Restaurants Buy Locally, Cook Stylishly

Serving local food is definitely pricier than buying from mass distributors, but is the extra cost worth it?
November 08, 2011

As most chefs know, locally sourced foods have become an established part of culinary life—and an important part of their cost calculations.

According to a 2006 survey by research firm Packaged Facts, 87 percent of fine-dining establishments and three-quarters of family dining and casual restaurants served local items. An American Culinary Federation survey of chefs found locally grown produce top in hot trends for 2010. Some major chains like Chipotle Mexican Grill emphasize use of local ingredients in their marketing.

Why local? Restaurateurs find they can attract customers while supporting their own communities. Using local foodstuffs isn't a cakewalk. Economics and logistics can be challenging. Do things right, however, and the trade-offs are more than worth the extra effort.

Local offers marketing advantages, according to OnSite Consulting principal James Sinclair. "Buying locally allows a relationship to be formed which only helps brand the restaurant and maybe assist with promotions," he said. Restaurants may also find unique ingredients unavailable from larger purveyors.

Fresh To Order is a five-year-old group of six restaurants in the Atlanta area that focuses on what vice president of operations Jesse Gideon calls "fine fast" dining: Customers place their orders at cashier stations and then get wait staff-delivered meals. The company uses local-grown product whenever possible. "It costs a lot less fuel to ship chicken from 50 miles away instead of 500 miles away, so it's good for the environment," Gideon said. "If everyone around me is growing and has money, they might spend more at my restaurants, theoretically."

Customers also want local foods. Dean Ogan owns Rocky Top Hospitality in North Carolina, with six restaurants and two catering locations in Raleigh, Cary, Fayetteville, and Chapel Hill. While planning a seventh restaurant in January, Rocky Top conducted a survey about the new menu, asking whether it was important to source food locally. Close to two-thirds of his perspective customers said yes.

"Customers appreciate the fact that we offer local specials, and they especially love our Margherita pizza with local heirloom tomatoes," said Clori Rose-Geiger, co-owner with her husband of a single pizzeria in Cumming, Georgia. They would love to do more but "just can't handle the diversity in preparation."

Local may be smart marketing restaurateurs can feel good about, but there are practical issues. Gideon says that local ingredients "easily" cost 15 percent to 20 percent more than what he could get from national distributors. Even though those products come a much longer distance, big companies get good shipping rates and remain cheaper. There can be incremental economic advantages to local ingredients, like longer shelf life for some foods that haven't spent days or weeks in a freight car or truck, but alone they don't eradicate the cost differentials.

Handled wrong, local food prices can be crippling. Ogan said he knows a local restaurateur "fighting a 45 percent [of sales price] food cost, which is killing him." The man charged customers 30 percent to 40 percent less than he should have and, in the process, trained them to expect lower prices.

On the other hand, raising prices can make a menu too costly for consumers. Instead, you need the right sales mix, Gideon said. Some items that feature local produce can still produce better margins and help lower average food costs.

For Ogan's Tribeca Tavern "burger joint," aged meat is $2.75 a pound, versus the $1.20 mass distributors could offer. Fresh local buns are 52 or 53 cents each rather than "something out of a freezer box for 20 cents apiece." His menu is capped at $15. Depending on the cheese a customer chooses, the burger's food costs are 33.5 percent of the burger's price, or about $3.35 on the restaurant's typical $10 burger.

The right meal mix keeps the business profitable. Ogan's most popular non-burger item is a fried green tomato BLT with a food cost percentage of menu price in the high 20s. Fish tacos run in the low 20s. About 32 percent of his sales are wine, liquor and mostly local microbrewed beers that run 25 perecent to 26 percent food costs. His typical average costs are around 30 percent. Balancing that piece of the pie with high volume, "we can turn in respectable numbers." Ogan did note that achieving equilibrium is a lot easier by designing local into an operation from the start.

Availability can also be a problem. A restaurant like An Nhau in Brooklyn can successfully use local farmers' markets to obtain ingredients, according to owner Thomas Bui, but what's available will vary significantly by season. In the winter, the restaurant can still get basil, chives, onions and fresh jalapenos locally but looks to a distributor for other ingredients.

Even when a product like local beef or pork isn't seasonal, small farmers may simply not deliver what they've promised. "Half an hour ago...one of my local farmers said they didn't have my pork chops for the weekend," Ogan says. "God love them, they're great people, but if I put it on the menu, I need to have the chop." Working with local purveyors often means educating them on your business realities. Also, expect to juggle the logistics of many small deliveries rather one large one that can be easier to plan around.

Clearly, a lot of restaurants find the trouble worth it. "You also have the local pride of going to the farms and see if they do good stuff with their animals and produce or not," Gideon said. "We'll absorb a higher food cost, so we can feel better when we're sitting around talking about the food we produce. Your hope is your guests will see that."

Erik Sherman is a writer—primarily covering business and technology—who has written for the New York Times Magazine, Newsweek and Advertising Age, among others.