and you are at Applebee's or Chili's or something like that, yeah, you're right. You're right. But you've locked in the price of ground beef for a year. You've locked in the price of hot dogs for a year or ketchup for a year, or buns or fries or chicken wings or whatever it is.
[00:07:34] But for the rest of you, I'm guessing you are independent restaurant owners. And so you are, you are swept up in the whims of the market, right? The price of chicken wings go up, your purveyor, your distributor is going to charge you more for chicken wings. So then what do you do?
[00:07:49] And I know a lot of people are like, well, I really don't want to raise prices. And so here's the thing, right? Here's the thing. When we say I don't want to raise prices, it gets us into a bad habit, right? We're saying, because really the underlying assumption there is I don't want to raise prices when it's too expensive, then people will no longer come. And that may be true, but that just means you have not properly groomed your consumers to expect regular price increases. Guess what?
[00:08:16] The supermarket has done a really great job over the last, I'll say, 100 plus years of grooming consumers to expect certain fluctuations in prices, right? And prices go up a little, down a little, Up a little, down a little. But for the most part they are. If you, if you plotted it on a graph, it only goes up and up and up and up and up because it moves pretty much on target with inflation. Unless, let's say the last 18 months or so when it got haywire. And so it moved way different. You know, it was separated from the rate of inflation, right? This sort of goes back to exactly my point. Point. This is why you should be changing your menu prices every single month.
[00:08:53] Restaurant owners. Because I know you guys out there are restaurant owners. If you want a steady, predictable flow of new customers, you need to check out restaurant scale secrets. They're fully done for you. Marketing systems have helped tons of restaurants, including more than 50 members of this, the restaurant strategy community.
[00:09:11] Their systems have helped fill tables and add tens of thousands of dollars to top line revenue. If you're ready to take marketing off your plate and start filling tables, head to restaurantscalesecrets.com chip to book your free discovery. Call again restaurantscalesecrets.com Chip as always, you'll find that link in the show notes.
[00:09:34] Now, let me explain what I mean. Do you raise everything on Your menu by 5% every single month? No, absolutely not. It's absolutely stupid.
[00:09:42] What you do is something I call popcorning prices. So every single month you are going to increase prices on your menu, but not your entire menu. This is really, really crucial. So every month, rather than sitting down and going like, ooh, should we raise prices? You sit down and you go, well, we have to raise prices. Because that's Chip's theory and there's validity to the popcorning prices mentality. We say, okay, so we're going to raise prices. What items will we rape raise prices on? And that becomes crucial. So if every month you are committed to raising prices on, let's say, 5 to 10% of your menu, not a 5 to 10% increase on everything on your menu, but an increase on 5 to 10% of the items on your menu, right? And by keeping really good track of your real time plate costs, understanding the fluctuations in eggs or chicken wings or butter or potatoes or whatever it is, that will tell you which items you're going to raise the prices on and by how much.
[00:10:38] So we are always managing the margins that we make from our food. And so when the price of chicken wings go up and up and up and up, we're going, man, that's the first thing I'm raising prices on in three weeks when we, when it's time to raise prices.
[00:10:51] When you do this, when you get in this mentality, it's so much easier to conduct yourself because you really do come to the table and say, what are we raising prices on? Every single month, you should be raising the prices on a portion of your menu, right? 5%, 10%, 15% of your menu. And sometimes it might just be soft drinks. It's soft drinks. And this, this dessert or it's all, well drinks or just, you know, bottled beer or it's these two apps, these two entrees and that dessert, whatever it is, every month you sit down, you've got a lot, you got a lot that you sell in your restaurant. So just pick some items and raise the price little by little. And I promise you, even if it's expensive, even if there's an expense to printing off your menu, I'm guessing it's not tens of thousands of dollars, I'm guessing it's hundreds of dollars, maybe a thousand dollars, right? So even if it's a thousand dollars and you're going to raise your number one item, right, your number one appetizer on your P mix, your number one entree on your P mix, meaning, hey, I'm going to raise my number one appetizer by a buck and my number one entree by two bucks, right? I'm going to guess you sold like 500 of the app, so that's 500 extra bucks in your pocket next month because I'm going to assume same amount of units are going to move next month. And if you raise the price on your best selling signature entree by two bucks, right, and you sold 500, that's a thousand bucks. So if it cost you 1,000 bucks for the printing, you're going to make an additional $1,500, right? So even here, even we're looking at the printing, the ROI on a new print should pay for itself when you do this, right?
[00:12:24] So you make your decisions on what to raise the prices on. On two factors, and I've sort of hinted at them here. Number one, you look at your real time plate costs, you look at the increase in prices on certain items and you see what that's done to the profitability of certain items in your menu. You never want it to fall below the target profitability. So those are the first items that go. And the next thing, you always look at your most popular items. Hopefully your unpopular items are just getting chopped off every month. You're using this to also reconsider your men.
[00:12:53] So, man, I put this new item in the menu. It's real stinker. It's not selling. Just chop it off. Just leave it, lose it. Now, maybe you replace it with another item, fine, but just lose it.
[00:13:04] And then raise the prices on your items that are no longer profitable or your items that are very, very popular. So you should be raising prices on your menu every single month. Not all of your prices, but popcorn, the prices. So what happens? You raise a certain percentage of them over the course of the year, then you will have raised everything. And it changes the way you approach your, changes the, the way that you think about profitability. You go, well, I'm committed to profitability. So much so that I'm going to amend my menu prices every single month. What happens then? What happens is that your consumers, and I said this a few minutes ago, your consumers. You're starting to groom your consumers to expect little price increases just like the supermarket does. So well, you are going to raise prices little by little by little, maybe 50 cents or a dollar or 75 cents all over your menu, little by little by little. So they come to expect it. And it doesn't ding their favorite item every single month. It only dings their favorite item once a year or twice a year. That's okay, because they see other things changing. They're going like, oh, yeah, oh, look, coffees are more expensive. Oh, look, the iced tea went up. Okay. Oh, yeah. Well, now it makes sense. My favorite chicken sandwiches also increased the price this month. Okay, great. Makes sense. Yeah. I mean, it looks like they do little by little because they know that you have to run a business that if you're no longer profitable, you're gonna go, it's not worth it. Let me just shut this place down. And then they don't have their favorite chicken place, they don't have their favorite sushi place anymore. They don't have their favorite pizza place.
[00:14:29] So. Point of this, point of this video is to convince you to raise your prices every single month. And you do this through this philosophy, this idea of popcorning prices. One final request, if you haven't subscribed already, make sure to click the bell below. You'll be notified every time this new video. And if you wanna learn more about the program I run, the P3 mastermind. The link is down below in the captions. Click a link, go set up time. Chat with me or someone from my team. We'll. We'll talk about your restaurant. We'll talk about the program I run. Thanks, guys. See you next time.
