Keeping Your Prices Honest…Not as Common as You think

Law and ethics have an interesting relationship in the business world, and certainly in the restaurant industry. I’m talking specifically about price consistency [prices as they appear online vs. in the restaurant itself], where the opportunity to bend the rules remains ever-present. While many restaurant owners are pushing the boundaries to come across as more affordable on the front end, they will feel the consequences of lost volume and loyalty if the gap between perceived price and actual price grows too big.

I became an alienated customer last week, when my bill totaled 50% more than I planned to spend. This restaurant’s ‘average price’ was listed around $30 in several online resources. $30 covered my entrée [nowhere near this restaurant’s most expensive item] and a side dish. No drinks, no dessert, and one appetizer split four ways. After tax and tip I spent $45 to leave just above the threshold of still hungry.

The money wasn't the issue. The food happened to be very good, and aside from small portion sizes, worth the cost. The problem was that everyone in my group felt cheated, like the restaurant lured us in with a $30 estimated price, then used a bait-and-switch to make us pay $45 at the table. We will not be dining there again for a long time.

Keep your perceived menu prices honest. Try the following tactics...

Keep Your Online Menu Up-to-Date
The vast majority of potential customers look up a restaurant’s menu online before deciding to dine. Cases certainly exist where restaurants leave an outdated menu that lists phased-out items, or worse, old prices. Inflation and rising food costs inevitably lead to price hikes, but be sure to give your customers realistic expectations of what they need to pay. The difference of a dollar, or even a few cents, can be a deal-breaker for some customers, and ultimately will mean the difference between them becoming repeat customers. Not to mention what they will say to their friends if they felt like they were cheated out of a few bucks…

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"If your target customer doesn't typically look at the price when ordering, they’re not going to look much at the estimated price online either."

Some restaurants choose not to include prices on their online menus. This topic could become its own article [and likely will in the future], but as a general rule the only restaurants that should do this are those that appeal exclusively to a highly affluent clientele. If your target customer doesn't typically look at the price when ordering, they’re not going to look much at the estimated price online either. For those restaurants catering to the other 99.9%, I would recommend posting your prices because your customers will find an estimated cost one way or another.

Monitor Your Prices on Online Review Sites
Restaurant research is dominated by the Zagats and Opentables of the world. While many customers will find your menu online, they will almost certainly use tools like these to look you up [or find you in the first place]. These resources each have their own methods for calculating average check: entree, appetizer and split dessert vs. entree and both split appetizer and dessert; 1 drink included vs. no drinks included, etc. virtually none of them factor in tax and tip. The key is to keep your prices as consistent as possible across these platforms.

Understand the Customer Experience
It is also essential to be realistic in projecting what your typical customer would order. If you serve smaller portions and notice customers averaging 3-4 dishes each, it is imperative to reflect these findings in your estimated average check. Nobody likes to leave a restaurant hungry, and customers that feel like they need to cut back on the amount of food they order just to stay within budget will be hesitant to return.

Additionally, your projections should properly reflect which ‘cost tier’ customers order from most often. Very few people will order the cheapest appetizer, entree and dessert on the menu, and customers will quickly pick up a restaurant's attempts to hide higher prices behind singular low-cost items. Consider a tracking system that lines up items in each menu category from least to greatest and records the amount of each item ordered. The resulting visual is a bar chart that shows you the where the majority of your customers will fall in terms of price point.

In hindsight, the principles are quite simple. Be real about your restaurant's prices. This may cost you in the short-term, but you will reap tremendous rewards over time by growing repeat customer revenue and word-of-mouth marketing.