Staying Afloat in Any Economy

When the economy starts to slow down, it's inevitable that businesses take a closer look at their margins. For restaurants, where each one tries to stand out from the one next door or down the street, chefs may use exotic ingredients or offer larger portions to attract customers. Rather than helping their businesses, these may be the exact things that are hurting their bottom line.

Some restaurateurs use their intuition and feel they can do this "in their head," while others use software or financial experts to come up with their margins, when to change menu prices and other business issues. Experienced restaurateurs may use a combination of both. Jonathan and Lisa Krach, owners of the Vienna Restaurant & Historic Inn in Southbridge, Mass., explained that they have to examine expenses closely, and on a quarterly basis they closely review their financials. "For decades, some things did not change like utilities, insurance and building maintenance. Utilities were about three percent of your gross for years, and now it's 10 percent," Jonathan Krach noted. "There's probably another 25 things that have changed from single digits to double digits," added Lisa. "Years ago, people didn't have cell phones, mailboxes, etc., and these can bog you down."

He stressed frequent reviews of menu prices and specific items. "If they're looking at the menu only once a year, I'll bet they won't be around next year," he joked. "Food inflation is way above what is considered the norm." Designing a menu that changes completely daily or weekly may increase your food costs. While Krach does about 50% of his shopping on a daily basis, some of his costs are dictated by availability. Some food items have volatile price, take lettuce, for example. One week it's $17 and then $40 the next. But you can't change the price of your meals each week." He noted that some items cost 20% more than they did a year ago, and 20% more from a year prior to that.

"You have to cater to your customers'
needs. But at the end of the day,
if the bottom line isn't black ink,
you'll be unemployed." - Jonathan Krach

"We operate under standard accounting principles. Take food costs, multiply it by three and that's about what it should sell for," he explained. "But again, there's cost averages. Filets are about $12.95 at cost, so we'd have to ask $60 for it. The market will not tolerate that." Their waitstaff will try to suggest more affordable options to their customers, like maybe a daily special. And he'll design new menu items to offer selections. "Price isn't always a simple equation of cost. We're offering the best possible menu items at a fair price. We obviously have a mark-up; we have expenses like everyone else."

"Less is more" is the approach of Ihsan Gurdal, co-owner of Formaggio Kitchen in Cambridge, Mass. "Making less look like more really is an art." When asked about cheese plates and how some chefs place large pieces on a dish without thinking of the cost, Gurdal explained cheese plates won't cost restaurateurs as much if chefs use the proper cheese and slice them differently. "Cut a thinner wedge and layer it. There are simple ways of filling a plate, like roasting some nuts, adding beautiful condiments or using savoy lettuce. If it's proportioned beautifully, then the presentation precedes the quantity."

Gurdal knows that cost can be a big factor when adding something to a menu. "I like to see someone taking the time to look closely at the cheese and figure out the cost. They do it with everything else, why not cheese?" When working with restaurants to create cheese plates, he can be creative to fit their needs, but they need to take the time to discuss what they're really looking for. "If they really love a cheese that retails at $30 a pound, we'll show them one that mimics it and costs less money."

And saving money by carefully slicing cheeses isn't your only option. Many restaurants will add dry fruits to cheese plates thinking this is a better option to filling out a plate. "Instead of throwing in a handful, take the time to cut them and fan them out on the plate," Gurdal suggested. And the restaurateur and innkeeper agrees. "Chefs want to make their mark and while they have great expertise, what they lack in confidence, they take out on the house," Krach added. "They put too much food on the plate. There's a fine line of having too many elements and too much on the plate, and you won't make any money on it."

"You need to have an equal amount of passion for making money and making extraordinary food. If you have great food and service, but you're not making money, you're not doing anyone a service and you'll be out of business," Krach noted. On the other hand, trying to offer food for too little money can be just as damaging. "Chefs might not have the confidence to charge the right amount. But people will find the money if the quality is there."

If you haven't been in business for years and weathered the ups and downs of the economy, then maybe some financial guidance would be beneficial to get you on the right track. Firms like Bacall & Coniff and the Boston Restaurant Group can help with menu prices and such. And there's software out there to do it yourself, from Sysco or ChefTec from Culinary Software. As Krach put it, "You have to cater to your customers' needs. But at the end of the day, if the bottom line isn't black ink, you'll be unemployed."