How Market Volatility Is Changing Pricing Strategy in 2025

Introduction

Food costs up 20%, labor up 18%, rent climbing—but guests remain price-sensitive after years of inflation. How do you protect margins without losing volume? The pricing playbook that worked for decades has fundamentally changed. Static annual menu price reviews are insufficient when input costs fluctuate monthly and competitive dynamics shift weekly. In 2025, successful restaurant operators use dynamic pricing strategies informed by real-time competitive intelligence, market benchmarks, and predictive analytics. This article explores how market volatility is forcing operators to rethink pricing—and what actually works.

Why This Matters for Restaurant Operators

Pricing is the most powerful lever restaurant operators control. A 1% price increase flows directly to EBITDA if volume holds. Yet most operators under-utilize this lever because pricing decisions feel risky without proper intelligence:

Competitive fear: Will I lose guests to competitors if I raise prices?

Volume risk: How much traffic decline can I expect from price increases?

Market timing: Are competitors also raising prices, or will I be the expensive outlier?

Category strategy: Should I raise prices uniformly or target specific menu categories?

Without competitive context and predictive modeling, operators either hold prices too long (sacrificing margin) or raise prices too aggressively (losing volume). Both mistakes are costly in volatile markets.

The Limits of Traditional Tools

Most operators use annual menu engineering reviews combined with gut instinct:

Annual price reviews: Once yearly, operations and finance review menu pricing, typically making broad percentage increases across categories.

Cost-plus pricing: Calculate food cost percentage, add target margin, set price—ignoring competitive positioning and guest price sensitivity.

Reactive adjustments: Notice margins declining, implement price increase, hope volume holds.

Limited competitive intel: Occasional competitive price checks provide snapshots but miss the dynamic pricing patterns that matter.

This traditional approach fails in volatile markets for three reasons:

1. Lagging response: By the time annual review arrives, cost increases have accumulated for months 2. No competitive context: You price in isolation without understanding competitive dynamics 3. Binary decisions: You either hold all prices or raise all prices, missing opportunities for strategic differentiation

Result: Operators leave 1-2 points of margin on the table or lose 5-8% volume from poorly timed price increases.

How Sundae Changes the Picture

Sundae provides the intelligence infrastructure for dynamic pricing strategy:

Competitive price monitoring: Watchtower tracks competitor menu pricing continuously, identifying when competitors adjust prices and by how much.

Price sensitivity modeling: Historical transaction data reveals which menu items have elastic demand (sensitive to price) versus inelastic (insensitive to price).

Volume impact prediction: Machine learning forecasts expected traffic impact from proposed price increases based on competitive positioning and historical patterns.

Category-specific strategy: Instead of uniform percentage increases, Sundae identifies which categories can absorb larger increases with minimal volume impact.

Market timing intelligence: Watchtower shows when competitors are raising prices—the optimal window for your own increases.

The transformation: from annual cost-plus pricing to continuous strategic pricing informed by competitive intelligence and predictive analytics.

Real-World Scenarios

Scenario 1: Strategic Category Pricing

Traditional approach: CFO recommends 4% price increase across all menu items to offset cost increases. Operations implements uniformly, worries about guest reaction.

With Sundae intelligence:

- Price sensitivity analysis shows appetizers and sides have inelastic demand—guests order them regardless of price - Entrees have moderate elasticity—5% increase likely causes 2-3% volume decline - Beverage has high elasticity—price increases significantly impact attach rates - Strategic pricing: 7% on apps/sides, 4% on entrees, hold beverage pricing - Result: Average 4.2% price increase achieved, volume decline limited to 1.8% due to strategic differentiation

Scenario 2: Competitive Timing

Traditional approach: Notice margins declining in March, implement 5% price increase in April. Competitive price check shows you're now 8-10% above nearest competitors—traffic declines 7% over next 90 days.

With Watchtower intelligence:

- Monitor shows 3 of 5 direct competitors implemented 4-6% increases in January-February - Window opens in March-April when market has accepted higher prices - Implement 5.5% increase when competitive gap is favorable - Watchtower confirms competitors not discounting in response - Result: Price increase fully absorbed, volume decline limited to 2%

Scenario 3: Market-Specific Strategy

Traditional approach: Portfolio-wide 4% price increase across all 30 locations. Some markets lose significant volume, others could have gone higher.

With location-level intelligence:

- Sundae Report shows Dubai market median prices up 6% YoY, Riyadh up 4%, Doha up 3% - Watchtower competitive mapping shows location-specific positioning - Dynamic pricing: 6% in Dubai (below market trend), 4.5% in Riyadh (at market), 3% in Doha (leading market) - Result: Optimized pricing by market conditions, overall volume impact minimal while maximizing margin capture

The Measurable Impact

Operators implementing data-driven dynamic pricing achieve:

- Margin improvement: 1-2 additional points captured through strategic pricing versus uniform approaches - Volume protection: Traffic declines 40-50% lower when timing aligned with competitive moves - Confidence: Leaders make pricing decisions backed by competitive intelligence and predictive modeling - Responsiveness: Continuous monitoring enables quarterly price adjustments versus annual reviews - Differentiation: Category-specific strategies optimize margin while protecting volume on sensitive items

For 30-location group with $45M revenue, capturing 1.5 additional points through better pricing represents $675K in incremental EBITDA.

Operator Checklist: How to Get Started

Step 1: Analyze Current Pricing Strategy

- When did you last adjust menu pricing? - Do you know which menu categories have elastic versus inelastic demand? - How much volume did you lose from last price increase? - Do you know where your pricing stands relative to direct competitors?

Step 2: Build Competitive Intelligence

- Identify direct competitors for each location - Implement continuous competitive price monitoring - Track when competitors make pricing changes - Map your positioning relative to market

Step 3: Model Price Sensitivity

- Analyze historical transaction data to identify price-sensitive items - Build volume impact models for different increase scenarios - Identify categories where you can push pricing aggressively - Identify categories requiring conservative approach

Step 4: Implement Dynamic Pricing Framework

- Move from annual reviews to quarterly assessment - Use competitive timing to your advantage - Test category-specific strategies at pilot locations - Scale winning approaches portfolio-wide - Monitor volume impact continuously and adjust

Closing and Call to Action

Market volatility has made static pricing strategies obsolete. Successful operators in 2025 use dynamic pricing informed by competitive intelligence, price sensitivity modeling, and predictive analytics. The difference between reactive cost-plus pricing and strategic dynamic pricing is measurable: 1-2 points of margin improvement with 40-50% less volume impact.

The operators winning in volatile markets don't price based on costs alone—they price based on competitive positioning, market dynamics, and predicted guest response. Book a demo to see how Sundae provides the competitive intelligence and predictive modeling that enables confident, data-driven pricing decisions.