Over the past year, just about every restaurant chain has raised menu prices at least once, and many have taken price several times. But as operators try to balance between affording higher salaries/commodities prices while not turning off customers, there are more strategies for dealing with inflation out there. Craig Barber, CEO of midwestern casual-dining chain, O’Charley’s, has raised prices alongside creating added value for customers without requiring too much of an investment on their end.
From paring down menus, creating new specials for specific days of the week and adding new menu items with ingredients the kitchen already has on hand, O’Charley’s has managed to strengthen its value proposition while tamping down the effects of inflation.
“On the consumer side, you had inflation, interest rates and gas prices go up, and on the restaurant side, margins have been really hit by, again, the unprecedented high of commodity prices,” Barber said. “we’ve had to adjust the menu and take some things off the menu that from a commodity standpoint, weren't practical or profitable. […] We’ve looked into what is the best way to go about this: do we raise prices? Do we allow the customer to make the decision of ‘do I want that badly enough?’ Or do you try a combination of things: maybe reduce portion sizes a little and raise the prices and try to create that margin that's workable.”
For the most part, Barber said, he has found that customers don’t mind too much if you shrink portion sizes a little and raise prices. But that can’t be your only strategy: you have to be able to offer value to the guests, even if you’ve nudged prices up and removed some costly items from the menu.
For example, O’Charley’s began introducing daily specials for each day of the week, like Tender Lovin’ Tuesdays, which offers chicken tenders for a discounted rate, and Bones n Brews Thursdays, which offers discounts on ribs and beers, and allows the restaurant to show off its new in-house beer, created this fall in partnership with Underground Chuck’s.
If you create different deals for different days of the week and introduce new menu categories like in-house exclusive beer, then guests will want to keep coming back, Barber said. He also emphasized the importance of menu innovation, even as you’re shrinking the size of your menus. O’Charleys has been able to get creative by offering new menu items like the loaded mac and cheese tender bowl that was recently added to the kids’ menu and reuses their famous mac and cheese and chicken tenders in a new way.
“We create new offerings that are attractive to guests from an affordability standpoint, but also helped us to maintain margins to sustain the business overall,” Barber said. “Some of that was recapturing long-standing elements of our brands and repackaging them in a way we have not done before.”
Value and pricing strategy often has a lot to do with psychological technique as it does physically raising prices or adding and taking away menu items, Barber said. For example, that when particular items become expensive, they will use marketing to nudge guests toward ordering the items using cheaper commodities instead.
“You don’t want them to order chicken when chicken is particularly expensive, or steak when steak if expensive, so you want them to order fish instead,” Barber said. “So, we redesigned the menus and took chicken tenders off the cover […] It wasn’t that you couldn’t order them, we just didn't want them to be the first thing you thought about. […] It’s about managing against what consumers tend to do, based on what they see visually in front of them and then adding suggested selling from our servers.”
Barber also said that O’Charley’s has continued to offer pandemic-era family meal deals, even after many other restaurants had stopped doing them to help reiterate that branding that O’Charley’s is an affordable option for dining out during times of economic uncertainty.
“Our job is to try to package and market ourselves in a way that ultimately provides the combination of the food and hospitality where guests can leave and be excited that they took their hard-earned dollars and spent them with us,” Barber said.
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