How do you handle rising costs?

[Peachcreek]

It seems that every time I order food at work prices have gone up. Dairy products are higher than ever with no change in sight. Things like flour and dry goods cost more because of shipping. With higher gasoline prices I now get an "energy surcharge" added on for deliveries. Proteins are expensive with beef prices softening just a little but still higher than a few years ago. And so on.
So what to do. We raised prices earlier this year. We are portion conscious, waste is minimal. Now what? I guess there are a few ways to go:
Raise prices again.
Cut portion sizes.
Use cheaper or substitute ingredients.
So my question is this- if you were in my position, what would you do? I know I get freaked out at the idea of ANY substitutions- but I have to do something and can't believe that I would even think of stooping to that....but here I am...
What do you think as a customer? Would you be more upset if you favorite cookie was smaller or if I started using margarine instead of butter or if you came in one day only to find your favorite cookie was now $1.00 more?

[kuan]

Am I hearing this right? Mr. 2% food cost talking about rising food costs?

Take heart. The other guys are dealing with the same. In theory you will suffer no loss of business. In a sense, this is a great opportunity for the smaller operator to gain market share because they can react faster than the big guys.

Your customers will let you know in no uncertain terms when your prices are too high. They'll just stop buying. In the meantime, try and hold off price increases until absolutely necessary.

[KAYLINDA]

I would raise prices before I would change my portions or make substitutions to my ingredients. Customers don't like it any more than we do, but they understand our costs go up too. From what I've seen in our business, the hard-nosed ones will ***** a few times....then forget it....the others just accept the fact. They are coming to your place for more than your prices....and will continue to come as long as you don't lower your quality. One thing you can do if you want to work harder is to offer "small" portions compared to your regular portions and keep the same price for the smalls.

[yanick]

Well there's a few ways to have a «costwise» trough out the year

Is there only one supplier, check if there's at least one more in your area, sometimes your just one phone call away from saving.

Try to sign a contract for the meat you order more often.
don't cut down on the quality, you made up your name for it!!
raise the price but slowly a fast high raise will scare your customer.

people are willing to pay for quality, their not dumb... it's give and take world!!!!

[Chef Wil]

Some of the approaches that we have used are
1) buy local whenever possible. I purchase meats from an old Mom & Pop, 3 isle store that features an open meat counter. They age the meat for a total of 4 weeks and break the side up into primal cuts. I buy the cuts I want and do my own final butcher. I buy for a lot less than I can get from Sysco and other services too.

On the same note, try some of the new cuts that are out too. I serve an 8 oz. pinwheel dinner cut from the flat iron of the chuck for $13.00. the total cost for the meal is $2.12 and everyone reports that they like it better than NY or shell steaks.

2) Buy local. I get our seasonal vegetables from local organic farmers and gardeners. They also provide all our herbs that I don't grow myself.

3) Get to know your purveyors. I know the names of all my sales people, can usually tell you their wives and kids names and know most of their birthdays and anniversaries. I also have an end of summer party at my home for everyone. I get most of my foods at a lower rate than places serving 3 times the covers that we do. I always get notice of any promotion or special buy that comes along too.

[paulraphael@ear]

Originally Posted by KAYLINDA

I would raise prices before I would change my portions or make substitutions to my ingredients. Customers don't like it any more than we do, but they understand our costs go up too. From what I've seen in our business, the hard-nosed ones will ***** a few times....then forget it....the others just accept the fact. They are coming to your place for more than your prices....and will continue to come as long as you don't lower your quality. One thing you can do if you want to work harder is to offer "small" portions compared to your regular portions and keep the same price for the smalls.

This is a customer's point of view: I completely agree.
When I go to a familiar place for a familiar dish (or drink, or cookie, or whatever) and the portion is suddenly smaller, I feel cheated. When I go and the quality is diminished, I feel completely insulted. But when I go and the price has gone up, I understand. Things get more expensive. It's a bummer, but it's life.

The amount I spend on food (eating out and stocking up at home) is small enough that a few percent increase now and then doesn't affect me that much. But the quality of things going down profoundly affects my enjoyment of life. I would stop eating out entirely if I couldn't get food that's at least of comparable quality to what I make at home, and even in new york, a lot of restaurants are treading that line pretty closely.

[panini]

PEACH,
I hear ya.
Over the last year I've struggled with this problem. Using 2-300 lbs butter weekly I just can't pass on those prices to my customers.
I took a couple of days and just wrote everything about my business I could think of. Pros and cons. I finally focused on fixed costs,rent,utilities etc. I finally decided to shut my main production kitchen and enlarge the retail to accomodate everything. I fought everything non food related. Switched all of my urilities to get best prices. Took a 10yr with a 5opt. on lease with a fixed 10% over ten years, for lower rent. I actually formulated a bid sheet for non food things. Tele went from 600.mth to 350.
I'm just finishing my taxes for 03 due next Wed. "the only part of business I just don't like, and never file to the last possible minute"LOL but I did add 13% to the bottom line of 03 for the last 6 mth of that year.
Food wise, I focused on my lower cost items to draw. I have a local gourmet coffee co roasting and blending me a columbian-costarican. Since Feb 03 we have chaged 25 cents for a cup of coffee. That hit the news papers and it went wild. Increased morning baked goods 30%. It's funny though. At first I put up a banner-free coffee- only a couple of takers. Went to .25 (which I still make a couple of cents) and it flew.
I crave talking about this, please don't hesitate to pm.
NO SUBSTITUTES! You know better then that
Jeff
Oh BTW I copy and print out and post my butter prices for customers to see.Actually my wife does all that with funny copy and stuff. I also fought that stupid fuel surcharge. I call each vendor and gave them a two hour window delivery and the first time they missed I taking it off. I also informed that I would write seperate checks and 1099 them for it at the end of year.