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Tuesday, December 27, 2005

The Enigmatic Prime Rib

When I'm onsite helping clients, I like to order soups with beef broth whenever the menu focus is steak or prime rib. The thicker and beefier versions typically correlate to lower profits. It's very difficult to get a decent menu price for items which utilize leftover prime rib. The soup gets thicker as the utility declines.

One of my customers serves an open-faced sandwich called Blackened Prime Rib. His soup was actually a robust beef stew. The sandwich does not come close to making up for over production of prime rib at night. Making prime rib a weekend only event has increased his profits substantially.

Durgin Park in Boston has a Poor Man's Special at lunch. They serve a lot more prime rib at night than they do this lunch special. The day we were there, the lunch special soldout. That's the sign of a good forecast the previous night.

This weekend, we decided to serve a rib roast for Christmas. I noticed prices had increased over the previous year at my butcher. I decided to look up the current market data. In the 12/23/05 market report, prime exports were quoted at $7.25/pound vs. $5.52 last year. That's a 31.3% increase in price. Certainly, the beef market has had plenty of negative factors to digest. The higher fuel costs and the international bans due to diseases have played a role in price escalation.

Let's put these numbers to work for our beef lovers. If you pay $145 for a 20# piece of prime export with 7 bones, you need to charge more than last year to make a decent profit. If you charged $25 in both years for the house cut with 14 portions per piece, your profit would decline $34.60 [20# x ($7.25-$5.52)].

You need an extra $2.47 a portion just to stay even. Last year, the meat alone was 31.5% of the menu price. To maintain the same center of the plate cost percentage, you'd need to charge $32.88. That's a $7.88 increase per portion. If your in a competitive market, it may be impossible to ask for an additional $7.88 a portion.

For the operators afraid to change menu prices, the center of the plate cost soars to 41.4%.

It's tough to make a decent profit with costs this high. I'd expect a number of operators to try something in the middle. A menu price increase to $29 would put more money in the bank.

Just to check, I went back to late 2003 and found prices similar to this year. Maybe last year was unusual! Should prime rib be a "Market Priced" item on your menu?

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