In the first half of 2008, the high price of oil caused food prices to rise dramatically. And while oil prices have come down for now, food prices are still up: it is estimated your turkey dinner will cost 5.6% more than it did last year. In addition, consumers are spending less as a result of current economic conditions. All of this means that restaurateurs — already accustomed to razor-thin margins even in a good year — must be more creative than ever to keep their businesses running successfully.
Public Offering spoke with two alumni in the restaurant business in New York City, Peter Schatzberg ’07, co-owner of FreeFoods Organic Cafe in Midtown, and Cecilia Pineda Feret ’92, co-owner of Brasserie Julien on the Upper East Side, about how they’ve changed their business models to adjust to these challenges.
Measure twice, pay once
“We work by the motto ‘What gets measured, gets done,’” says Schatzberg, who worked at GE before he ventured into the restaurant business with raw food celeb-chef Matthew Kenney. “If you are watching and measuring people, it changes people’s behavior. You can value engineer; I measure the chef every week and keep moving the target, and that changes behavior.”
“If you can change a whole item on the menu with a new name, new ingredients and a new price for the season, [a change in price] is less visible,” says Schatzberg. “We have also scaled back on meat and chicken and are offering more vegetarian choices.”
Curate the menu
“Items with higher profit margins should come first,” says Feret, who has been in business with her husband, who is the chef, for nearly 10 years. “Work with your costs and see what dishes you need to encourage people to try. We put all the entrees under $19.50 in one column because we saw people at the door were concerned with price, and this encourages them to come in.”
New food presentation
“We created a new menu item last year as a tactical way to keep our costs down but provide the same quality of meat,” says Feret. “The hanging brochette is a kebab presentation [of steak], that allows us to have the quality of filet mignon without having to worry about buying larger pieces that are more expensive.”
Photo credit: Peter Schatzberg