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Is Dynamic Pricing the Future for Restaurants?

By the end of 2022, the food industry expects to reach $899 billion in sales. Although the numbers continue to rise, many entrepreneurs often ask why it’s so difficult to stay in business and succeed in today’s economy.

According to the National Restaurant Association, only 1 out of 5 restaurants succeed overall. What’s even scarier is that 4 out of 5 restaurants fail within 5 years of starting their operation, and 3 out of 5 don’t make it past the first year.

Any restaurant owner knows that running a successful business has a million and one challenges. From keeping up with the latest trends to ensuring your menu is appealing to customers, there’s always something to worry about. One challenge that is often overlooked is menu pricing. Food, labor, and rent costs are ever-fluctuating, and it can be very challenging to keep up as a business owner. For restauranteurs, it’s a never-ending balancing act to keep up with all the volatile changing demands of their business while still making a profit. In today’s competitive market, getting the pricing right is more important than ever. Is dynamic pricing the answer? 

What is dynamic pricing, and how does it work for restaurants?

Dynamic pricing isn’t new. It’s been used in many industries for years, including travel, hotels, and, more recently, e-commerce. Basically, it’s a way of optimizing revenue by increasing prices when demand is up but also by decreasing prices to draw customers during off-peak times. In its simplest form, dynamic pricing is all about supply and demand. When demand is high, you charge more—when it’s low, you charge less.

To do this effectively, you need to have a clear understanding of several factors: 

  • Your customer base and what they’re willing to pay for your products

  • Past and current demand and seasonality

  • Competitor positioning, local events, and even weather factors. 

Once you have the above information, you can start experimenting with different price points to see what impact it will have on your restaurant’s profits.

Implementing dynamic pricing doesn’t have to be a difficult task. One option is to offer discounts at off-peak times, like happy hour or late-night dining. Another is to provide tiered pricing depending on when customers dine—for example, charging a premium for dinner service but offering a discount for lunch. You could also experiment with menu engineering, which is changing your menu items and prices regularly based on what’s selling and what’s not.

The key to a dynamic pricing strategy is flexibility

You need to be able to change your prices quickly and efficiently according to market conditions. Successfully doing this manually would be near impossible, time-consuming, and not scalable. Using the right technologies, this pricing strategy has been proven to successfully optimize revenue, increase sales, and help businesses stay competitive. Although dynamic pricing is not used as commonly in the restaurant industry, with new technologies emerging like Souffle Rise, now is the perfect time for restaurant owners to explore how powerful dynamic pricing can be for their restaurants.

Turn today’s market challenges into an opportunity

In recent years, the restaurant industry has been hit hard by several challenges. Labor shortages have caused restaurants to reduce hours, refuse orders during peak times, and decrease menu items to keep up with demand. Inflation, supply chain issues, and material shortages have resulted in significant price increases in the cost of goods. 

According to the National Restaurant Association, wholesale food prices had the highest 12-month uptick since 1980; restaurants saw this sticker shock firsthand when commodity prices for beef increased 57.7%, fats and oils went up 49.6%, and egg prices rose 39.2%.

All these challenges have had a negative effect on a restaurant’s bottom line. Perhaps the most costly challenge restaurants faced was having to digitize their business and partner with online third-party delivery platforms. Although these partnerships resulted in sales increases for restaurants, having to split their already slim profit margins was detrimental to their bottom line, and of course, this also further overwhelmed restaurants during peak times.  

However, this challenge has also created an opportunity for restaurant owners to rethink their pricing strategy and move away from static menu pricing to dynamic pricing. While dynamic pricing may seem like a daunting task and just another thing restaurant owners have to worry about. There are now a small number of emerging software applications like Souffle Rise that can automate the process and take the guesswork out of pricing.

At Souffle, we created an AI-powered Dynamic Pricing engine specifically tailored for restaurants. Our Dynamic Pricing solution, Soufflé Rise, is based on machine learning algorithms that take inputs from past and current demand, seasonality, competitor positioning, time of the day, and even weather. Using these learnings, Rise allows for automated real-time price changes to suit demand levels and ensure revenue optimization. This dynamic approach has the potential to positively impact a restaurant’s business by helping mitigate these many challenges and improving its bottom line. Its algorithmic approach is specifically tailored to restaurants’ digital menus and has proven to increase returns.

The benefits of dynamic pricing for restaurateurs and consumers

It’s not just about the money. Dynamic pricing is a way for restaurants to stay competitive in an ever-changing industry, and consumers will always have more options. Apps like Door Dash and Uber Eats make it tremendously easy for consumers to find the best deals on the food they love. Sticking to the same old static pricing approach can cause your businesses to stall. Dynamic pricing not only benefits the consumers, it also helps the restaurant owner in more ways than one. 

For restauranteurs it can potentially

– Increase profit margins by 10% to 40% during peak times using a data-driven approach to automate slight price increases.

– Increase order traffic and generate more revenue during off-peak hours using the same data-driven approach to reduce pricing – think digital happy hour.

– Help create a sense of excitement and urgency among diners searching for a great deal for those less price-cautious consumers looking for fast service.

– Offer flexibility to ensure their prices fit the demand and current business costs.

– Gives restaurant owners more control over their bottom line and the ability to offer current and future customers fair pricing options that are seen as a value, not a drawback.

– Helps slash excess inventory like perishables by offering better incentives.

– Flexible pricing can help even out demand patterns and mitigate hectic peak times vs. slow off-peak times to create a more balanced revenue stream and workload.         

From the consumer perspective it can potentially

– Offer access to lower prices during off-peak times.

– Positively affects inventory control, thus providing consumers with better access to the foods they love and want to satisfy their cravings.

– Improve consumer service levels and reduce wait times by balancing demand patterns – just like an early bird special – only digital.

Either way, dynamic pricing is a win-win. Consumers can ensure the restaurants they love stay in business, while restauranteurs can offer those same consumers more flexible options. 


Technology has played a role in shaping the future of the restaurant industry and propelling it forward. With more restaurants adding digital menus, partnering with third-party delivery apps, embracing technology, and looking to automate their business, dynamic pricing is now easier to implement than ever before. Research has shown that 62% percent of restaurants say that automation would help fill critical gaps in their business.

Consumers have come to accept dynamic pricing in other industries, so will this be the future for the restaurant industry? At Souffle, we’re in the early stages and are one of the few companies working on perfecting a dynamic pricing tool tailored to the restaurant industry. However, our early traction would suggest that more restaurants than not will be implementing data-driven sophisticated pricing strategies in the coming years.

At this point, restaurants are just beginning to explore the many ways dynamic pricing can benefit them and their customers. It is important to tread carefully and implement this pricing strategy effectively to avoid a negative result. Being transparent about dynamic pricing, educating customers, and utilizing the right technologies, should be top of mind for restaurant owners. 

If you’re looking to explore dynamic pricing, you don’t have to do it alone. Speak to one of our Souffle Rise experts today. Our team will give you the right ingredients and process to bake the perfect “dynamic pricing souffle” for your restaurants and your consumers.

– The Souffle Team