It’s not all about price. Instead, rethink value, affordability, and how to balance rising food costs and shrinking margins.
Food that is accessible and aspirational is the goal, but throw affordability into the mix and the plot thickens: The farm-to-table sourcing model doesn’t come cheap, and neither do fresh, seasonal foods, robust wine collections, or multiple taps of seasonal craft beers. Meanwhile, the growing competition from chef-driven fast casuals makes it even more imperative for full serves to win consumers’ discretionary dollars. To accomplish this in our value-driven society—despite rising food costs and constricted margins—operators are increasingly seeking ways to offer “Cheap Eats” in creative ways, keeping books in the black and patrons flocking in. FSR reached out to its readers to learn the how and why of affordable food menus. The clear outcome: Cheap Eats is as much about business strategy as it is about price points. Here are successful strategies from a handful of operators that are representative of reader feedback:
Craft Your Own Margins
Around three decades ago, Michael Olesen held a blueprint of his future in his hands as he prepared to graduate from the University of Illinois. His independent study, “The Economics of Nightclubs in Today’s Alcohol Industry,” earned Olesen a degree six months ahead of schedule. But it wasn’t until 2002 that the plan had a chance to officially enter the real world.
In May of that year, Olesen realized his dream with the opening of Stockholm’s Brew Pub in his hometown of historic Geneva, Illinois, a modest-sized Chicago suburb first settled in the 1830s. Even decades later, Olesen remembered his college research as he began to chart a plan for the 11-table restaurant. First and foremost, Olesen wanted to conduct business “the right way,” which meant “no gimmicks, no fillers. We don’t short-change anything.”
Yet, as operators at all altitudes of the industry understand, good intentions alone don’t produce good margins. And what’s one of the first places people always sacrifice? “I wasn’t going to cut food cost,” Olesen says. Fourteen years later, the restaurant keeps food costs steady around 38 percent, which sounds more like a high-end steakhouse than a neighborhood brewpub.
Being able to thrive with those kinds of numbers, and ideals, is one of the full-service sector’s greatest challenges. Olesen’s success has myriad layers, but here’s the starting point: The restaurant brews its own beer, effectively erasing the distributor, or middleman, from the equation. In fact, the soon-to-be 54-year-old restaurateur, who also owns an investment brokerage company, Geneva Investment Group, is crafting batches of beer himself early in the morning. The small price of ingredients doesn’t dent his bottom line. Rather, the considerable savings enables Olesen to charge a competitive $4.50 a pint for one of his eight microbrews and three blends, and the money he saves by brewing in-house effectively lifts the cap off food restrictions. The restaurant enjoys a 70/30 mix between food and alcohol sales, respectively, with beer accounting for more than 10 percent of the total revenue. And Olesen cuts no corners.
“We actually have a custom-grind on our hamburgers so that our hamburger is a better burger than our competition. We hand-cut our own steaks. We do these extra things with our food, and we’re able to do this because of the fact that we produce our own beer and sell our own product. We’ve basically cut out the distributor,” he explains. However, he acknowledges the brewing equipment was much cheaper 14 years ago than it is today. Still, he believes this straightforward plan beats alternative options for dealing with food costs, like the marketing and pricing gimmicks he’s seen others employ, such as when operators offer discount coupons on over-priced items that have lower-quality ingredients. Bottom line, Olesen believes in making money, but doing so with integrity. “It’s the right way to be; I believe in being honest and forthright,” he continues. “People appreciate that.”