Raising prices on operators’ minds

“If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business. I’ve been in both, and I know the difference.”
-Warren Buffett

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Our industry for so long has been thought of as an affordable option to feed a family. The fear when raising prices is that you will lose customers, or that you will become unaffordable. The truth is, for most of you reading this, you have been under-charging for a long time. There are many approaches determining what your pricing should look like. In the end, you want to be able to offer fair pricing, but you also want to make sure you are making a profit.

I like to take the approach of writing my menu prices down according to my food cost. Having your menu broken down so you know how much each pizza costs is essential. Let’s take breaking down the cost of a pepperoni pizza, for example. The first step is knowing how much ingredient goes into each recipe. If I ask you how many pepperonis go on your large pizza, you should know that number. At Caliente, we have build guides for every menu item that we sell. For our large 14-inch pizza, we know the cost of the dough ball, the cost of the 6 ounces of sauce, and the 8 ounces of cheese. We also know the cost of the 48 pepperonis that go on the pizza. We then look at the cost of the box that the pizza goes into. We then take that amount and start the process of finding our menu price. Our goal at the stores is to have a 29-percent food cost.

Reviewing each individual topping pizza like the example above, and then getting the average of what it costs to make each pizza, is the way to determine what a one-topping pizza should cost on your menu. However, there will be more variation when you break down your gourmet pizzas. I suggest having pricing tiers for your gourmet pizzas. We used to price ours all the same, but by designating them into three tiers, we have been able to keep the costs closer to that 29-percent food cost goal.

You have to get over the fear that you will lose customers if you raise prices. Stand behind the quality of your product. The worst thing you can do is get into a price war with your competitors. I have found raising prices has been essential in staying in business. Inflation has skyrocketed since COVID, and if you have raised your prices less than three times since the beginning of the pandemic, you need to raise them again now.

Going over every menu item, step-by-step, and breaking down the cost of each item is the second step — but you must first create the resources you need to monitor and determine those prices. Creating build and recipe guides for all your menu items is the first step in this process, and that’s what we will cover in the next installment of Building Blocks.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza