With the impending minimum wage increase in California, and all of the stress around the junk fee law SB 478 (which thankfully is looking like it will be clarified by the new law SB 1524 to allow restaurants to continue using service charges and surcharges on their menus), restaurants are examining how much they can raise their prices without scaring away guests. The 2024 American Diner Trends Report from Touch Bistro finally has the specific numbers for you!
According to the report, while 31 percent of respondents indicated that a price increase would significantly reduce their interest in dining out, and 41 percent said it would somewhat impact their decision, this also means a substantial portion of diners remain open to paying more, especially if they perceive enhanced value and experience. Strategic price increases can be successful if restaurants communicate these enhancements effectively to their customers.
Communicating Enhanced Value and Experience
When raising prices, it’s vital to clearly communicate the reasons behind the increase. Highlight improvements such as higher-quality ingredients, farm-to-table sourcing, or unique, seasonal dishes that justify the higher cost. Emphasize any upgrades in service, such as more personalized attention, faster service, or new technology that enhances the dining experience. For example, showcasing a new chef or a revamped menu can create excitement and a sense of exclusivity that justifies a price increase. We believe that transparency is key—let your customers know where their money is going and how it improves their overall dining experience. That will keep them loyal.
Leveraging Special Promotions and Loyalty Programs
Gen Z diners, despite being more sensitive to price increases, represent a high-value demographic due to their significant spending at restaurants. To ease the price transition for them, consider offering exclusive perks, early access to new menu items, or rewards for frequent visits. Engaging with this demographic through social media and personalized marketing can also help maintain their loyalty. By providing added value through these programs, restaurants can justify higher prices and retain their customer base. That’s a win for everyone!
Understanding Acceptable Price Thresholds
The survey revealed that diners have clear thresholds for acceptable price increases. For full-service restaurants, customers are willing to tolerate a price increase of up to 11 percent. This suggests that incremental adjustments within this range are less likely to deter patrons, especially if accompanied by visible improvements in quality and service. For takeout and delivery from full-service restaurants, the tolerance is slightly lower at 10.5 percent. Understanding these limits can help restaurants make informed decisions about price adjustments without significantly affecting customer interest.
Quick-Service Restaurants and Pricing Strategies
Quick-service restaurants have a similar but slightly lower threshold for acceptable price increases, with diners willing to tolerate up to a 10.4 percent increase for dine-in and 10.3 percent for takeout/delivery. In this segment, it’s crucial to focus on speed, convenience, and consistent quality. If you would like to get a pulse on how your guests experience the customer service in your restaurant, we offer mystery shopping services that will provide a full report. Highlighting improvements in these areas, such as faster service times, better packaging for takeout, and maintaining high standards of food quality, can help justify price increases. Clear communication about these enhancements will reassure customers that they are receiving value for their money.
