Not too long ago I remember hearing that beef prices were going up!
I think I may have been heard it on the financial channel, yes some of us still watch the boob tube to get our daily news fix.
So oil is at a 2 year low and beef is at an estimated record a high because of drought and diseases across the country.
Retail beef prices that averaged $5.29 per pound last year are now up to $5.63 per pound.
Have you noticed how expensive bacon is in the store!
Where is the Beef and What’s On Your Menu?
Back in 1984 Wendy’s – Where’s the Beef commercials took over the boob tube airwaves and the public couldn’t stop chanting this carnivorous mantra!
Wendy’s does make a great hamburger! My ex worked in one during college for extra dough! So I got the inside scoop on how fresh their meat was and how it also used fresh ground beef in their chili recipe. Yes and what about those Chocolate Frost’s, you don’t need to be a chocoholic to get addicted to those spoon slurping desserts.
Where is the Beef and What’s On Your Menu?
Meat prices are expected to jump 3.5% in 2015, assuming normal weather conditions. Overall, food prices are expected to increase an average of 2.5% next year.
What’s a restaurant owner to do?
Your menu pricing, is one of the main reasons your customers come through your doors. And no doubt, your prices will influence how your restaurant is perceived by the public. Although there is no perfect formula, this post offers some tips on how to deal with the forever-rising food cost dilemmas.
Tips and Not Just Beef Ones
Go Farm-to-Table- Basic ingredients and many raw commodity food items can fluctuate daily. For instance, flooding in California could wipe out a tomato, olive or lettuce crop, causing supply to drop and demand to increase. In this case, you have two easy options: raise your prices or work with a seasonal menu. Seasonal menus allow flexibility for buying crops in season, or in supply, to keep costs down.
The Farm-to-table restaurants concept (refers to a movement concerned with producing food locally and delivering that food to locally) is feeding a need! Saving the consumer some money and allowing restaurants not to lose money!
Not only does it help the local farmers and the labor force, it also educates customers on what produce and products are at their peak of flavor! Local and seasonal crops have become a must on restaurants, menu special boards and many small restaurants have even adopted a rotating seasonal menu to entice their customers.
Research What Your Target Market Is Willing to Pay- Figure out the very least you can charge while still making a reasonable profit in your business, and then determine the highest price your market will pay for your items. Research information about demographics and average income levels in order to find out the prices people in your target market are willing to pay.
Competition’s Pricing Gauge- Using this method assigns prices to items based on the prices your competitor has on the restaurant menu. Usually, you price the item to be the same as the competitors’ prices or price it slightly lower to get those looking for a bargain, or price it higher to attract those looking for higher quality.
Best Grossing Menu Items- Once you know which menu items are, the highest grossing items (meaning they result in the most profit before any other expenses are considered) then you know which items to promote. Make sure you make those items stand out on the menu.
Don’t waste space on a menu with filler items that do not offer much in the way of gross profitability. Train your serving team to upsell those menu items.
Buying Power Lock In Pricing-
“Beef has gone up and it is going up still,” said Gus Mancy, operator of Mancy’s Steak House in Toledo and a partner in the Mancy Restaurant Group.
“We’re fortunate in that we were able to buy in contracts,” Mr. Mancy said. “We were able to lock our price in for a year at a time so we were set before these price increases. But we’re still not immune from these rising prices. Some other cuts, we can’t lock in. Like tenderloin, because its price fluctuates so much.”
Based on product and load volume, how much you spend, and your credit, you are free to speak to your rep about getting better prices. It does help to have some ammunition to back up your claims of “XYZ Company is only charging $x.xx per unit” when you are comparing notes.
Another alternative, works well for some, a contract agreement. This is beneficial if you have a good history of purchases. Beware of contracts, though. If you enter into an agreement when prices are high and they drop, as does produce from winter to spring/summer, you may be paying significantly more than needed.
My Final Word
Always remember be sure your prices represent the service value your customers receive whether you’re a fast-casual restaurant or a fine dining restaurant be inline so you can increase your bottom line.