Setting strategy: Restaurants cope with big jump in wholesale food prices

For Leonard Mirabile, pleasing customers at his family-owned Italian restaurants — Jasper’s and Marco Polo Trattoria — has been the top priority. Mirabile takes pride in presenting a full plate of pasta or a hot sandwich at an affordable price.

That task is tougher these days as Mirabile and other local restaurateurs face the highest wholesale food price inflation in 27 years.

In June, Mirabile raised prices 3 percent across the board. Menus with new pricing were printed over a weekend and presented to customers the next week without a formal announcement. He changed the printed menu boards at Marco Polo’s to chalkboards, making it easier to change prices again, if need be.

“We’ve been able to absorb cost increases longer than others because we own our building,” Mirabile said. “We’re watching the payroll, the lights, the air conditioning — things we watched before … (but) we’re leaving everything else the way it is, including portion size. The worst thing a restaurant can do is cut its portions.”

According to the National Restaurant Association, food and beverage costs are the most significant line items for restaurants, accounting for 33 cents of every dollar in sales. With small margins between 4 and 6 percent, any increase in food costs can dramatically affect a restaurant’s bottom line. Now add increased fuel costs and you’ve got a real smorgasbord of challenges.

Jason Pryor, interim president of the Greater Kansas City Restaurant Association, says members are frustrated with rising fuel and food costs. The organization has had several roundtable discussions about the issues, yet no one has come up with “the” solution to rising costs.

Local restaurant and food service consultant Stephen Cole noted other factors, too.

“We have a huge number of new dining seats in this market and, as a result, it’s had a softening on the market,” Cole said.

Kansas City-based Houlihan’s Restaurants, which has 92 restaurants across the country, including five in the Kansas City area, has long-term beef contracts, which held down costs, said Murray C. Meikenhous, vice president of purchasing.

To avoid passing on price increases, Houlihan’s is offering special chef’s menus that take advantage of seasonally available food products and change about every three months, said Jen Gulvik, Houlihan’s marketing vice president. Wine pairings are made with each item on the menu.

“We’ve seen a pretty dramatic increase in our wine sales — up 13 percent,” Gulvik said.

Houlihan’s also is test-marketing brunch at several of its local restaurants this month.

Richard Ng’s six Bo Lings Chinese restaurants — grappling in particular with rising costs for cooking oil and rice — increased menu prices in December, but Ng is trying to hold the line now.

“It’s hard to tell a customer we need to charge more money,” Ng said.

Instead, Ng is watching waste and lowering cooking oil temperatures so the oil lasts longer.

“We haven’t come up with a plan yet for rice because everyone expects rice at a Chinese restaurant, and there’s so much waste,” he said.

Bo Lings has added more specials and 20 percent discounts for regular customers.

“We are looking at frequent dining cards … and how to use the Web to drive more traffic,” Ng said.

Smaller restaurateurs may face greater challenges because they don’t have the purchasing power to negotiate much on pricing.