I renew my contracts annually because I'm still perfecting my policies so once a year when the parents sign the new contract for the next year it states in there that everything is guaranteed for the year. I won't spring any surprises on them because that would be bad business practice.

However, since you've been in the business for 19 years Jodaycare, I'm sure your contract is perfected. I think your plan is great, to make up a letter to the parents now as advance warning that there will be a rate change coming up so they can budget for it properly and have time to digest the news. I raised my rates this year and the reason I gave was also exactly as you stated - to keep up with the rising cost of food.