I just bought a 12 oz. steak for $15 at the grocery store. Is there any rule of thumb for what I would expect to pay for that steak in a restaurant?
Granted, the valued added of someone who knows how to season and the equipment to sear a steak are worth a good markup, I’m just not sure by how much. Would that steak probably run me $20? $35? $50? Any of those prices for the same piece of meat?
Percentage of Cost Rules of Thumb. Food cost. Food cost as a percentage of food sales (costs/sales) is generally in the 28 percent to 32 percent range in many full-service and limited-service restaurants.
According to what I have learned, food costs in a restaurant should be around 33%. So a $15 steak would be priced at $45.
As mentioned, the traditional rule of thumb is that menu price is three times the price of ingredients. Like any such rule even if accurate there must be many exceptions. The Economist magazine had a short article this week comparing sandwich prices in the UK and US. Prices at Pret a Manger outlets in Boston are around 74% higher than same chain in London on average for various types of sandwich, although those two cities come out close to one another in overall cost of living rankings at the current USD/GBP exchange rate. It mentioned the rule but noted it was just a starting point and also subject to differing customer expectations and competition in a particular type of dining places in different locations. It noted that lobster roll prices are still higher at that chain in Boston than London though the lobster meat comes from Maine in either case, so presumably the menu price/ingredient ratio is lower in London at that type of place at least.
From the supermarket pricing stated you (most likely) overpaid as it is a odd amount for that size for ‘choice’ cuts (‘choice’ is the typical supermarket steaks). Either that or you were dealing with prime meats (few supermarkets have that). Thus I suspect your restaurant price would likely be lower than the 3x markup due to you paying too much.
[Moderating]
I think this thread might do better in Cafe Society, with all the other food questions.
Do restaurants pay supermarket prices for their steaks?
If not, you shouldn’t use the supermarket retail price to estimate what the restaurant will charge.
They’re more likely to pay what the supermarket pays their suppliers before markup.*
So a $15 steak at a supermarket cost the market less than $15.
*Steaks are complicated, because supermarkets generally sell choice, while restaurants sell better grades.
Not to mention the added value of having your entire dinner (not just the meat) cooked better than you can cook; the added value of someone serving you and cleaning up after you; the added value of having a variety of wines (that have been pre-selected as not being total dreck) available right then and there; the added value of the “dining experience,” etc. etc.
It’s like asking how much the Mona Lisa is worth based on how much DaVinci paid for the paint.
Well, yes, which is why I mentioned added value. I mean, I literally wrote it in the OP.
Very interesting about the rule of thumb on ingredient costs, and point taken about retail vs wholesale costs of food. Thank you all.
The only grade better than choice is prime, and there just isn’t that much prime around. Most restaurants, except high end jacket-and-tie places, serve choice.
As to the difference between retail and wholesale cost of foods: I know a small rural cafe owner who gets part of the food for the cafe from a grocery chain rather than off the truck (from the food service supplier) because it’s cheaper. So while restaurants are paying a little less for food than the general public, it is not a huge percent.
It still seems strange to me to think of a restaurant meal as ingredients + added value because the “added value” is most of what you are paying for. Think of all the expenses the restaurant has before they even open for business: renting the property, designing the interior, buying equipment and constructing the kitchen, furniture & decoration, developing the menu, developing the supply chain, advertising, hiring, etc. Then the day-to-day expenses regardless of how many people eat there that day - rent, electricity, wages for all workers (cooks don’t get tips), buying all the ingredients which may or may not get used, taxes, etc. These are some of the things you are paying for when you eat at a restaurant, not just an ingredient + a few minutes of a cook’s time.
Most of the prime goes to restaurants (I seem to recall a figure of like 95%). It will be higher end steakhouses, but they need not be jacket-and-tie places; I’m not even sure there’s many jacket-and-tie places around anymore. Business casual and sometimes even looser than that (Ruth’s Chris, Smith and Wollensky, Morton’s all have prime and, while on the fine dining end of things, don’t have that strict of a dress code.)
But if you do want to find prime, Costco is great for that. And for certain cuts of meat, it’s not crazy expensive. I would buy packer cut prime briskets for barbecues at something like $3/lb within the last 5 years. Your steak cuts are going to be more, but not prohibitively expensive (IMHO). Nothing over $20/lb there, and I think closer to $15/lb last I remember for something like prime strip.
And then Whole Foods and those types of upmarket supermarkets will often carry prime, as well. Though if given a choice between dry-aged choice and prime, I’ll go for the dry-aged choice most every time. (And if you like filet mignon, there’s just no point, IMHO, in getting a prime filet vs a choice. Just get the choice. There’s no difference I can tell.)
As for the rule of thumb, 3x-4x cost is what I was taught when I briefly worked in a restaurant, but it slides around a bit. Cheaper stuff gets closer to 4x, more expensive stuff is towards 3x, and maybe even slightly less.
Jesus Christ, I HOPE your restaurants aren’t buying their steak at a supermarket.
I never order steak at a restaurant, unless I’m a a place like Peter Luger’s. You’re better off buying the best cut of rib steak you can find, at a good butcher, and grilling or broiling it yourself.
Simply, with salt and pepper. Or, if you want fancy, rub in a mash of olive oil, garlic, black pepper and a little anchovy. Let rest for an hour before cooking. Bliss.
I want to shop at your Costco.
As for overpaying, don’t read too much into that. Much depends on location. “Certified Black Angus” and/or “Organic Grass Fed” rib eyes or filets can easily cost $15 for 12 oz. for choice in NYC. Location is important. Every time I hear some chef show talk about cheap cuts of beef like flank or skirt, I want to throw something at the TV hoping it will go through and strike the chef. Those cuts are a minimum of $10/lb here when discounted. Even chuck roasts run $7 to $8/lb when not on sale.
I’ll have to go soon to double check my memory, but I looked online, and here’s a prime NY Strip from 2018 at $13.99/lb from Costco, so I don’t think my memory is too far off or outdated (though I have not bought prime beef this year yet, so it is possible prices have spiked.) Here’s a prime brisket at $3.29/lb from this year. It may very well be a good bit cheaper here in Chicago for some reason. I did find a post on another message board that prime ribeyes were at $17.99/lb in a suburban Costco here last month, and last year in June they had prime tomahawks at $12.49/lb.
So, yeah, I guess not too bad around here. 
But when it comes to regular choice cuts at regular grocery stores, chuck fluctuates, but it’s typically about $4/lb, but might be cheaper on sale. I have choice shank in the freezer from July of this year because it was down to $1.99/lb at my local grocery, and it’s one of my favorite stewing cuts. Flank or skirt isn’t that cheap, though, but it’s still cheaper than where you’re at. We’re looking at $7-$8/lb for those cuts (which I think is crazy high for those cuts.)
I’ve seen a few smaller restaurant, Cafe or even deli owners buying at the supermarkets. I think for them it makes sense, at larger restaurant however availability and needing mass quantities makes this a tricky option to manage and the truck is more dependable.
‘Small’ and ‘rural’ are the two operative words here. Delivery is one of the biggest costs in buying food wholesale. If you’re ordering small quantities for remote locations, the wholesaler is going to whack some serious delivery charges onto your order. The same wouldn’t be remotely true in a city of any decent size.
Retail is usually be anywhere from 50-100% more than the price the retailer paid the producer or wholesaler.
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Markup is going to vary wildly depending on what exactly is being sold (and where).
Supermarket margins are as low as 1-2%; the profit is entirely in the volume. The store only makes a few pennies on any given item, but they count on 1000 customers buying 200 items every single day, and 1000 more buying 10-50 items every single day.
ETA: Yes I am aware that markup and profit margin are not the same thing.
