Should you raise your pizzeria’s prices in 2019? With minimum wage hikes looming in many states and the higher demand for an artisanal pizza experience, that’s the question on a lot of operators’ minds. And there’s no easy answer to it. But one thing’s for certain: If your expenses are going up, your prices probably should, too.
“We have to factor in our costs,” John Arena, co-owner of Metro Pizza in Las Vegas, tells PMQ. “The biggest mistake people in our industry make is, they look at their competition and say, ‘I have to charge what they charge.’ But I’m not interested in what the guy down the street is charging. I have to base what I charge on my expenses.”
According to restaurant consultant Linda Lipsky, a restaurant’s food costs average about 33 percent of menu prices, depending on the type of restaurant. Pizzeria owners who take pride in offering high-quality ingredients shouldn’t hesitate to raise their prices, Arena notes, because great-tasting pizza delivers high value. “Say a large pizza costs $22,” he says. “If four people eat that pizza, that’s $5.50 a person. They also come into this beautiful building that cost us millions to build, and they get to share a meal with a beverage, a salad and a pizza. Is that really that high? Although $22 sounds like a lot, pizza is still a phenomenal value.”
“Think about what I did to make that pizza,” Arena (pictured below) continues. “I sourced the best ingredients. I studied my craft for 45 years. I traveled all over the world to improve my skills. I provide a great environment. I’m on my feet 14 hours a day making this food. I’m fermenting my dough for three or four days. Factor all that in, and [the customer] can still eat a meal for $5.50, and I’m asking too much?”
Rising food and labor costs wait for no one. With that in mind, here are some ideas for raising your prices without scaring customers away:
Take incremental steps. To avoid inflicting “sticker shock” on your guests, raise your prices incrementally, a little bit at a time. Instead of hiking the price on a popular menu item by 50 cents or $1, raise it by 15 or 25 cents quarterly, thus easing your customer into the higher cost.
Focus on core menu items. Identify the menu items that drive the greatest percentage of your sales and bump them up, preferably all at the same time (otherwise, you’ll have to keep ordering new menus for each price hike on each individual item). For example, if your sausage and pepperoni pie accounts for 30 percent of your total sales, it makes sense to bump up the price slowly on that particular pizza.
Offer special deals on popular items. Once you’ve bumped up the price on your sausage and pepperoni pizza, offer discounts on them or place them in combo deals during non-peak business hours. For example, create a weekly Monday Madness special in which you sell the sausage and pepperoni pie at the original price point for one day only. Or offer that pizza in a discounted combo deal with a high-margin side item, like wings, on designated slow nights. When customers ask about the higher price on that pizza, you can inform them of these special deals and boost business on a weeknight that would otherwise be slow.
Promote your loyalty program. Although many customers—perhaps most—won’t notice a price hike, some will complain. When they do, don’t get defensive. Be sympathetic. Explain your reasons, reassure them that you take their concerns seriously, and take the opportunity to sign them up for your loyalty program. Explain how program membership can earn points toward discounted or free food.
Arena says pizza makers should be proud of their profession and price their food accordingly. “Considering the passion and skill and hard work that goes into operating a pizzeria—the tremendous risk, the emotional and physical wear-and-tear on you and your family—we’re underpaid,” he says. “Pizza should be more expensive than it is.”