This post is by Restaurant SmartBrief contributor Janet Forgrieve.
A good news/bad news report from NPD Group last week said restaurants may benefit from higher food prices this year. As higher commodity costs push up prices at the grocery store, consumers are likely to pull back on cooking at home and head out to eat more often, the report says, especially at larger chains that won’t feel as much pressure to raise prices. Restaurant chains are often able to negotiate long-term supply contracts at lower costs than grocery stores can, the report says.
Under that logic, independent restaurants and smaller chains may not reap the same benefits. But what about the hybrids — boutique restaurant companies such as Scottsdale, Ariz.-based Fox Restaurant Concepts, which operates one or more locations under 13 banners? The company’s restaurants range from casual Mexican at Blanco Tacos + Tequila to modern Italian at North to new American cuisine at the company’s first restaurant, Wildflower, which opened in Tucson in 1998.
The cuisines may vary, but the company’s size gives it the power to negotiate better commodity prices for all, says CFO Brian Stoll. “Each restaurant benefits from the purchasing power of the entire organization.” That power has grown along with the company, which plans to launch its newest brand, The Arrogant Butcher, late next month in Phoenix.
“Every year we take advantage of our growth and the changes in the commodities market,” he added. “We are constantly trying to do the right thing by our guests, investors, brands, etc., in terms of providing the best quality product at the best possible price.”
We spoke with Stoll this week about how the company handles sourcing, menu pricing and decisions on where to grow next.
On how the company decides menu prices
All pricing decisions are made collectively. Traditionally, inflation, commodity increases, and perceived value play in to determining how we engineer our menus. We’ve been very careful about taking price increases in light of the recent economy.
On post-recession pricing decisions
While we see some light in terms of increasing guest counts and check averages, we are still extremely sensitive to guest perception on price and value at large. We did not raise prices last year, strategically or systematically.
On balancing new concepts and cost
We are thoughtful to the menu we want to deliver as it relates to the return on investment and what the market will bear. Concepts will either be born or not born based on whether or not those key tenets can be checked off. It is a complicated question. For some brands, we offer premium items that are priced as such simply because the concept demands that certain items appear on the menu. We may or may not sell many of these items, but there are many areas where we won’t sacrifice quality for price. If we are looking at a certain item that falls outside our cost of sales or prime costs and it fits the overall concept, we will make these available to our guest. But we also offer a variety of other items at various price points so our guests have plenty of selection and choice.
On the latest concept
We are opening an urban grill called The Arrogant Butcher in downtown Phoenix in late February. The menu will offer a variety of boldly flavored dishes and will include a raw bar, charcuterie and cheese selection, salads, sandwiches, and entrees like beef short rib stew, Berkshire pork osso buco, Dungeness crab stuffed chicken and scallops with black-eyed peas.
Will higher food prices be good news or bad news for your restaurant this year?
Photo credit: Fox Restaurant Concepts Facebook page