Running a food business has never been easy, and with today’s rising costs, tariffs, and supply chain challenges, it’s even more demanding. To help Rhode Island’s small food business owners navigate these challenges, we picked the brain of Maggie Longo, our Food Systems, Restaurant + Hospitality Business Counselor at the Rhode Island Small Business Development Center.
Maggie answered four key questions every food entrepreneur should be thinking about right now. From inventory management to profitability and customer communication, Maggie’s insights are practical and realistic.
All small business owners in the food industry should take a few minutes to read this Q&A. You’ll walk away with ideas you can apply immediately.
Q. When inventory costs are rising, how can owners of RI small food businesses adapt?
A: First, they need to actually know their costs, not just guess or rely on last year’s numbers. Rising inventory costs can creep in quietly and wreck margins before anyone notices. Weekly or biweekly inventory counts for high-cost ingredients, updated product costing, and a living P&L are your early-warning systems.
Second, use substitutions and portion control strategically. If the price of flour, eggs, or imported goods spikes, consider temporarily adjusting your menu mix or reducing usage in ways that don’t compromise the guest experience. For example, a caterer might move from individual boxed lunches to shared platters, which allows for tighter portion control and better yield.
Lastly, negotiate. Even if you’re not a big buyer, local vendors want your business. Ask about case discounts, forward-buying agreements, or alternative products. You don’t get what you don’t ask for.
Q. What steps can I take to protect profitability?
A: Protecting profitability begins with understanding your prime costs, specifically, food, beverage, and labor. These should be tracked weekly, not monthly. If you’re waiting for your bookkeeper’s report at the end of the month, you’re already behind.
Watch your menu mix. Are you selling more of your low-margin items than your high-margin ones? That’s a problem. Push the profitable ones through placement, signage, staff upselling, and LTOs.
Also, don’t ignore labor. Rising product costs are bad, but poorly scheduled shifts or staff doing inefficient prep work will quietly eat your margin just as fast.
Finally, build in profitability. If your prices haven’t changed since 2022, it’s time. Raising prices modestly and thoughtfully, with honest communication with staff and customers, is not just OK, it’s necessary.
Q. What options do food business owners have other than increasing prices and passing these increases onto customers?
A: Pricing isn’t your only lever. There’s also portion sizing, plating style, and bundling.
Smaller plate sizes, combo offers, and “value meals” can drive up perceived value without adding more cost. Bundle a drink and snack at a flat price that gives you more margin while still looking like a deal.
Operationally, you can cut costs through better prep management, reducing waste, and streamlining SKUs. I’ve recently worked with a café that was able to save 4% on food costs by eliminating overlapping ingredients, adding daily high-value inventory checks, and beginning a monthly inventory process.
You can also rethink your service model. It might be time to explore staggering staff in and out to better meet the needs of service.
Q. What else should small food business owners examine in the face of rising inventory costs?
A: Margins tell part of the story; menu engineering tells the rest. Are your top sellers also your most profitable? If not, that’s where you start.
Also, look at vendor diversification. Many small operators are overly reliant on a single distributor (or just run to the local market). That’s convenient, but risky. Start testing a second or third vendor now, even if just for a few items. Consider buying from local growers/farmers/makers; not only are there no tariffs, but you’re supporting another local small business.
Waste is a big one. Whether it’s spoilage, overproduction, or employee meals not being accounted for, most operators are losing 5 – 10% of product without realizing it. That’s money straight out the door. Redo the COGS calculations with current pricing (or start with the top 10 menu items if you’ve never done it) and review portion sizes with the team.
And finally, stop thinking you need to absorb all the impact. Customers know the economy has changed. If your quality and service are strong, most customers will accept a slight price increase, especially if you’re transparent and thoughtful about it.
Running a small food business comes with daily challenges, but you don’t have to figure it out alone. The Rhode Island Small Business Development Center is here to help you manage rising costs, protect profitability, and grow sustainably.
👉 If you have questions, need one-on-one guidance, or want to attend a webinar, reach out to the RISBDC team today. Whether you’re a restaurant owner, caterer, or café operator, our advisors can help you make smart financial decisions and plan for the future.
📞 Call (401) 874-7232
📧 Request a meeting with an advisor
🌐 Learn more at risbdc.org
