Navigating Rising Costs: How Restaurants Can Balance Diner Expectations and Profitability

Navigating Rising Costs: How Restaurants Can Balance Diner Expectations and Profitability

The restaurant industry is no stranger to challenges, and over the past year, rising operational costs have put even more pressure on owners. They’re tasked with maintaining profitability, paying staff fairly, and retaining customers who are cutting back on spending. According to a recent report from Square, many restaurant leaders have turned to value-driven promotions and limited-time deals to keep diners coming through the door.

The Rise of Value Promotions

Square’s report highlights that at least one-third of restaurant leaders implemented eight different types of promotional programs, including:

  • Loyalty program discounts (43%)
  • Value items and combo deals (38%)
  • Coupon codes (33%)

These strategies have helped sustain foot traffic and boost customer satisfaction. In fact, diners reported high satisfaction rates across different restaurant formats, from 82% for dine-in experiences to 72% for delivery. However, the success of these programs has also led to a shift in customer expectations—nearly half of surveyed diners now expect restaurants to maintain or expand their value offerings in the coming year.

The Pricing Challenge in 2025

The reality, however, is that restaurant owners are facing increasing financial pressure. The Square report found that 71% of restaurant leaders plan to raise prices over the next 12 months to offset higher food and wage costs. This creates a potential disconnect between what customers expect and what restaurants can realistically offer.

While this gap may not drive people away from dining out altogether, it does mean that operators need to become even more strategic with their pricing models.

Finding the Right Balance

Raising prices across the board isn’t always the best strategy. Instead, restaurant owners can leverage data and analytics tools—like those provided by their point-of-sale (POS) systems—to identify cost leaks and optimize pricing strategies. Here are a few steps to consider:

  1. Analyze Your Sales Data – Use your POS system to determine which menu items are top sellers and where you might have room for price adjustments without deterring customers.
  2. Test Targeted Price Increases – Instead of raising prices across the board, experiment with small increases on high-demand items that diners are unlikely to resist.
  3. Continue Offering Value – While price hikes may be necessary, maintaining loyalty programs or strategic promotions can keep customers engaged and spending.
  4. Educate Diners on Quality – Transparency about ingredient sourcing and labor costs can help justify higher prices and build stronger customer trust.

The Path Forward

For restaurant owners, 2025 will be about balancing diner expectations with financial sustainability. While discount-driven promotions have helped boost traffic, long-term success will require smart pricing decisions backed by data.

As Square suggests, taking advantage of analytical tools and making calculated pricing adjustments can help restaurant owners maintain profitability without alienating their customer base. It’s all about finding the right mix—offering value while ensuring that every plate served contributes to a healthy bottom line.

Cited source: Square Report on Restaurant Industry Trends