Yield & Purchasing / Menu Pricing / More Yield Tests

We began class with a review of yield and how it influences product purchasing. Vegetable scraps can be saved and used in vegetable stock. But if you're making beef stock at a steak house, the cost of bones can be significant. So your meat purchasing will be influences. The cost of buying subprimals (parts of the animal, bones and fat and all) and the cost of buying fabricated meat (deboned, trimmed of fat, cut to edible portions) change when you have a use for the bones that would be missing in a fabricated cut.

We spent a few hours discussing product pricing. This is determined first by the kind of menu the establishment has. For a cycle menu: one with a fixed daily menu (like in a corporate cafeteria or prison -- what's the dif?) prices will be determined to an extent by the limitations that the host has determined. The law firm where I worked, for instance, had a cheap-ass caf with good food, undoubtedly restricted by a contract the food service had with the firm. Also, because the menu changes every day, the uses for carry-over (a.k.a. left overs) are more limited, thereby raising food costs. In a school cafeteria, today's hamburgers can become tomorrow's chili, but a corporate cafeteria's clams casino is a little bit more tricky.

A restaurant's menu that changes completely everyday is tricky because of the carry-over issue, but gives the flexibility of going to market every day and getting what is fresh and cheap, though in smaller more expensive quantities. A standard menu can have specials, which can use up what's in excess or what's cheap at the moment. Specials have to be thought through, or a "creative" chef can drive up the food cost of a special into unprofitability.

Factors that influence menu pricing:

• Local competition
• Service level -- table vs. counter service makes a perception of quality, and determines turn time of the tables
• Guest type -- what are the customers willing to spend?
• Product quality
• Portion size
• Ambiance
• Meal Period -- a.k.a. dayparts. Weekends can get a premium over weekdays, dinners get more cash than lunches,
• Location, location, location
• Sales mix -- different menu items will be more profitable than other.

There are different ways to assign a menu price, and a lot of places use the dumb cudgel of the food cost percent. You can assign a 20% food cost to everything (if a dish costs $4, you charge $10) but if the food cost of a steak is $25, the cost of a pasta dish is $3 and a glass of lemonade is $.03, the perception of a $125 steak and a 15 cent glass of lemonade will seem a bit crazy to a customer.

The desired cost percent can be determined by looking at what the other expenses of the restaurant are. If sales = 100% of income, fixed costs like labor, occupancy, desired profit and operating expenses can be subtracted to find what % of the income can be dedicated to the cost of the food.

The number that is much more important than the food cost percent is the number where the money is: the Contribution Margin.

Contribution Margin = Sales Price - Cost

Also known as the Gross Profit, the CM is not a percent, it's the MONEY. Alternately, the Sale Price = Cost + Contribution Margin. A steak house typically has a huge food cost and a tiny profit margin, but because steaks go for hundreds a throw, the contribution margin is going to mean big profits regardless.

For the remainder of the class, we revisited the butcher test card and theoretically broke down a whole chicken, which had a lot of parts: drumstick, thigh, wing, back and neck, giblets, waste, and breasteses. Each part has a different value per pound. Literally, the value of the whole chicken is not necessarily the sum of the value of its parts. Hence, supermarkets love to sell chicken parts because the perceived value is a lot higher than the perceived value of the whole carcass. Mmmmm, carcass.