NEXT TIME you cringe over a $6.95 shrimp cocktail, but don't hestitate to pay the same price for a first course of fettucine, consider this: The shrimp probably cost the restaurant more than $4, the noodles just pennies. From your standpoint, diners, the shrimp are a better deal.
Menu prices, the diner's unrelenting bottom line, often don't seem to make sense. Raspberries for $8? A beer for $3? Veal for $5.95 at the neighborhood pasta place and $15.95 on K St.? And how did the main course get to be $18.95 anyway?
Menu prices often seem arbitrary, illogical or simply too high.
Even for restaurateurs, menu pricing is far from a defined science. While there are general rules and formulas that some restaurateurs follow, probably the most widely used pricing method is intuition, a gut reaction.
It's a strategy, a judgment game: The Eastern Shore Seafood plate on the new lunch menu at the American Harvest Restaurant is priced at $14.50, according to David Romm, the Vista International Hotel food and beverage director, because (1) he won't sell too many cold platters in cold weather and the kitchen will have to buy shellfish in small, expensive quantities, and (2) "the guy who wants to eat cold scallops and shrimp in December is going to want to eat it whether it's $7 or $14."
It's what the market will bear: "I'm not going to be the idiot who charges 70 cents for a scotch," says restaurateur Jason Wolin, owner of 209 1/2, Foggy Bottom Cafe and Mrs. Simpson's.
It's competition: Restaurateurs are frequent diners, checking to see if the steak next door is a better or lesser value. Before the Vista opened, a "food researcher" was hired to gather costs of such items as eggs, toast and coffee at every hotel in town.
In addition, there are a host of operating expenses that restaurateurs must take into consideration. The $50,000 chef's salary, the $20,000 a year for fresh flowers, the $45 a week for dishwashing detergent, the $4,000 unexpected roof repair, are all eating into that $3 profit from the shrimp cocktail.
Obviously, those expenses are defined by the nature of the operation. When Robert Greault, now chef and owner of the mid-priced La Colline, was running Le Bagatelle, a K Street expense-account eatery, he priced his bouillabaisse at $15.95. That same bouillabaisse -- saffron and all -- now sells at La Colline for $12.95.
But, says Greault, the plates at La Colline only cost $4 or $5 to replace instead of $20 for Le Bagatelle's gold-rimmed ones, his rent on Capitol Hill is a third of what it was on K St., and he sells more of the dish at La Colline.
It's not that every broken pizza oven or thrown-out kiwi is factored into the cost of the entre'e. But what many restaurateurs try to gauge (with varying degrees of sophistication and expertise) is their food cost: that is, what the ingredients for a specific dish cost them. And for most dishes, the formula goes, the food costs should be about 33 percent. So if the ingredients of the soup cost $1, charge the diner $3.
Take the lasagna at Adams Morgan Spaghetti Garden. Chef/owner Iraj Askarinam makes a batch for 40 servings that comes to $67.40 for ingredients. His cost per portion is $1.69; he sells it for $4.95.
After that, labor costs should account for under 30 percent, so that the total food-labor package is less than 65 percent of the price of the dish, says Dale Nelson, who teaches menus and facilities planning at the Culinary Institute of America.
After all the "shoulds," the system goes haywire. The formulas don't fit. Fast food restaurants, for example, may have food costs as low as 22 percent. The Palm, on the other hand, has a food cost of 52 or 53 percent for the meat alone. Fancy French restaurants have high food costs, high labor costs, but can command high prices per sale.
What careful restaurants look for, then, is a sales mix. Take a loss on an item like fresh roasted turkey (which is an expensive item for a restaurant to prepare, but which is also a dish that can't command high prices, says Mark Caraluzzi, a food consultant who helps restaurants determine prices), and balance it out with a chicken dish in a pastry shell, which is a relatively inexpensive dish to prepare, but which has a high-price perception.
High markups in alcohol are often used to cover a multitude of sins, to offset loss leaders, especially because there is little labor involved in serving alcohol.
"To serve one plate of food, I need a salad person, a chef . . .," says Paul Loukas, president of the Washington D.C. Restaurant and Beverage Association. "One bartender can serve 100 people."
Plus, says Rumors' general manager/co-owner Steve Micheletti, "gin just sits there, it doesn't go bad in two days."
Or, says Caraluzzi, high wine prices may help to subsidize an expensive kitchen or help pay the rent at some downtown restaurants where the markups for inexpensive bottles can be six times the cost. It can also make up for bad management, said Caraluzzi.
Restaurants make big money on house wines and draft beer. Caraluzzi, who previously was chef/co-owner of the American Cafe', said he did a survey of house wine prices in Georgetown before pricing the cafe''s wine. According to his calculations, glasses of wine that were selling between $2.50 and $3 a glass were costing the restaurants between 5 and 20 cents a glass.
Loukas, who owns Le Jardin, Pall Mall and Winston's, said the draft beer he sells at the bars for $1.75 costs him about 19 cents. For a domestic bottled beer that sells for $2, Loukas pays 38 cents.
Caraluzzi says restaurants may take advantage of seasonality. You know you're being overcharged, said Caraluzzi, when soft-shell crabs are $22.95 and $10.95 in otherwise comparable restaurants. The wholesale cost is probably nearly the same to both; the restaurant charging more may be trying to grab the diner who will eat his seasonal quota of soft-shells at any price.
Pasta dishes and soups are traditional money makers, and eggs benedict are a classic example that several local restaurateurs admit to making a bundle. But the restaurant that charges $10 for first-of-the season raspberries probably isn't making any money off them; it probably paid almost as much as that, said Caraluzzi.
Wolin corroborates, saying that a misconception that diners have is that a restaurant pays much less money for items than supermarket shoppers do, pointing to the fact that he buys veal for $10 a pound at Evans & Van Cleff.
To diners, though, it often seems that expensive restaurants should easily make a lot of money. They can, and some do, but running a restaurant is a complicated, expensive endeavor and it's easy to fail. The butter arriving from the wholesaler is a quarter pound short, the chef errs on the side of generosity with the whipped cream, the brother-in-law of the owner "borrows" four pounds of meat for a family barbecue, and the bartender is skimming some of the take. Food costs and wastage aren't properly being monitored, and the volume isn't high enough to support the errors. By the same token, a popular restaurant can go out of business, because it may not be paying careful attention to its expenses.
Caraluzzi said a deli he did consulting for in Florida never realized that it was grossly losing money on sliced roast beef. The deli was selling it for $8.95 a pound, but had never "priced it out." Wholesale, the meat cost the restaurant $5 a pound, but it wasn't figuring shrinkage after roasting and trimming. In reality, the roast beef cost the deli $14 a pound.
As many versions of clam chowder as there are, there are that many approaches to menu pricing, depending on the type of operation and the person in command:
*At Wolin's prix-fixe-menu restaurant, 209 1/2, he works backwards. The meal must total $25, so he asks his chef to experiment with dishes that fit into his 35 percent food cost target. He factors out his food costs for every dish, not missing the one cent for the three teaspoons of flour or the three cents for the tablespoon of mustard. His food costs for one meal: Che vre Salad with Bacon ($1.07), Veal Chop Caramel ($5.18), Strawberries in California Port Cream (82 cents). Total cost to Wolin: $7.07. Multiplied by 3.5 equals $24.75.
*At the Adams-Morgan Spaghetti Garden, chef/co-owner Askarinam says he doesn't really have a set system for pricing; the lasagna may have a 35 percent food cost, but he sells dishes such as veal milanaise, which cost him $4, for $5.95.
But he knows his operating expenses: About $200 a month for paper napkins, $25 a day for free bread on the tables (not including butter), $5 to $6 a night for dishwashing detergent, $1,150 a month for his lease. He figures he can cover expenses with high volume and markups on wine and beer. And since he is the co-owner and chef, he doesn't have high kitchen labor costs.
*At the Vista International Hotel, where 225 people comprise the food and beverage department for three restaurants, room service and banquet facilities, a science is made out of restaurant management. This is where MBA's converge with the culinary world to produce "Operating Manual: Food and Beverage Control," and where a "food and beverage analyst" who is part of the "cost control team" is employed to price out menu ingredients for every dish, and to make sure that the quantities on the sheet match what's being used in the kitchen.
(Even so, a pricing sheet for Avocado Half with Crabmeat, Mushrooms, Smithfield Ham and Hollandaise Sauce priced the avocado half at 65 cents. When questioned about the unlikelihood of a whole avocado costing $1.30, food and beverage director Romm rechecked to find that the hotel is really paying 8 cents for each half.)
The order in which certain-priced items appear on the menu is an important stategy, says Romm. The first and last items on a menu are generally the most popular, he says, an observation corroborated in the book "Menu Pricing and Strategy," which says that since most people eye a menu quickly and want to make decisions quickly, those items at the beginning and end are the ones they will remember.
Romm says that he might put a lower-priced item at the beginning so as not to "frighten" diners away. Or, conversely, he might put the most expensive item first, i.e. a "sexy" lobster dish, because he knows it will sell, and then follow it with the least expensive menu item so diners don't think they have to spend that much.
Romm says hotel restaurants can run at higher profit percentages because expenses such as rent, taxes, light and heating are not factored into the cost of the meal; they are part of the hotel's general budget. But Romm said hotel restaurants run at a disadvantage because they don't have street entrances to entice walk-in business, and they must stay open, even at off-peak dining hours, in order to accommodate hotel guests. And in Washington, said Romm, "hotel restaurants have a bad name."
*Not unlike other watering holes in the M Street and Georgetown corridor, at Rumors on M Street there are different types of expenses that general manager Micheletti has to pay -- $100 a week for the "plant lady" to maintain the greenery, entertainment expenses, two extra busboys on crowded nights to pick up empty glasses so that breakage is minimized, two bouncers checking ID's, two people to make sure guests go in the right entrance.
Rumors on M St. does 35 percent of its sales in food, 65 percent in alcohol. At the Rumors on H St., the food/beverage mix is different -- 50 percent food sales.
General manager Micheletti says that the H Street establishment is perceived as more of a restaurant, so he can tack on an additional $1 for the identical daily specials served at M St. and still sell out of them.
But at M Street, the clientele doesn't go for specials such as coho salmon. That perception also effects the pricing of items such as grilled swordfish, which he can sell for $7.95 or $8.95, but which can't command prices like $10.95 because diners see the place as an eatery for burgers. Diners, says Micheletti, figure, "they don't know how to cook it swordfish ."
It all shows, says Micheletti, that try as you might to be scientific about menu pricing, there are lots of intangibles.