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Why does a steak cost so much more at a restaurant than at the grocery store? —Doug S., Kirkwood
There are people who avoid higher-end restaurants for precisely this reason: They just can't rationalize the difference in cost. But believe it or not, from a food cost standpoint, a steak can be a relative bargain.
The reason that a steakhouse (or any restaurant, for that matter) charges what might appear to be usurious prices for steaks is rooted in the cost structure. A restaurant makes a profit when its costs (food, labor, overhead) are in line with projections, but the profit margin often ends up being a few percentage points or less, hence the industry's high failure rate.
Steak is a high-cost/low-profit item and is—often and reluctantly—a loss leader: Restaurants simply can't charge a fair price for them (veal chops are even worse). In addition, steakhouse restaurants seek out the highest-grade meats and are willing to pay for the privilege, compounding the issue and sending food cost to more than 40 percent when 25 to 33 percent is the norm. Restaurants like the newly opened The Capital Grille dry-age their steaks in house, which reduces the yield and increases the relative cost even more.
In a normal restaurant, high-cost steaks are balanced by lower-cost menu items, such as salads, pizza, and pasta. But let's face it: Diners who go to steakhouses do so for steak, not entrée salads, which means that despite efforts to increase sales by upselling, there are fewer offsetting costs, so the price per steak must be increased.
If you factor in the labor component (and today's increased pressure to pay cooks a higher living wage) and add rent and buildout costs, then it makes sense that the nicer the surroundings, the more expensive the menu prices will be. And I'm fine with that. High-end restaurants that offer a memorable dining experience are worth the splurge, since a high perceived value can be found at any price level.
Follow George on Twitter @stlmag_dining or send him an email at gmahe@stlmag.com. For more from St. Louis Magazine, subscribe or follow us on Facebook and Twitter.
