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Brisket prices have been going up for quite a while now, not least since the pandemic started. This event is likely going to be a blip. That said, typically one of the ways to hedge against volatile prices is through forward contracts. If you have a float, have you thought about pre-paying for brisket to get a discount? I only mention this because I remember reading a story told by Nick Kokonas, who co-owns Alinea, a famous 3 Michelin starred restaurant in Chicago. When he discovered he had a float, he decided to pre-pay his vendors instead of taking net 120 and in the process got a 50% discount on beef. (because pre-paying improved his vendor's cashflow and reduced their risk, they passed it back to him in the form of savings) From: https://commoncog.com/blog/cash-flow-games/ "Food costs money. But the way that everyone (in the F&B industry) looks at food costs, and paying for food is very weird. When COVID started, every famous chef that went on TV said, “This is the kind of business where this week’s revenues pay for bills from a month ago.” So when we started to bring in money from deposits and prepaid reservations, I suddenly looked and we had a bank account that had a couple million dollars in it — of forward money "I started calling up some of our big vendors for the big, expensive items — like proteins: meat, fish; luxury items: like caviar, foie gras, wine and liquor, and I said, “I don’t want net-120 anymore, I want to prepay you for the next three months.” And they had never had that kind of a phone call from a restaurant before. So how much should they discount it? So let’s say we’re going to buy steaks. We’re going to pay $34 a pound wholesale for dry aged rib-eye, we get net-120 (normally). So I call the guy and say “I’m going to use 400 pounds of your beef a week for the next 4 months, for our menu, which is about about $300,000 of beef, what (would) we get, if we prepay you?” And he was like “what do you mean?” I’m like “I want to write you a check tomorrow for all of it, for four months.” And he was like, “Well, no one has ever said that.” So he called me the next day, he said “$18 a pound” … so … half. Half price. I went, “I’ll pay you $20 if you tell me why.” And he said, “Well, it’s very simple. I have to slaughter the cows, then I put the beef to dry. For the first 35 days I can sell it. After 35 days there’s only a handful of places that would buy it, after 60 days, I sell it $1 a pound for dog food.” So his waste on the slaughter, and these animals’s lives, and the ethics of all of that, are because of net-120! Seems like someone should have figured this out! As soon as he said that, everything clicked, and I went “We need to call every one of our vendors, every time, and say that we will prepay them.” |
That is an excellent idea (having more than just a transactional relationship with you food vendor is a good idea in general) but my volume is way too low to have that type of leverage. The best I can do (and fortunately what I did when I saw the prices increasing) is pre-buy and freeze as much as I can to lock in the then-current pricing. Right now food supplies aren't even able to fill many wholesale orders because they don't have enough supply so I'm not sure pre-paying would help if they can't even get the product. For example one major vendor has changed their order cutoff time from 11PM to 5PM so they can spend that extra time allocating their available stock across all the orders because they don't have enough for everyone.
BBQ is my side hustle so I'll be ok either way - but if I was paying my mortgage via food service I would be alot more concerned.