You Raised Your Pizza Prices. Did You Actually Make More Money?
By ProfitWise - a Visa Business Plans company
A pizza restaurant owner told us he had finally raised his prices.
Ingredient costs had been climbing for months, especially cheese, and he had resisted increasing menu prices for as long as he could. Eventually, he added a couple of dollars to some of his most popular pizzas.
A few months later, he was happy with the decision.
“Sales are up,” he told us. “The price increase worked.”
Maybe. But when we started looking at the numbers together, the answer wasn’t quite that simple.
This is something that can easily happen in a pizza restaurant. You increase the price of a pizza from $18 to $20, and it feels like you’re making an additional $2 every time one leaves the kitchen.
Meanwhile, the cost of making that pizza may have changed too. Cheese costs more. The box costs more. Your delivery platform may take a percentage of the higher selling price. Labor may have increased since the last time you reviewed the menu.
Then there’s the customer.
Maybe people continue ordering the pizza exactly as they did before. In that case, the increase may be doing exactly what you hoped. But sometimes customers respond in ways that aren’t immediately obvious. They order one pizza instead of two, skip the appetizer, use a coupon, or order less frequently.
None of those changes necessarily mean raising prices was a mistake. In many cases, restaurants need to increase prices simply to keep up with rising costs. The important part is going back afterward and seeing what actually happened.
That’s something we do with restaurant clients at ProfitWise. Once a pricing change has been in place long enough to give us useful information, we can compare what was happening before and after. We look beyond total sales and try to understand whether the restaurant is actually keeping more of what it earns.
Sometimes the answer is yes, and the owner realizes the increase probably should have happened sooner.
Other times, we find that one part of the menu is performing very differently from another. Perhaps the price increase worked beautifully on specialty pizzas but had a different effect on family combinations or delivery orders. That gives the owner something much more useful than simply knowing that monthly sales went up.
It gives them information they can use the next time prices need to change.
Restaurant pricing is rarely a decision you make once and forget about. Food costs change, labor changes, customer habits change, and eventually the menu has to change with them.
So the next time you raise the price of a pizza, give the new menu some time and then go back to the numbers.
The price increase tells you what you hoped would happen. Your numbers tell you what actually did.
