LFTL: The Tariff Test - Flexing Your Menu Costing Muscles
If there’s one thing we know about this industry, it’s that the heat never lets up.
The latest challenge? Unexpected on-again, off-again tariffs on ingredients from Canada and Mexico. Whether tariffs are here to stay or not (they were put off again in the time it took to write this), in our role managing our client’s accounts payable we’ve seen that suppliers are already passing along price increases. Imported products like mussels, lobsters, and certain produce items are about to cost you more.
Before we get lost in frustration, let’s treat this challenge as an opportunity— because this is exactly the kind of moment that separates disciplined, profitable restaurants from those that struggle to keep up.
The Tariff Test: A Reality Check on Menu Costs
Every menu item you serve should already be costed out with precision (if you need assistance on this – let us know). But let’s be honest—how often do we update those numbers? Many operators will react to this tariff spike by adjusting pricing on a handful of affected dishes, but that’s only part of the solution.
The smarter move? Use this as a forcing function to sharpen your entire menu’s profitability.
Audit Your Menu
Tariffs may have triggered this, but ingredient costs fluctuate constantly. If you haven’t costed out your menu in the last six months, you’re due for a menu check-up.
Break out your spreadsheets/costing software and reassess everything across all menu categories.
If you don’t have the time to look at every dish and don’t want to consider a blanket price increase, remember the 80/20 rule (Pareto Principle) – 80 percent of outputs are driven by 20% of inputs. So look at your product mix and find that 20% of dishes that drive most of your sales, and this is where you need to be laser focused.
Raise Prices Where It Makes Sense
If a dish can no longer be served profitably without an increase, adjust accordingly. Your best guests will understand the realities of food costs if your menu value remains strong.
Don’t be afraid of changes - even bold ones. As much as we wish eggs were still $1.40 a dozen (2019 prices!), they’re averaging $4.15 in 2024. We have psychological biases about what menu items should cost, so in periods of volatility (whether driven by monetary policy, like over the past 5 years, or new taxes, like over the last 100 days) it is imperative to replace gut feelings with math when setting prices. And remember: nobody thinks about your restaurant and your prices as much as you do. During each service many guests will be seeing your menu for the first time, so the important thing tonight is not what prices were, but how you present the prices as they must be now.
Take some time to learn about the psychology of pricing strategies and make sure your menu pricing is consistent with your goals. Do you use price anchoring to make the bulk of your menu appear more affordable? Are you using rounded numbers to position your items as luxury, or simply out of habit? Are you cognizant of left digit bias and charm pricing effects? (Fun fact: empirical studies from MIT demonstrate that the bias for the digit is so intense that consumers prefer $39 over $34 for the same item by 24%… brains are fascinating.)
Don’t just raise prices arbitrarily—be strategic. Certain items may have room for an increase, while others might require a different approach.
Redesign and Replace Thoughtfully
Sometimes, the best move isn’t to raise prices but to rethink your offerings. Is there a way to substitute high-cost ingredients without compromising the experience? Offer high cost ingredients as supplements where you capture value?
Remember again about product mix – are these dishes the must-have on the menu? There is a maxim in the film industry that you have to “kill your darlings” meaning a tightly edited film will have scenes that the director didn’t want to cut but did in service of a coherent and winning narrative.
This is where strong kitchen leadership shines—developing new, cost-effective dishes that maintain quality and keep margins in check.
Prepare with Improved Policies and Procedures
By the time you read this the tariffs may be on, off, on, off, on, and off again. What doesn’t seem to change is change. There will be good surprises and bad. If we’re talking about the relations of nations – why not quote Machiavelli? His insight “fortune is a river, but have you built dams" illustrates that the key to thriving in the future is creating strong policies and procedures. You can’t build the dam while the river’s flooding. Creating these systems is where we can best help at Harmony – creating that culture of financial literacy that makes for enduringly profitable restaurants.
Tariffs make headlines, but ingredient volatility is a constant reality. If you’re going through the work of menu costing, don’t stop at the affected items.
Schedule the time to do a regular full menu assessment (quarterly) and be aware of your product mix so you’re not caught off guard when other products see price hikes down the road.
Discipline Wins the Game
Restaurants that thrive in the long run aren’t just good at cooking; they’re great at financial discipline. We work with our operators to not just react to cost increases — we want to help you anticipate, adapt, and strengthen your business model as an ongoing process.
Tariffs are a stress test. But they’re also a reminder to stay sharp, keep your numbers tight, and run a more profitable kitchen. If you need guidance or best practices on menu engineering, costing strategies, or supplier negotiations, we’re here to help.