Should operators improve their menu items to make consumers feel like the increases are worth it? I recently spoke to a high-end restaurateur for my next book. And he said, ‘Every time I do a price increase, I return it to my customers somehow—better linens, better china.’ He was always trying to enhance the product. I’m not sure what you can do to truly enhance the product.

There is room for a chain to come out and say, ‘We know pricing is tough. We’re looking out for you and trying to do the best we can.’ Chains should start having more of an open dialogue with their customers about that because the customers see the price increases, and they’re likely to say, ‘Oh, they’re just making up for fewer customers.’

I’ve seen this in some of the companies I’ve worked with who have done price increases. It’s very important to messenger to the consum er why they’re doing it. Having that open dialogue with the consumer was very successful for them, and they passed along some very large price increases.

Should you always offer a lower option when increasing prices? Or can you offer a higher option and increase prices on your existing menu? This is a good time for operators to think out their pricing strategy. Most companies I work with don’t really think it out. The notion is: Customers with different budgets are walking through your doors every day. Your goal is to get them to spend as much as possible in your store. I really do think many restaurants should have a good, better, and best option for their customers. This isn’t necessarily about having a low-price option, but it’s about rethinking pricing. There are customers today who are quite happy with your prices; get them to pay more. What would be a higher menu option that you could have?

Come out with the Cheesecake Factory Sampler or a Chef Series and allow customers to have the choice to pay you more.

Should operators emphasize their good, better, and best options equally? Yes. I think it should be emphasized equally, so people don’t feel like there is constant upsell. Especially in this time period, it’s about offering people options.

Have you seen many restaurants or chains increasing prices recently because of the down economy? I have. It’s interesting that we’re having this interview. What I am seeing is a lot of restaurants, higher-end restaurants, coming out with specials and lower-priced menus. For instance, I just got this coupon in the mail from Morton’s. They’re offering a $99 dinner for two, and they’re giving you the option to buy a bottle of wine for $30. The interesting part was this: They’re very clear in the ad to the customer. They say, ‘This is not available on the menu. You have to bring this little card in to get the deal.’

This is a classic example of price discrimination. Only people who this really matters to are going to take the time to clip this coupon and go in. If there was a sign in the restaurant promoting the deal, most people would order it. But what Morton’s is saying is, ‘People are coming through the door and expecting to pay our regular prices, so we’re not going to offer them the deal. We’re only going to offer it to the people who took the time to clip the coupon and bring it in.’

That is a brilliant pricing strategy. You can have two tables next to each other, and one doesn’t know they’re paying double the price of the other table.

How did Morton’s know whom to send the coupons to? They’re sending them out to their mailing list and letting them self-select. For me, I wasn’t happy with the entrées they were offering, but I know a lot of other people who were. It’s a very good pricing strategy. The key take-away is to offer the consumers these types of options and keep them in the fold. Be cognizant that you have customers in your fold who would be willing to pay more. What can you do to get these guys to pay you more without doing an across-the-board price increase?

Morton’s is a fine-dining concept, though. Can you still use this strategy if you’re a quick-serve with a much lower price point? Yes, of course. Look at McDonald’s. It offers a $1 value meal. Its menu ranges from $1 hamburger to $3 for a Big Mac. There might be room to come in with a fighter brand in the middle, also.

Any last pieces of advice about price increases? It doesn’t make sense to just do an across-the-board price increase. In these times you really have to think about how your prices are going to affect consumers. You can get the same revenue by spreading the price increase differently or offering options. Don’t do an across-the-board price increase. Take an hour and figure out how you can get what you need out of your pricing in this economy.