At What Cost?
Food costs are a stern taskmaster, a simple percentage that operations live and sometimes die by.
Whether signaling splurges or simply satisfying an appetite for something grand, steaks maintain strong selling power as quintessential American classics and never more so than at those temples of beef known as steakhouses.
“Steakhouses offer an experience like no other,” says Carlos Alferez, general manager of Lawry’s The Prime Rib in Chicago. “It’s old-school dining where you get the full 360 degrees of great food, great service and luxurious setting.”
That experience, however, comes at a price. With wholesale costs for beef, whether grass or corn fed, prime, choice or branded, continuing to increase, operators are asked to look for ways to make food-cost math work.
At Lawry’s, Alferez sees it as a balancing act. “You want to be in a place that allows you to run the business profitably, but that also takes care of guests,” he says. That typically means affording different pricing consideration to steaks and prime rib.
“You cost it accordingly and look for ways to even it out,” says Alfarez, adding that the Chicago location operates at a respectable 29 percent. “That takes everything into consideration. We have a little more leeway because we work hard sourcing beef and getting a price we can work with.”
At The Pine Club in Dayton, Ohio, general manager Karen Watson acknowledges that food costs are a dance of sorts. “We do things a little differently and it works out,” she explains. A bustling bar business, disciplined purchasing, strong connections to the area and national accolades are among strategies that work.
“It’s the whole picture, not just one thing,” she says.
The sweet spot for food costs is different for every operation, but 27 percent to 33 percent is a range that’s often cited. Depending on cut and grade, steaks can spike to 40 percent or more. Smartly built menus feature items that offset higher costs by coming in way below average. In steakhouses, shared sides, appetizers, salads, desserts and adult beverages help considerably. Michael Sternberg, partner in Rare Steakhouse’s three locations, cautions, however, that such menu items can be less profitable than in the past.
“It used to be okay to use iceberg lettuce in salads. Now, guests look for something more special, maybe organic field greens with heirloom tomatoes. People expect the best ingredients, and that changes those margins.”
Sternberg believes, though, that guests know steaks are pricey. “They see them in the supermarket, so they’re less surprised,” he says. “You no longer have to apologize for pricing, and that changes how steakhouses operate.”