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High food costs threaten the recipe for success

10:03 AM EDT on Thursday, May 8, 2008

By Gail Ciampa
Journal Food Editor

Pamela Johnson, the chef at Cornucopia in East Greenwich and considered a whiz at cost evaluation, is watching every penny these days, right down to the cost of the carrots she chops in her kitchen. Restaurants locally and nationally are feeling the pinch of soaring food costs, as well as the high price of fuel. The Providence Journal Sandor Bodo

The prices for flour, oil, dairy products and meat are soaring. Gas and energy costs are spiraling upward. There’s even an international rice crisis, with worldwide demand doubling costs and leading to fears of shortages in some Asian nations.

From the seasonal fish shacks to the neighborhood bistros to the highest-priced steak houses, restaurants in Rhode Island are not only dealing with the increasing cost of raw ingredients but seeing fuel surcharges on deliveries and even waste removal.

Egg prices have increased 187 percent over the last 24 months, while flour is up 108 percent; oil up 63 percent; rice up 47 percent; cheese 30 percent; and milk up 25 percent, according to the National Restaurant Association’s analysis. Locally, the increases differ week to week and supplier to supplier.

In Rhode Island, restaurateurs cope by shopping around for the lowest prices from a variety of wholesale suppliers; others work to cut their energy or staffing costs. Some are watching portion sizes and preaching to staff about waste, others are offering deals to entice more customers. In some cases, bread is being served only on request.

All say that if they passed on their increased costs to diners, they risk alienating customers who are already financially stressed by higher energy and food costs at home.

The industry problem is nationwide. Restaurants have seen an effect in their already small profit margins, a decrease of 4 to 6 percent, according to the restaurant association.

Matt Gennuso, the owner/chef at Chez Pascal on Providence’s East Side, said he can’t cut down on food costs but he can reduce energy bills. If he catches one of his cooks walking away from a lit gas burner after finished up a dish, he asks him for his car keys.

“So I can leave their car running,” he said.

That’s his way of preaching energy-saving in the kitchen. He turns off the kitchen’s gas valve before leaving on Saturday night. The restaurant is closed on Sunday and Monday. That shuts off the pilot lights and actually cools down the kitchen, another advantage as hot weather approaches. It might only save $5 a day, but he’ll take it. He’s also watching water use to cut waste.

Gennuso is staying later at work and sending another cook home to save on payroll, but some costs he can’t control.

“If I need saffron, I need saffron,” he said. “I can’t skimp on the food.”

His suppliers held the line as long as they could before they finally raised prices. “But we have to hold the line on prices or we lose customers,” he said.

Gennuso’s wife and co-owner, Kristin, who manages the restaurant, said diners don’t want to hear about money pressures when they go out to eat.

“When you go to a bank, you know you are doing business,” she said. “But the moment you remind a customer that a restaurant is a business you’ve ruined it. That’s not fun.”

Scott Cowell and his wife, Elaine, opened the Melville Grille at the East Passage Marina in Portsmouth last summer and had a strong first year. He was well-prepared for the task with a 25-year restaurant career that included a tour of Newport restaurants and experience on the business side with the Back Bay Restaurant Group (owners of Papa Razzi in Cranston).

To gain an edge this year, he opened his seasonal restaurant in March, considerably earlier than his counterparts. He also opens seven days, serving lunch daily, adding dinner on Friday and Saturday. With room for 125 inside, private parties add the volume that will help boost his business.

Cowell is mixing up the menu to balance items that cost more — scallops, swordfish and lobster — with those that don’t cost as much — pasta and pizza.

“You have to look at your menu and do some product analysis,” he said. “Decide what your signature items will be and then do purveyor research.”

“Down here there is a unique environment,” he said. “Boaters are frugal and you have to commit to giving the best food at best prices.”

At Cornucopia, an organic restaurant in East Greenwich, Pamela Johnson is not just the chef, she’s a whiz at cost evaluation, according to manager Merry-Jayne Murray.

“I operate differently,” said Johnson, who keeps food costs 15 percent below the industry average for her 34-seat restaurant.

She gets her beef from Wolfe’s Neck, an organic source in Maine, but she doesn’t order pre-cut steaks, choosing to trim every piece herself. She buys whole organic chickens and chops them up as she needs them for cooking.

Not buying individual portions allows her to use everything; less waste saves money.

Johnson has a new twist on seasonal, too. She buys her sweet corn from Barden Family Farm in season and has learned how to freeze it to keep the flavor. She has one package left from last year.

“First, it’s 10 times better and second, it’s so less expensive,” she said.

Calling herself “very picky,” she changes her menu every week and bakes her own bread.

Paul Jalaf picked a tough time to jump back into the restaurant wars. The new owner of N.E.C. North End Cafe in North Providence and the former owner of Mezza Restaurant, said food costs should average 25 to 30 percent of his operating budget, but they are now up to 35 percent.

He makes everything from scratch so he really feels the pain of all the ingredient increases.

The sacks of flour he buys have gone from $11 to $27, a big hit — especially since he makes his own bread to save money. The restaurant now serves bread only on request. Beef prices are up, as are fish prices. The fuel surcharges are unending, he said, with a surcharge even on removing the trash bins. Plus, Jalaf said, many local restaurateurs are reporting a 10- to 15-percent decrease in customers from last year.

Carlo Slaughter is co-owner of two restaurants, d. Carlo Trattoria in Smithfield, and Flare in Coventry. At the Trattoria, the cost of producing the Italian dishes is reasonable but the price of bread is killing him. He buys from LaSalle Bakery and has no intention of switching, but he plans to start buying their dough and baking it at the restaurant to save money. He’s also doing request-only for bread at lunch.

Slaughter cuts prices by offering some less expensive cuts of meat, such as hangar steaks, to watch his pennies.

“We’re doing everything we should do, but the profit line is still shrinking,” he said.

He said he’s gotten letters from suppliers apologizing for having to raise prices.

Add to that the fuel surcharges for deliveries.

“But I can’t put a fuel charge on a check,” he said.

Wayne Clark, owner/chef of Il Piccolo in Johnston, said when he finds a deal from one of his purveyors, such as for canola oil, he stocks up.

Chicken prices are stable, so too are some fish, so he tries to offer more of those items. His specials are seasonal and what is a good deal will make it on the menu.

“Eggs are ridiculously expensive,” he said. “but you need them so you just have to pay it.”

“A gallon of milk costs more than a gallon a gas,” he said. “So I’m not buying as much.”

He will not cut portions.

“I can’t wait for the farm stands to open and then I’ll just go shop and get all that fresh produce that hasn’t been shipped,” he said. As much as that will help, “I still have to put gas in my truck.”

While many local restaurateurs want to serve local and seasonal food and be environmentally friendly, the mission is not easily accomplished, restaurant owners told a food industry consultant at a Providence gathering six months ago. Derek Wagner of Providence’s Nicks on Broadway, Champe Speidel of Persimmon in Bristol and Chez Pascal’s Gennuso all talked about the high costs of delivering food that satisfies their savvy and demanding customers.

They also said that locating organic and local products takes time, and time is money. They cited the cost and inconvenience of having to pick up locally grown produce, as it is rarely delivered. And they have found recycling and composting are not cost-effective or feasible, though some do still make the effort.

Providence’s Local 121, owned by Josh and Nancy Miller, save both financially and ecologically by sending their food scraps to a compost pile with Red Planet Vegetables, on the West Side of Providence.

National chain restaurants, which can buy in bulk, have some advantage –– and their advertising campaigns suggest that they are cheaper.

Kevin Gaudreau, general manager at Ruth’s Chris Steak House, said, “As a company we are absorbing the costs. Guests have it hard enough, so we’re taking it on the chin.”

The chain is seeking to increase volume, offering a three-course dinner for two at $89, as a way to keep business going.

As a big company, Ruth’s Chris can contract their meat purchases for a year, so prices have stayed solid, he said. But even for the chain, produce and dairy are “off the charts.”

Ruth’s Chris is also offering small finger food at the bar, such as a trio of beef with a Kobe slider; a petit filet; and a mini New York sirloin. The combined eight ounces of meat cost $10. A seafood trio is also $10.

Working to increase customers, not prices, is the solution for Bob Burke, owner of Providence’s Pot au Feu. He said the restaurant is thriving as many of his customers are opting out of the month-long vacation in Tuscany or renting the villa in Provence — choosing to dine out instead.

“We are relying on the age-old business practice of raising volume,” he said.

Every entrée still comes with a vegetable and potato and that matters to diners. “They are not taking a chance with Cuban Thai Cheese steak,” he said.

The restaurant is also saving energy with new water, heating and air-conditioning systems. “After 35 years we have been through every cycle. The lesson is don’t be crazy on the upturn,” Burke said.

gciampa@projo.com

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