Restaurant Food Costs: What Gives? – US Food Trends

In light of soaring prices on everything from cheese to chicken, restaurant operators are taking a multipronged approach to striking a budget balance.

This article first appeared in the 1 February 2009 issue of Restaurants & Institutions (R&I).

R&I is the USA's leading source of food and business-trend information and exclusive research on operators and restaurant patrons. Editorial coverage spans the entire foodservice industry, including chains, independent restaurants, hotels and institutions. Visit the R&I website to find out more about the magazine or to search its recipe database.

By Christine LaFave, Associate Editor

The last six months have seen insult added to injury for foodservice operations: Costs for proteins, flours and other kitchen staples have remained high as guest counts and sales have declined.

"Purchase costs have skyrocketed," says Chef David Bull of upscale Bolla restaurant at The Stoneleigh Hotel in Dallas. "We ended last year at 31% [of spending tied up in food costs]. I much prefer to run at 28%."

The Fix: Be A Savvier Buyer

Taking the time to re-evaluate buying strategies can yield significant, quickly realized savings. And in looking to cut costs via this route, operators say, the aim should be to maximize buying efficiency rather than merely to opt for less-expensive items. At Antico Posto, a Lettuce Entertain You Enterprises concept in Oak Brook, Ill., chef Tony Di Paolo approached buying efficiency on two fronts.

- "We were buying a number of things by the each or by the pound," he says. "We went to buying by the case instead." Additionally, the restaurant sought to make wider use on its menu of seasonal ingredients-serving up fresh pears or butternut squash in two or three recipes as opposed to one, for example.

To help control delivery costs at his catering company and three restaurant concepts (Aqua Blue, Hi Life Kitchen and Cocktails and Marlow's Tavern) in metropolitan Atlanta, John Metz worked to reduce his number of suppliers. "We've worked on the consolidation of product between vendors," he says. "For example, your mayonnaise company may also sell an oil or a dressing, and if you have the flexibility to make the switch without sacrificing quality, it's worth it. That's been huge for us."

At Bolla, building connections with local farmers has proved worthwhile in helping to control food expenses while delivering the freshest product available. Climbing produce costs and increased demand from consumers and other operators alike "really make it a necessity to build those relationships" with smaller but integral-to-the-restaurant suppliers, Bull says. Talk with the farmers; explore their range of products-and then look to negotiate. "If we talk with a farmer who really has incredible herbs, [it's], ‘OK, if we buy all of our herbs from you, what does that mean [in terms of getting a better pricing deal]?'"

The Fix: Serve Smarter

Getting a great deal on an ingredient means little if guests aren't buying the finished product, of course. That's why it's more important than ever to hone in on what diners are gravitating toward as well as how they're dining.

"We're always working to make sure that everything we have on the menu is productive," Metz says. In 2008, Aqua Blue removed five items from its core menu and seven items from the sushi menu.

- Additionally, the restaurant nixed a few offerings that featured pricier cuts of beef. "A couple of the high-end steaks we took off the menu, like a bone-in rib-eye," says Metz. "The prices we would have had to charge were ridiculous."

Customers certainly aren't balking at not having the chance to order rib-eye wherever they go. Craving comfort and value, guests across segments are gobbling up nostalgic, stick-to-their-ribs fare-rich and creamy vegetarian choices and items made with less-expensive cuts of meat.

"Instead of selling steaks at $30, we're able to sell meatloaf and eggplant Parmigiana," says Antico Posto's Di Paolo. "[You want to] make sure people don't leave hungry and make sure people feel like they're getting a value. … The last thing we want to do is scare people away."

There's a limit to menu trimming, of course. A core menu is just that-a core-and customers appreciate familiarity as well as innovation.

"You have to keep some things on the menu that you don't sell a lot of" to appease the items' die-hard fans, Metz acknowledges. But Aqua Blue also lets its loyal guests know that-with one or two days' notice-the restaurant often can accommodate special orders for items that don't appear on the regular menu. Scaling back the menu saved the restaurant approximately 1% in food costs and even more in labor costs while freeing up inventory space in the kitchen, says Metz.

"We're really working hard on streamlining our menu in terms of the number of items on the core menu and then facilitating variety and seasonality on our specials menu," he notes.

For Bolla's David Bull, serving smarter means being a little less free with freebies than in the past. Previously, Bolla guests often were treated to several amuse bouches before their meal. Now, "We cut back a little bit on those extra-special treats," Bull says. "Currently we're doing one."

Of course, across the foodservice spectrum, it's a relatively narrow range of operations that have ever offered multiple amuse bouches. But other freebies, from unlimited bread or chips to glasses of water delivered to every table, may warrant reconsideration for operators looking to rein in food-and-beverage spending.

Emphasizing portion management has been essential at Atlanta-based The Flying Biscuit Cafe, a Raving Brands concept. "If you just kind of let [staff] run loose, you're going to be wasting food," says Raving Brands President Daryl Dollinger. "You have to retrain personnel and make sure consistent product is going out … If we're supposed to give 4 ounces of egg, are we giving 4 ounces of egg?"

Flying Biscuit Cafe employees from managers to line cooks have a bonus structure, Dollinger notes, so staff members know that they profit from conscientious food use.

Also in Atlanta, new fast-casual pizza concept Maddio's Pizza Joint prides itself on offering customized, made-to-order pies-but that leeway for guests could mean unpredictable and inconsistent ingredient use. Again, portioning tools keep prep work under control.

"We've got spoodles for everything, whether it's for the meats or the cheeses or the vegetables," says owner Matt Andrew.

The Fix: Prioritize Price Hikes

Understandably, many operators are reluctant to take price increases-with all of the economic pressures consumers are facing, why risk providing another disincentive for guests to return?

Lee Goodfriend, owner of Dixons Downtown Grill and Racines casual-dining restaurants in Denver, held out for more than a year and a half. After marking up the menu at both concepts in March 2007, "We just saw our food costs go up and up, and we were very hesitant to raise prices," she says. "We felt it would be better to make less money and keep our quality and portions up so guests would keep coming." And make less money they did, even though customer counts stayed consistent. In December 2008, Racines and Dixons took a 5% price increase-but on only half of their menus.

"Nobody complained," Goodfriend says. "We have a lot of repeat business, and I think people realized that we held out as long as we could." By raising prices on items whose ingredients had seen their costs jump the most, the restaurants were able to recoup some of their food-cost losses, and guests weren't faced with the sticker shock of an across-the-board price hike.

Antico Posto's Di Paolo also found customers to be more forgiving of price increases than operators tend to fear they will be. "It just seems that the mood was right out there for people to understand it," he says. "They go to the grocery store; they know that things have gone up."

Both Antico Posto and Aqua Blue focused on their specials menus when they took their most recent price increases. "It's hard to take an increase on a side of grits," Aqua Blue's Metz notes. So instead, Aqua Blue set prices for new menu additions 50 cents or $1 higher than had originally been planned for them.

From Scratch or Premade?

At Aqua Blue in Roswell, Ga., scrutinizing every penny's worth of food spending meant weighing whether it was worth it to continue making some items from scratch in-house.

"We kind of toed the line on that," Chef-owner John Metz says. Labor savings from the use of premade goods can more than make up for the items' higher purchase costs, but there are other factors to consider, says Metz, who also co-owns Greazy Spoon Consulting.

"We're still focused on a really fresh product," he says. And the fact that Aqua Blue prepares some items from scratch remains a point of pride for chefs and a selling point for servers.

"It's more about the staff's perception and their pride to sell those foods to the guest," he says. It was for this reason that Aqua Blue opted not to choose more premade products for 2009. Still, adds Metz, "There are some great premade products out there that I would recommend depending on the concept."

Knowing When It's Worth It

Chef David Bull of Bolla in Dallas pays attention to dollar profit margins, not just percent profit margins, in planning his menu.

"We bought a turbot a few weeks back for $600," he says. "The food-cost percent was like 58%, but we charged $60 for the plate, and we made a $35 profit." A salad may offer a 20% profit, "but if that equates to $2," Bull says, "I'd rather do the fish where the percent profit is lower but the dollar value is higher."

Bull discusses the importance of profit-margin analysis regularly with his chefs. "When you force people to change the way they perceive things, people get stronger and they get smarter," he says.

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