2021 – The Year of Raising Prices by Joel Feigeheimer, Ph.D

2021 — The Year of Raising Prices

By Joel Feigenheimer

Prices are rising on every front. Food prices have lunged to their highest monthly jump in years. Fuel seems to be going up weekly. (Remember the days of “fuel surcharges” on your invoices?) Labor prices are not far behind as some response to the “fight for $15” is taking hold nationwide. Why work when you can stay home and make nearly as much as you would have made on the job? Operators nationwide are at a critical point in their ability to generate sustainable profits after the repercussions of the COVID pandemic. Many operators renegotiated their leases (those who could stay in business) for extended payment options. Those payments that were pushed off are now starting to be added to present monthly lease payments. This perfect storm of expense inflation is producing the only result that it can — the reality that for an operator to stay profitable, prices must rise.

Most people agree you cannot raise a family on $9 an hour. However, most of our entry-level positions offer just entry-level wages. Those wages were never meant to support a family but instead to start someone on their way to moving up the ladder, if they chose to get more training in our field. With entry-level positions soon to be paid at $15 per hour, does that mean more highly trained employees will now earn $20 or $25 per hour? If operators are going to pay these wages — and I am not here to argue that point one way or the other — there must be income to offset this increased expense. I remember the last time beef prices skyrocketed, and operators were afraid to raise prices for fear of losing market share. I watched how different steakhouse organizations responded. Some cut portion size or quality; others decreased their level of service. Some did both. However, I remember going to New York Prime in Boca Raton, Florida (FYI, I do not have any connection with them) and seeing a note attached

to the menu. It commented on the fact that prices were rising everywhere and confirmed that the company had made a cognizant decision to keep their standards the same. And due to that, they were going to raise prices and hoped that their guests would understand. I found that honesty and reflection of reality to be refreshing, as opposed to going into another steakhouse and being disappointed at the quality or quantity changes in the product. Operators at every price point will have to determine their own strategies on how to keep and improve market share, deal with the upcoming inflation, attract and keep quality employees and — let’s not forget — make a profit. Just when we thought things would be getting back to normal after COVID, we realize this is truly a new normal. We will have to deal with these challenges of ramping up our businesses while battling inflation on almost every front, even more astutely than when we had to watch over our operations as business dwindled and the government shut us down. Nimble operating and accurate planning will help us moving forward. However, I don’t see businesses generating a profit unless they are bold enough to raise their prices and deliver the message to the guest in a logical and intelligent manner that makes the guest feel included or understood, as opposed to tricked or cheated. Good luck to us all for Summer 2021 and the remainder of this wild year.