We’re all paying more for food now than we did last year. According to a recent report by Bloomberg’s Chase van der Rhoer, food prices are up 19% from December of last year. In the meat industry, we’ve seen as much as 44% food cost inflation since 2012 on many popular cuts.
At the same time, average base pay increases for 2014 will remain at 3 percent for the second year in a row in the U.S.—roughly one percentage point below pre-recession levels, according to the seventh annual Compensation Planning Survey by Buck Consultants.
The dichotomy of faster food price escalation over wages presents major challenges for restaurateurs. How do you maintain profits with food costs escalating faster than your customer’s disposable income?
Quality Costs Customers
Restaurant patrons are faced with paying higher prices—myself included. I’m much more discerning about where I spend my money now. I want quality, and a dining experience that satisfies me—that makes me feel my hard earned money was well spent. People want to walk out of a restaurant saying, “We’d come back here!” no matter if it’s fast casual or fine dining.
Some of my favorite local restaurants have cut the quality on their food to deal with higher food costs this year. As a customer, it’s disappointing to me. I find myself saying, ‘No, let’s not go there. It’s not as good as it used to be.’ I’d rather spend a little more money and go to a place where I walk away feeling satisfied and delighted.
What gives customers that, ‘come back’ feeling? It’s a combination of great service and great quality food. When I have a bad experience with the service, but the food is delicious, I’m much more forgiving than when I have bad food experience. When the food quality is poor or less than what I expected, I’m hesitant to go back. Sure nobody’s perfect and there are times when something goes wrong, but if I give the place another try and I have the same poor quality food experience, I’m done—cross that place off my list.
How do you feel when you dine out and are met with disappointment?
How Quality Pays
When buyers opt for lowest prices despite quality, customer experience problems often begin. Quality ultimately reduces costs and builds customer loyalty. While that’s hard to measure on comparative bid sheets, there are many studies that prove quality pays in the long run.
In the 1979 book, Quality is Free, author Philip B. Crosby explains the idea of understanding the true “cost of poor quality,” by illustrating out how much it really costs to do things badly. Crosby demonstrates the cost of bad quality is inevitably more than the higher costs of good quality from the onset.
Every dollar you don’t spend on making up for poor quality becomes a dollar right to your bottom line. In the food service industry, every dollar you don’t spend to comp a meal, replace spoilage or decrease yields on finished goods from cheaper products, are dollars going straight to your bottom line.
Good quality increases income by attracting more customers and repurchase probabilities. At the same time, good quality lowers costs by elimination of lost business, rework and waste. Some studies show that implementing quality-focused programs can increase profits by 5%-10% of sales. Quality is not only free; it pays.
Quality is Relative to Consistency
What most restaurant patrons look for is consistency. When it comes to food, consistency starts with the quality of the products purchased. They can be consistently good in quality, consistently bad in quality, or inconsistent in quality. When food is purchased consistently good or consistently bad, the result is predictable. The worst scenario is when there is inconsistent quality.
Inconsistent quality usually stems from shopping for the lowest price and being fooled by the promise of quality. We see this every day in the supply side of the food service industry. Potential customers send out bid sheets with generic descriptions of the products they want prices on like, “GROUND BEEF” or “CHOICE FILET—8 OZ”, and then often buy the lowest bid. This is why shopping the ‘exact same item’ is so important; not all ‘GROUND BEEF’ or ‘CHOICE FILET—8 OZ’ are the same.
Any purveyor can quote a low price week to week using lower quality products to win the bid. But in the end, what do low quality, lower bid winning products really do for your restaurant? They deliver inconsistency and ultimately damage future returns.
Increase Quality & Consistency
Quality Doesn’t Cost, It Pays! was a tag line a friend of mine had painted on his produce trucks. I love this expression because it speaks directly to successful food cost management. Here are four cost savvy tips you can use to help increase quality and consistency:
- Survey your staff. What does your wait staff hear from your guests about the food quality and consistency? What do your chefs and line cooks say about the quality of the food they prep?
- Check your garbage. How much and what kind of foodstuffs are in your back of the house garbage? Low priced/Low quality food often spoils faster, has more waste and less yield. How much uneaten food are your bussers clearing off the table? Were your guests less hungry than they thought, or less happy with the quality of their meal?
- Be specific and finite with your purchase specifications. Cite brand names or sources, specific quality grades and origins.
- Work with suppliers that care about quality as much as you do. Define what quality means to you and how you measure it. If your suppliers don’t understand your true objectives, their guestimates can introduce inconsistent quality.
Paying a lower vendor price versus a higher one seems like a beneficial move—but the critical comparative here is that the purchase is for the exact same item. Look beyond price and focus on quality to improve your bottom line. You will reap positive results in the long run and be glad you did.