The Case of the Shrinking Protein
You are the sous chef responsible for menu costing. The executive chef has introduced a new dish: a 10-ounce portion of prime rib, cooked sous-vide, served with roasted vegetables and a red wine reduction. The prime rib is purchased at $12.50 per pound. The yield test shows that after trimming and cooking, the 10-ounce raw portion yields only 7.5 ounces of servable meat. The vegetables cost $0.75 per portion, and the sauce costs $0.50 per portion. The target food cost percentage is 30%. The current menu price for a similar dish is $38. You need to determine the actual cost per portion and whether the menu price is appropriate. Additionally, the supplier has just announced a 10% increase in the price of prime rib. How do you adjust?
1. Calculate the cost per portion for the prime rib dish, including the yield loss.
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First, determine the cost of the raw prime rib per ounce: $12.50 per pound = $12.50/16 = $0.78125 per ounce. The raw portion is 10 ounces, so the raw cost per portion is 10 * $0.78125 = $7.8125. However, the yield is only 7.5 ounces servable, so the cost per servable ounce is $7.8125 / 7.5 = $1.04167 per ounce. But we need the cost per portion as served (7.5 oz), which is still $7.8125 because we bought 10 oz to serve 7.5 oz. So the meat cost per portion is $7.81 (rounded). Add vegetables $0.75 and sauce $0.50, total cost = $7.81 + $0.75 + $0.50 = $9.06. To achieve a 30% food cost, the menu price should be $9.06 / 0.30 = $30.20. The current menu price of $38 gives a food cost percentage of $9.06/$38 = 23.8%, which is below target (good for profit). However, if the target is 30%, the price could be lower, but competitive pricing may keep it at $38. With the 10% increase, the new meat cost is $7.8125 * 1.10 = $8.59375, total cost = $8.59 + $0.75 + $0.50 = $9.84. At $38, food cost % = 25.9%. Still below 30%. So the price may not need to change, but you should monitor.
2. What factors should you consider before changing the menu price?
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Consider: (1) Customer perception and demand elasticity-will a price increase reduce sales? (2) Competitor pricing. (3) The overall menu mix and profitability. (4) The target food cost percentage and profit margins. (5) The supplier increase may be temporary; consider absorbing it or adjusting portion sizes. (6) Could you negotiate with the supplier or find alternative sources? (7) Could you adjust the yield by changing cooking methods or trimming? (8) Communicate with the executive chef and GM. (9) Consider menu engineering: is this dish a star or a plowhorse? (10) Check if the price increase is across the board or just this item.