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Hansen’s Restaurant
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Hansen’s Restaurant Kathryn McGarry, chef and co-owner of Hansen’s Hideaway, planned to expand the restaurant’s service from breakfast and lunch to also include dinner. She had to decide if she should buy ready-to-cook, pre-portioned cuts of beef or fabricate portions in-house from larger cuts. She wanted to base the make or buy decision on the lowest total cost of ownership. She needed to analyze her preliminary research to present to her co-owners next Monday. Hansen’s Hideaway Hansen’s Hideaway was a family-owned business located on the Athabasca River in Jasper, Alberta. The town benefited from the fact that each season attracted vacationers. Winter visitors came for downhill skiing, snowboarding, ice fishing and ice skating. Spring featured river rafting, and summer boasted freshwater fishing, biking, hiking and trail running. Fall brought hikers, mountain bikers and leaf-peepers. Wildlife and nature were enjoyed year-round. The Hideaway consisted of a dozen one- and two-bedroom cabins, and a lodge with Hansen’s Restaurant and a general store that sold a limited selection of groceries, sundries and souvenirs. It was started by Helen and Marvin Hansen in 1952. Their daughter, Elizabeth, and her husband, Patrick, had run the business for the last 35 years. Now their son, Dean Hansen, and his wife, Kathryn, were returning to take over management of the operation. Dean had worked summers at Hansen’s until he headed off to the School of Hospitality, Food and Tourism Management at the University of Guelph. Since graduating in 1995, he had worked a variety of positions in hospitality management, including banquet manager at a large hotel, food and beverage manager at a conference centre and, most recently, as a steakhouse manager. Kathryn had spent her career in the hospitality industry, beginning with waiting tables in high school. She had attended culinary school, and worked her way up in the kitchens of various types of restaurants. She had experience in menu development and recipe formulation. Most recently, she had worked in a “nose-to-tail” restaurant to master meat fabrication. She was especially interested in the farm-to-table movement and planned to feature locally grown and raised food. Hansen’s Restaurant Dean and Kathryn had advised his parents on ways to keep the business relevant to the new generation of vacationers. In addition to cabins and motels in the area, many wealthier families had built vacation homes. Many were rented out on a weekly basis bringing in a steady flow of regulars and one-time tourists. Industry studies as well as their own professional experience indicated that vacationers were more likely to eat out multiple meals on vacation in sharp contrast to previous generations who picnicked, grilled or cooked while on vacation. For many years, the restaurant had served only hearty breakfasts and homemade baked goods. Dean and Kathryn had recommended adding lunch service. Kathryn had developed the menu. New suppliers and purchasing relationships, a kitchen remodel, and additional staff were required. Although there had
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been some early glitches, the lunchtime service brought in new customers. It was now well established and generated additional profit for the family business. Currently, Hansen’s purchased from a regional food purveyor who supplied most everything the kitchen needed, including proteins in ready-to-cook portions, fresh produce and canned goods. Breads and bakery items were provided by a local baker. Soups were made fresh with packaged stocks as the base. Menus included basic, hearty fare at a reasonable price. In 2015, Dean and Kathryn moved to Jasper to take over general management, with Kathryn acting as head chef. Dean’s parents planned to remain in the area and were still healthy and interested enough to participate in the growth of the business. They believed that the biggest potential area of increased profitability was the restaurant. They were eager to add dinner service with better margins on dinner selections and higher-end wine and liquor. Determining and Specifying Needs: The Menu As chef, Kathryn’s first task was to develop a menu. The menu drove food purchases. Meat was typically the highest cost item in a kitchen. Therefore meat, especially beef, was one of the greatest potential areas for profit as well as loss. Product quality and consistency were critical. Coordinating menu items across all three meals minimized food waste, increased labour efficiency and maximized profitability. Therefore, Kathryn proposed a flexible dinner menu highlighting steaks, ribs and burgers as “centre of plate” offerings, with chicken, fish and pasta alternatives. Her revamped lunch menu included gourmet burgers with specialty toppings, sandwiches, from-scratch soups, stews and salads. While breakfast had always been hearty, Kathryn wanted to upgrade the meat offerings to include steaks as well as various sausages and applewood smoked bacon. Menu flexibility and daily specials also minimized food waste. This was especially important since Hansen’s had a limited menu. It would also keep things interesting for the kitchen staff, waiters and customers; use product that might otherwise go to waste; improve relations between the front (wait staff) and back (kitchen staff) of the house; and, perhaps most importantly, give waiters a chance to start conversations and establish rapport with customers.
Kathryn’s menus included a lot of reduction sauces, soups and stews which required beef stock. She believed that from-scratch stock was necessary for quality. Preparation and cooking time, skimming, straining, chilling, cleaning up, storing, maintaining food safety, sanitizing and employee training were all cost factors. Her options for making stock mirrored those for meat purchasing: buy ready-made, packaged stock, make stock from purchased bones and trimmings, or make it from bones and trimmings saved during meat fabrication. Although Hansen’s had years of data on breakfast and lunch service, Kathryn was uncertain about forecasting meat requirements for dinner. She knew she would need as much flexibility as possible in terms of menu items, portion sizes and quantities, especially at first. She was unsure if, or how, offering dinner would affect breakfast and lunch service. Would dinner cannibalize the lunch service or attract new customers with different eating and spending habits? Whichever meat specification(s) she chose, she needed a flexible supplier who delivered, had no minimum purchase requirements and was willing to work with her until she had a better handle on demand.
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Beef Quality Cut and grade of beef largely determined quality. The cut described the part of the animal the meat came from. Using the right cut for the right dish and preparing it correctly helped ensure tasty dishes at a sensible cost. Using the wrong cut drove in avoidable costs. The grade of beef described how much marbling, or intramuscular fat, the meat contained. Marbling related to taste. Beef grades depended on the eating quality, or palatability, of the beef, the appearance in the retail case, and the lean yield in the carcass. Eating quality depended on flavour, juiciness and tenderness. The tenderness of the meat was enhanced by aging. Product appearance indicated freshness and quality of beef items. A bright red color was required for Canada’s high-quality beef grades. Yield grades provided an estimate of the amount of muscle tissue or lean yield in the carcass. Yield was influenced by animal breed, age, sex, and on-farm management practices. Kathryn knew that she could buy fresh beef with the intention of using it immediately and still have a backup plan of freezing it. If beef was properly aged, frozen quickly (i.e., cryogenically), and thawed slowly under refrigeration, the taste, juiciness and tenderness were rarely affected. However, since Kathryn would not be able to quick-freeze beef like a manufacturer, she was concerned about how long she could keep meat frozen without a discernible deterioration in taste, juiciness and tenderness. She also knew she would have additional purge (blood and water loss) as the frozen beef thawed, resulting in lower yield.
Food Safety Meat was highly perishable and highly susceptible to pathogens because of its high-water content. Therefore, safe handling and storage were critical. Cooler space had to be kept at or below 4°C during fabrication. A high risk of cross-contamination could occur if fish, chicken, pork and beef were prepared in the same area or with the same knives. Storing meat in the same cooler as dairy and produce, or storing it near the door, was risky because continually opening the door might raise the temperature above 4°C. Therefore, Kathryn knew she could not skimp on cooler space. Hansen’s had a small number of long-time employees who were well-trained and experienced at maintaining food safety. Kathryn was less certain about seasonal workers. There were also risks when making in-house ground beef from trimmings. Boxed beef was not pathogen tested at the packing plant, which meant that pathogens might exist on the exterior surface of the meat with no warning signs. If deadly pathogens were present on the meat’s exterior surface, they would get mixed in during the grinding process. If the ground beef or burgers were not cooked to 160°C (well-done), then there was the possibility for customer illness. The cooling process for beef stock was also a food safety issue. Ideally, hot stock was placed in an ice water bath to get it from hot to cool (below 60°C) as quickly as possible before storing it in a cooler. This would keep it out of the “danger zone” (4ºC–60ºC) where pathogens would multiply most quickly, for as little time as possible. While the staff was familiar with this process, the volume would increase if Kathryn broke down carcasses, sides or quarters of beef. Cold chain management of bones and trimmings was critical until they were ground, cooked or frozen.
In addition to cleaning, sanitizing or reducing microorganisms to very low levels on food contact surfaces and equipment (knives, cutting boards, slicers, grinders) was essential. The amount of sanitizing would
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increase depending on the amount of in-house fabrication. Kathryn wondered about the level of risk of cross-contamination and the need to continuously dispose of blood, sinew and inedible material. Besides food safety, would these tasks affect staff morale?
Because of the longer shelf life of vacuum-packed meat and the lower risk of leakage, Kathryn had decided that, if she fabricated meat in-house, she would need to purchase a vacuum-packer that cost between $1,500 and $2,000. She believed the purchase price would be offset by reduced risk of contamination as well as significant savings from reduced product loss and improvements in meat storage options. This was especially important because of the uncertainty about projected sales at the newly offered dinner service and the likelihood of freezing meat.
Meat Suppliers
Kathryn was considering three types of meat suppliers: general foodservice purveyors, meat purveyors and local cattle farmers. A general foodservice purveyor sold a huge variety of goods, including a large assortment of meat specifications and quality grades. Often regionally or nationally owned and part of a larger corporation, they purchased large quantities and offered the best prices. Typically, they had a minimum order size, and delivery was once or twice a week via a large semi-trailer truck. Delivery surcharges and, at times, a fuel surcharge were included. For Hansen’s, surcharges might be substantial. Charges for returned items were likely.
Meat purveyors were more regionally located, and typically were long-established smaller corporations, often second or third generation and family owned. They still fabricated some meat from whole primals and would custom cut meat. Most could provide dry-aged products. Often they were inspected and had their own brand names and labels. They were focused on customer service and often delivered multiple times per week.
There were a number of local cattle farmers from whom Kathryn could purchase whole carcasses, sides or quarters. Often they specialized in grass-fed and finished, or grass-finished cattle. They typically partnered with small, local processors who would custom cut orders. Ordering windows and delivery schedules, or even availability of delivery, varied. Partnering with a local farmer was a typical feature of farm-to-table and nose-to-tail establishments. Ordering and Receiving Processes Kathryn had worked with the staff at Hansen’s to improve processes and procedures for ordering, receiving and storing. The result had been better management of food and labour costs, improved food quality, consistency, overall customer satisfaction, sanitation and staff morale. Over the last year there had been fewer times when Hansen’s had run out of something because of failing to order, ordering late or discovering that ordered products had not been received. Because of the high degree of uncertainty over dinner demand, Kathryn wanted to build in as much flexibility as possible without driving up food costs, paying delivery premiums or increasing inventory carrying costs. She thought flexibility with beef portion sizes would reduce the risk associated with demand uncertainty without adversely affecting customers.
The Meat Fabrication Process
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Meat was purchased in many forms and processing stages. The whole carcass was cut into halves (sides), which were cut in half into fore- and hindquarters. Quarters were then separated into primal cuts which were cut into subprimals, steak-ready cuts and, finally, ready-to-cook portion cuts. Kathryn could buy beef at any stage and fabricate portions in-house. Or she could buy ready-to-cook portion cuts.
Exhibit 1: Cuts of Beef
At each successive stage, the fabricator added more value by producing more manageable and readily used cuts, and the buyer paid higher prices and had less control. For example, a whole carcass of beef might cost around $4 per pound and a high-quality centre-cut filet mignon completely cut and trimmed might cost $20 per pound. Portion control was an important factor in keeping Hansen’s profitable. Kathryn’s goal was to produce the least expensive portion with the highest quality product within the proper food cost for Hansen’s. She had to decide which make or buy specification(s) met the needs and capabilities of Hansen’s at the lowest total cost of ownership.
The Make Option: In-house Fabrication Carcasses would be fabricated by a supplier or in-house by a skilled chef or kitchen staff. The make option included several possibilities. Kathryn could fabricate whole carcasses, sides of beef, fore- and hindquarters, primal cuts, subprimal cuts or steak-ready cuts. There were costs and benefits at each stage. She needed to identify and assess all the cost elements to determine total cost of ownership for each make option and to compare them to the total cost of the buy option. Key cost drivers were yield percentages and labour. Yields depended on grade and quality, general quantity and yield loss when producing specific cuts as well as the fabrication skills of the chef. Labour costs included training or attracting and keeping a skilled butcher. Since Kathryn had acquired an average level of butchering skill, beef fabrication would be her responsibility, at least at first, if she decided on in-house fabrication. She also would have primary responsibility for developing menus, formulating recipes, creating specials and working as head chef at dinner. If done well, the benefits expected from in-house fabrication included increased consistency of portions, custom product specifications, increased product quality, reduced costs and increased pride in production. Much of the trim from fabrication could be used for stocks, garnishes, soups and sauces.
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Processes had to be in place to store, label and use stored meat in a first-in, first-out (FIFO) inventory management system to avoid spoilage. The cutting techniques and skill level required for meat fabrication varied depending on the stage of processing. For example, breaking down a carcass required the highest skill level and expensive equipment, while fabricating steak-ready cuts required simple, easily learned and perfected techniques. There was a cost associated with training staff, yield loss and potentially dissatisfied customers until the techniques were perfected. Plating instructions with strict portion amounts were a key cost control technique. Whether butchering, pre-portioning or plating, adherence to these instructions affected pricing, ordering and controlling cost. Well-calibrated scales were required. There were risks to both under- or over-sized portions. When guests ordered an 8-ounce steak, they expected to get eight ounces. The cost of unintentionally serving 8.5-ounce portions instead of eight added up. Assume the beef was $18/pound or $1.13/ounce. If an average of 30 steaks were served each day, six days a week, for four weeks, that was 720 steaks, and an extra 360 ounces of beef. This seemingly small measurement error would translate to $405 in lost food costs in four weeks. Kathryn had to train and monitor kitchen staff to adhere to portion sizes. Kathryn’s make options included fabricating from: (a) whole carcasses, (b) sides of beef, (c) fore- and hindquarters, (d) primal cuts, (e) subprimal cuts or (f) steak-ready cuts. Make Option A: Whole Carcass
Kathryn’s first make option was to fabricate portions from a whole carcass. According to the Meat Buyer’s Guide, the premier resource for meat cut specifications across North America, a 1,300-pound, Yield Grade 3 live steer typically yielded about an 800-pound carcass. This yielded 639 pounds of retail cuts and 167 pounds of fat and bone. The retail cuts included 396 pounds (62 per cent) of roasts and steaks, and 243 pounds (38 per cent) of ground beef and stew meat. The balance of the live weight (1,300 lbs. × 38 per cent, or 494 pounds) included about 27 lbs. of variety meats (liver, heart, tongue, tripe, sweetbreads and brains), plus by-products used in foods, cosmetics, clothing, manufactured items and medicines such as insulin and heparin.
While yields varied based on weight, type and feed, they gave Kathryn a starting point for cost assessment. She knew a standard serving size of steak and roast was eight ounces, and beef in stew was four ounces and a pot of stock used 10 pounds of bones.
Pricing
The Canadian Boxed Beef Report of June 19, 2015 gave a carcass cutout price of $3.17 per pound. This was the estimated value of a beef carcass based on prices paid for individual beef items derived from the carcass (subprimal cut prices building to primal cuts building to the carcass cutout). As of June 19, 2015, the average “as purchased” price of an 806 pound Canadian AAA or AA carcass was $2,555.02 (806 lbs. × $3.17). The prices in the Report were based on negotiated prices and volume and on average industry cutting yields. Values were in Canadian dollars per pound. Kathryn knew these prices did not reflect market prices.
When gathering preliminary market information on locally sourced beef, Kathryn discovered that the price per pound for a carcass ranged from $4.00/lb. to $9.40/lb. depending on the harvested weight,
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type of animal and feed (e.g., grain-fed and finished, grain-fed and grass-finished, grass-fed and finished). She needed a detailed, clear specification before she could get an actual quote.
In terms of managing food costs, a more useful price was the edible portion (EP) price. EP = AP price ÷ yield percentage. The purchase price she paid was called the “as purchased” or AP price. Yield was the percentage of the purchased product (e.g., 800 pound carcass) that was edible (e.g., 639 pounds of retail cuts).
Fabricating a carcass required the highest level of butchering skill in order to maximize yield and produce quality portions. Kathryn was not yet an expert, but her yields were up and portions were cleaner and more consistent than when she first started learning to butcher. Her labour cost would decrease as she developed fabrication skills, gained a complete knowledge of the bone structure and natural seams and understood more about yield possibilities of the entire carcass.
The most important thing for Hansen’s was a flexible menu and creativity to use all parts of the carcass with minimal waste. Even then, she wasn’t sure if she would have enough customers to buy all that she could offer. She believed that a central tenet of her marketing and advertising strategy could be “local beef butchered on the premises.”
Processing a whole carcass had the greatest impact on her back-of-the-house (kitchen) remodel. She needed a walk-in cooler large enough to accommodate a meat hook with a beef carcass, a solid cutting table made of non-corrosive material, a wrapping table, band saw, hack saws, grinder, slicer, wrapping materials, vacuum packing equipment, knives and sharpening steel and stone, knife sterilizer, safety aprons and gloves and sanitizing supplies.
Cutting rooms were refrigerated between 2°C and -4°C to prevent meat from spoiling. Cutting generated large amounts of blood and fat. Everything had to be sanitized daily with powerful antibacterial cleaners. She also needed additional refrigeration and freezer space to store the cuts, bones and trimmings. A general rule was one cubic foot of freezer space per 35 to 40 pounds of packaged meat with additional space for large or odd-shaped cuts. Walk-in coolers could cost $10,000 or more. Electricity and labour costs would increase. Her rough estimate for outfitting a butchering station ranged from $20,000 to $25,000. She was unsure of the extent or cost of kitchen remodelling that would be required.
She could vacuum pack and freeze portions to extend shelf life. According to food scientists, frozen meat, if properly tempered under refrigeration, did not lose quality or taste. Kathryn wondered if customers’ perceptions would match food scientists’ studies on meat quality and taste. She wondered if the prices she charged would be affected by the fresh or previously frozen label. If she could use frozen product, she would be able to hedge against higher future prices.
Kathryn was also concerned about her cash flow and inventory levels and carrying costs. The processing stage at which she purchased beef determined her cash outlay. For example, an 800-pound carcass at $4.00/lb. cost $3,000 whereas a whole strip loin was around $7.00/lb.
Make Option B: Sides of Beef
Kathryn also had the option of buying sides of beef. Although more manageable size-wise, she would still need the same butchering set-up (meat hook, saws, etc.). However, a smaller walk-in cooler for
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butchering and less refrigeration and freezer space were required. A side of processed beef typically fit in a 12-cubic-foot freezer. She would also have fewer portions that required freezing and less risk of dissatisfying customers by serving previously frozen meat. There would be fewer bones and fat trimmings for making stock.
A side of beef was sold by the hanging weight, before it was trimmed and cut. The approximate hanging weight was 400 lbs., priced at $4.25/lb. There were approximately 12 roasts, 14 T-bone steaks, 5 sirloin steaks, 5 sirloin tip steaks, 14 rib-eye steaks, 4 filet mignon and 6 round steaks. There were also short ribs, flank steak, stew meat, brisket and approximately 75 lbs. of ground beef. Any cuts could be ground.
Make Option C: Forequarters and Hindquarters
A carcass could be cut into quarters and sold as forequarters and hindquarters. A quarter of beef required far less cooler space for fabricating, and less cooler and freezer space for storage. There would be no need for a meat hook or band saw. There would be fewer bones and trimmings. Buying a quarter of beef would provide menu design flexibility while reducing labour, cleaning and sanitation costs, and space requirements.
Hindquarter of Beef. The hindquarter was about 45 per cent of the carcass side weight and had an edible portion yield of around 48 per cent. It consisted of three primal cuts: the loin (short loin, sirloin, tenderloin), round and flank. A hind quarter was sold by the hanging weight, or, before it was trimmed and cut. The approximate hanging weight was 180 lbs. at $3.88/lb. There were approximately 130 lbs. of edible retail cuts. A typical breakdown included 14 inside round steaks, 5 lbs. stir fry, 3 to 4 outside round roasts, 16 T-Bone steaks, 8 sirloin steaks, 6 tenderloin steaks, 3 sirloin tip roasts and 30 lbs. of stew and burger meat.
Forequarter of Beef. The forequarter of beef was roughly 55 per cent of the carcass side weight and had an edible portion yield of 52 per cent. It contained four primal cuts: the chuck, rib, short plate and brisket. The approximate hanging weight was 220 lbs. at $3.42 /lb. with approximately 170 lbs. of retail cuts. A typical breakdown was 3 to 4 blade roasts, 3 to 4 cross rib roasts, 1 standing rib roast, 8 prime rib steaks, 4 x 2lb. short ribs and 45 lbs. of burger and stew meat.
Make Option D: Primal Cuts
Quarters were divided into primal cuts. These were the chuck, rib, short plate, brisket, loin, round and flank. Although it varied, a rough breakdown of the percentage of the carcass for each was: chuck (30%), rib (11%), plate (7%), brisket (5%), loin (21%), round (22%) and flank (4%).
Primals were large and difficult to ship, so most food purveyors did not carry them. Most restaurants did not order them because of their size and the difficulty in fabricating. They could be special ordered. Kathryn was inclined to disregard this option.
Make Option E: Subprimal Cuts Subprimal cuts were subsections of primals. For example, a whole tenderloin was a subsection of the loin, and fabricated portions included filet mignon, tips and tails and ground beef. Subprimals were also called hotel, restaurant and institution (HRI) cuts because of their popularity with these types of businesses. There were a multitude of trim levels and specifics for these cuts. Yield percentages and
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labour drove purchasing decisions. Some cutting skill would be required. Subprimals also yielded trim (bones and fat) for making stock. Subprimals gave Kathryn less flexibility than quarters, sides or carcasses, but more flexibility than portion cuts. It was critical to determine the edible portion (EP) price, including the value of any trim, to accurately compare with portion cut prices. If the useable trim was 1 lb. and that type of trim sold for $5.99, then this amount had to be included in any calculation of EP price. If Kathryn purchased subprimals, she could focus on developing menus and formulating recipes and specials that optimized the use of all cuts and trimmings. She had the flexibility of ordering specific subprimals rather than having to create uses for everything that came from larger cuts. This gave her a high degree of flexibility in the kitchen. If she fabricated subprimals, she would have less output per subprimal, but more focus on specific cuts. If she fabricated subprimals, she would have less output per subprimal, but more focus on specific cuts.
The most expensive menu item that Kathryn planned to put on Hansen’s menu was filet mignon, which came from the tenderloin. She could buy whole boxed tenderloins and expect a 2 per cent average purge loss, and a 63 per cent average yield of steaks and 37 per cent trim. From the whole tenderloin, she could fabricate centre cut and end steaks; use the tips and tails for steak sandwiches, salads, satays, stir fries or stews; and grind the chain muscle for a custom burger blend. Or she could roast the whole tenderloin, cut it into smaller roasts or serve Chateaubriand for two. She would have quicker inventory turns buying just-in-time. She wondered if the supplier would deliver small quantities as frequently as needed without adding a delivery premium.
Make Option F: Steak-Ready Primal Cuts A steak-ready primal was a cut that had been trimmed and cleaned, vacuum-packed and delivered to the restaurant ready to be cut into steaks. The most common were tenderloin, strip loin, rib eye, top sirloin, outer skirt steak and flank steak. The beef was already properly aged and the meat company dealt with the waste and by-product. With steak-ready primals, Kathryn would have the flexibility of roasting whole or cutting steaks to any portion size needed without the yield loss of inedible fat and sinew or the by-products she would have to grind or use in another recipe. However, she would have to buy these by-products if she needed them for stock or to grind her own custom burger blend. One supplier Kathryn had spoken with discounted her idea of grinding trimmings for custom blended burgers. He told her he could sell her ground meat at a lower cost per pound. She wondered if she would be getting the same quality ground beef as she would have if she determined the type of trimming, fat percentage and proportions herself. Cash flow and inventory would be affected. The Buy Option: Portion Cuts A portion cut was a small, ready-to-cook cut packaged to defined specifications for quality, size and weight. Roasts, steaks, fillets, medallions, cutlets, stew meat and ground meat could all be ordered as
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portion cuts. They could be custom cut, were simple to use and required no skill level. The initial price was higher than all other cuts and portion cuts were inflexible. The menu item needed to stay within the portion size ordered. A subcategory was the reformulated cut which was created when pieces of meat were bonded together using transglutiminase to create a “new” portion. Kathryn was concerned about buying certain portion cuts because she only wanted to buy whole muscle cuts, not reformulated ones. Portion cuts were the most convenient and popular way for foodservice companies to purchase meat. They provided uniform portions and therefore precise food costing. The need for expensive cutting equipment and fabrication labour was eliminated. The risk of cross contamination was reduced. Portion control eliminated variability in cutting, purge loss (water and blood purged into the packaging as the product ages), trimming waste (bones and fat) and by-products and leftovers which either had to be used in another recipe or written off as waste. The buy option allowed Kathryn to purchase the specific cuts on a just-in-time basis. Vacuum sealing increased food safety and shelf life (to 21 days). Because steaks were already aged, she could avoid tying up cash flow to age beef or running the risk of serving less desirable un-aged beef. She could buy by-products at lower market prices, although she was concerned about ensuring the exact quality level for these. Meat purveyors promoted portion cuts as enablers of easier and more precise control over cost, cash flow and inventory.
Exhibit 2:
Sampling of Portion Cut Prices
from an Unknown Beef Specification
Cut
$/lb
Tenderloin steaks
19.36
Ribeye steaks
14.00
Prime rib roast
12.10
Striploin steaks
11.20
T-bone steaks
9.99
Top sirloin steak
8.99
Stew meat or stir-fry meat
8.61
Ground beef
4.00
Soup bones
1.80 Developing proper meat specifications for portion cuts was critical. A meat specification included the product’s Institutional Meat Purchasing Specifications (IMPS): name, meat grade and size. Size specifications included weight range, portion range, thickness, chilled state and trim fat. Weight range was specified for a large roast or other cut of meat. Portion weight referred to the weight of an individual fabricated cut, such as a 12-ounce steak. Thickness of portion-controlled cuts was indicated, such as 1.5″-thick sirloin steaks. Chilled state meant either refrigerated or frozen. Trim fat was typically 1/4″ unless otherwise specified. Kathryn would have to fully understand the meaning of each term to ensure correct ordering of the appropriate product for each recipe.
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If she ordered portion cuts, Kathryn had to understand clearly what her total menu requirements were, be able to translate these needs into proper specifications and communicate well with her meat purveyor. Whoever received orders at Hansen’s had to recognize what to accept and what to reject.
Beef Price Comparisons
Kathryn had not yet gathered prices on all options for exactly the same specification. From her research, she knew that there was a wide range of prices for cuts of meat. Therefore, she was unable to make a calculation with any degree of confidence in their comparability. After the team of co-owners met and discussed the strategic issue of making or buying beef portions, Kathryn could proceed to gather more accurate price and cost data on the feasible alternatives.
Conclusion Kathryn had to decide if it was better to make (fabricate) or buy beef portions. For Monday’s meeting, she wanted to identify all the relevant cost elements even if she could not yet quantify them. She also wanted to present some financial analysis and cost comparisons, even if they were incomplete. She wondered how she should present her research and ideas to her co-owners.