1. Outlook for 2013 - Keeping the Soaring Prices Grounded in Your Budget

For mid-size and emerging chain owners two things are obvious: that the landscape has changed dramatically over the last ten years and that every penny counts. The down economy, market saturation, large chains opening specialty concepts - each development has played its part in transforming the industry. And while most of the above are natural and foreseeable, no one could have predicted the lasting impact of this summer's epic drought. And it's putting restaurants at risk.

The drought has already spiked pricing on foods like pork, chicken, and lettuce that are directly and immediately affected by the drought; but the price hike tidal wave is coming three to four months down the road. Prices then will drive upward on anything and everything affected by corn - and that's a huge number of items. A lot of restaurant and chain operators will be caught in a price vise in the middle of winter, on everything from ketchup to fried foods; anything that contains corn syrup, corn oil, or even is delivered using fuel containing ethanol.

Just look at these popular food items that have already been dramatically affected by the drought:

Chicken Wings

Wing prices have remained flat instead of the normal upward autumn trend, so prices are about 52% higher than 2011. I also suspect normal increases to be tempered into Super Bowl season because of increased chicken production.

Bacon

Bacon is up about 7% over last year. HAM is about the same, if not just a bit LOWER (about 3.5%).

Apples

Prices will be up 20-30% this holiday season instead of being 10% lower if there had not been a drought.

Turkey

Turkey will see about a 3.1% jump in prices.

Whole Chickens

They have been 6% higher since April.

Chicken Breasts

They have been 5% higher since April.

Eggs

Prices of eggs will probably be much higher in 2013 because of the limited supply of chickens.

Cooking Oil

5% higher now, going into next year to a 10% increase over 2011.

Milk, Butter & Other Dairy Products

Butter prices usually drop 20% in the fall, but that has not happened. Instead, dairy prices will be 5-10% higher than 2011. Recently, butter has come down a little. Dairy may have also peaked as consumers have seen slight decreases in heavy cream from last year.

However, there is some good news out of all of this.

With the current wild fluctuations in commodity prices, operators are now focused on more creative ways to serve high quality products at a reduced cost so they can avoid menu price increases. Operators are now testing byproducts of quality cuts of meat as well as alternative cuts of meat. They are also working with pork as a solid option. Thigh meat is being used in larger quantity and the use of fresh vegetables in dishes is becoming more prevalent. Some chains have planned for variations in produce availability by avoiding specific identification of particular produce on their menus.

It is expected that menus will change more frequently and that there will be LOTS more in the marketplace as well as more daily specials. Avoiding lock-down in purchasing has become a key element for agility and survival. When a chain acting alone signs a purchasing contract, it's easy to get locked into the current deals and rates and become trapped when there's no protection against fluctuating prices.

The solution: look to a Group Purchasing Organization that deals specifically with mid-size and emerging chains.

Here are just a few questions to ask yourself to see if Group Purchasing could be the answer for you:

1. Are you purchasing all of your products with the buying leverage of 15,000 restaurants?

2. Do you have direct contracts with the produce growers?

3. Are you growing your brand to other markets and need help with distribution and purchasing volume?

4. Are you concerned with fluctuating prices for commodities and would like to have your arms more around it?

5. Do you have a Master Distribution Agreement expiring and need expertise to put together a new one?

So, while the soaring costs of your menu staples may be cause for alarm, you can still maintain your budget through a Group Purchasing Organization focused on your needs. And with that headache gone, you can get back to what matters most: customer service.