Food costs are going up, profit margins are shrinking, and consumers are anxious about the economy. This puts restaurants in a tough spot. Back of House operations expert Marylise Trépanier captures the dilemma that a lot of restaurants are facing today.
“You need to increase your pricing if you want to survive,” Marylise observes. “But I also respect that you have regular customers that you want to keep. So the real question is not ‘Should I raise menu prices?’ The question is, ‘How can I go about raising menu prices without losing customers?’”
We’ll take a closer look at exactly how to increase menu prices without alienating your customers. But we’ll also talk about the importance of offering your customers real value in exchange for those rising prices, and we’ll discuss the central role that customer loyalty programs for restaurants can play in delivering that value.
Inflation and Stagnation
Food prices are going up and the restaurant industry is feeling the effects. According to the National Restaurant Association (NRA), food and labor costs have raised operating costs for restaurants by 36% in just the last five years.
This is to say nothing of rising costs for space, energy, and restaurant processing fees on things like credit cards and delivery services. On top of that, says the NRA, customer traffic remains below pre-pandemic levels.
And more immediate factors like tariffs, inflation, and supply chain disruptions continue pushing costs upward. Together, these factors are making it harder than ever for restaurants to maintain the 3-5% profit margin they need to succeed.
In fact, the NRA calculates, if a hypothetical restaurant with a 5% profit margin at the start of 2020 did not raise menu prices over the last five years, that restaurant would be operating at a 24% loss today.
So where does that leave us as restaurant owners and operators?
Like It or Not, You Probably Have To Raise Menu Prices
“The only way most restaurant operators can cover their higher input costs is to increase menu prices,” says the NRA.
It seems most restaurant operators have actually arrived at the same conclusion. Between February of 2020 and April of 2025, average menu prices went up 31%. As the NRA points out, this is perfectly in line with the need to protect that 5% profit margin.
So the math checks out. Your competitors are raising their prices. If you’ve been hesitant to do it until now, you may want to reconsider your position.
“As our costs rise and our margins shrink, each of us needs to take a closer look at our restaurant menu pricing strategy, even if the thought of raising prices makes us uncomfortable,” Marylise tells us. “Fortunately, there are strategic ways to adjust your pricing without scaring your customers away.”
How To Raise Your Prices Without Losing Customers
“The last thing you want to do is give your customers sticker shock,” Marylise notes. “So you do want to be thoughtful about how you raise your prices.”
Below are a couple of basic tips on how to increase menu prices without alienating customers.
Make Incremental Changes
Don’t try to make up for your shrinking margins all at once. Raise your prices in small increments. A recent article from Gordon Food Services suggests making gradual price changes in the range of 1.5 to 2% each time.
Boost Your Best Sellers
Rather than hiking prices across your menu, start by charging a bit more for your most popular items. Trust your best-sellers to keep selling, even at a slightly higher price.
Update Your Menu
Plan your price hikes to coincide with the introduction of new items. Don’t think of it as hiding your price hike. Think of it as delivering your price hike in the form of an exciting new menu item that customers are happy to pay for.
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How To Lose Customers
If you’re still hesitant to raise your menu prices, perhaps you can find comfort in this fact. In a recent survey of restaurant diners, TouchBistro asked consumers what factors were most likely to keep them from visiting a restaurant. Diners cited:
- Health inspection failures
- Negative feedback from friends
- Long wait times
- Bad online reviews
- Long-distance travel
The list did not include rising menu prices. There are a lot of ways to lose customers, but raising menu prices to keep up with inflation is apparently not one of them. Your customers are willing to tolerate rising prices…to an extent.
But they do expect to get their money’s worth. They want value out of that experience. So how can you raise prices while keeping your customers happy?
Lean Into Your Loyalty Program
Customer loyalty programs for restaurants may be the key. A recent article from Business Insider points out that an effective loyalty program is not optional. Your customers expect it. In fact, many customers view loyalty programs as a way to get more value when dining out during a time of rising costs.
According to a survey cited in that Business Insider article, nearly 70% of consumers see loyalty programs as a way to help deal with inflation and rising prices. In the same survey, 33% of respondents said they use their restaurant loyalty programs more frequently these days because of mounting economic pressure.
Customers are sending the message that they are willing to pay your higher menu prices, but they’re expecting you to help offset the costs with targeted discounts, limited time offers, free add-ons, and other loyalty member perks.
Choosing a Loyalty Program
You have a lot of options when it comes to loyalty programs. Stand-alone loyalty programs like Incentivio include features like:
- Branded online ordering
- Personalized member rewards
- AI-powered insights into customer behavior
You can also find some of these loyalty features built into tech platforms like Libro’s reservation system or through all-in-one POS (point of sale) systems like Toast or Lightspeed.
With the right loyalty program, you can deliver value to your customers in other ways, even as your menu prices go up. Provide personalized rewards and discounts, create targeted marketing campaigns based on actual customer behavior, and ultimately, deliver the kinds of dining experiences your customers can’t get anywhere else.
If you do all of these things right, your customers will forgive the rising prices.
Turning to Tech for Help
Whether you’re thinking of updating your loyalty program, you need help optimizing your menu prices, or you’re looking for ways to understand your customers a little better, the right technology can help.
Not sure where to start? Schedule your free one-on-one consultation with Marylise and she’ll work with you to figure out what you need.
