For steak-loving customers, a bone-in ribeye is one of the most sought-after cuts on a restaurant menu. But it’s also become one of the priciest, as overall inflation and rising beef prices have forced restaurateurs to raise steak prices a couple of times this year.
And it’s not going to get better any time soon.
“Beef production was at a peak in 2022, but in 2024 will be the smallest since 2015,” said commodity forecaster David Maloni, principal in Datum FS, a foodservice supply chain consultancy. And less supply means higher prices. It typically takes cattle 18 to 22 months to reach market weight and several years to rebuild a herd. To make matters worse, Maloni predicts more cattle will be retained for breeding and not make it to market.
“It might be 2026 before we see any beef output expansion. It will be very hard for consumers looking for value to find it,” he added.
Kevin Good, VP, Industry Relations and Analysis at Centennial, Colo.-based CattleFax, a leader in beef industry research, has a similar forecast. “Supplies will be tighter for the next three to four years, with about 4% less domestic beef on the market,” he said. “The wholesale price is up 12% this year and I don’t see that it will go down next year.”
There’s also the issue of feed. “Year to date, half the herd is in dry conditions and one-third are in drought,” said Good. That puts another wrinkle in production. Grass and hay are limited—the mainstay of cattle’s diet before being sent to the feedlot to finish with corn. The prediction is that it may take longer than previously thought to rebuild the herd.
But Americans love their beef. Demand has held steady so far, according to the National Cattlemen’s Beef Association, the trade group for beef producers. While restaurants are taking price, they’re also practicing creative sourcing and menu strategies to meet that demand.
Steering guests to less pricey cuts
The marketing hook at Smokey Bones Bar & Fire Grill is “masters of meat,” and naturally, beef is a big part of the menu.
“You always want to have a ‘showpiece’ cut,’ said Peter Farrand, chief food and beverage innovation officer at the 61-unit casual-dining chain based in Aventura, Fla. “Our 18-ounce ribeye is that cut, but it’s risen significantly in price.”
Smokey Bones charges $36.99 for the ribeye—pretty pricey for casual dining. But Farrand believes the bone-in strip can substitute nicely for the ribeye if the cost of the cut continues to escalate. “During the second half of 2023, we took a position on the bone-in 16-ounce strip—also called a Kansas City Strip—and can menu it for less than $30,” he said.
For steak customers who want to spend a little less, Smokey Bones offers a 10-ounce Ribeye Surf & Turf LTO for $27.99. | Photo courtesy of Smokey Bones
Farrand is also offering a 10-ounce ribeye as an LTO. “When the packer cuts the 18-ounce ribeye, another smaller size ‘drops off,’” he explained. “Pricing is more attractive than on one steak, so I work with my supplier to spot buy some of the byproduct and utilize it in different ways. I also take tips and tails.”
The kitchen takes advantage of spot buys for LTOs, like the current Ribeye Surf & Turf. The 10-ounce steak is grilled and topped with garlic butter, then served with five grilled shrimp and two sides for $27.99. It’s a good value for the guest and yields a higher margin for Smokey Bones.
CattleFax’s Good also sees a benefit to pricing a year out right now, especially for chain restaurants that don’t have $100 steaks on the menu. “The futures market has had a huge correction, going from a $10 premium to a $5 discount,” he said. “The recent break in the futures market is a buying opportunity.”
Smokey Bones' Bonefire Grill mixes up proteins, pairing pork, chicken and sausage with pricier beef to deliver good value. | Photo courtesy of Smokey Bones
Farrand has close relationships with his packers and contracts out front for cuts such as sirloin, tenderloin medallions and that Kansas City Strip, all of which have higher margins. He recently re-engineered the menu to downsize the sirloin steak from 10 ounces to 9 ounces, selling it for $22.99.
The sirloin also goes into the restaurant’s Bonefire Grill, a dish that stretches the beef dollar by combining it with other proteins in an impressive presentation. “We slice the sirloin and fan it out on the plate so it provides more coverage and expands the portion size,” said Farrand. It’s surrounded by baby back pork ribs, smoked wings, smoked sausage and chicken breast, as well as peppers, onions and potatoes. The generous entrée, which is large enough to share with up to four people, goes for $49.99.
“All operational adjustments should be under consideration, including reducing portions or changing a spec for choice beef tenderloin instead of prime, for example.”
“Covid has given us the license to be more flexible about specs,” said Farrand.
That flexibility is an advantage, agrees Maloni. “All operational adjustments should be under consideration, including reducing portions or changing a spec for choice beef tenderloin instead of prime, for example.” he said.
Flexibility is in this restaurant’s DNA
Dallas-based Fogo de Chão doesn’t have spec restraints, a big advantage when it comes to swings in meat supply and price.
“We don’t have a plated menu and aren’t tied to specific cuts or weights,” said CEO Barry McGowan. At the 84-location Brazilian churrasco-style chain, the meats are cooked on skewers, then hand-carved and served at the table for each guest. Different cuts of beef can be rotated in when the price and supply are favorable.
“We can buy overhang in the market, purchasing heavier loins when available. Ribeye can be one size on the skewer one day, and another size another day,” McGowan said. “Or we can pick up a porterhouse when it’s a good price or add strip steak in the winter, once demand goes down from the busy summer grilling season.”
At Fogo de Chao, meat is cooked on skewers and hand-carved at the table; there's no need to spec the same size and cut every time. | Photo courtesy of Fogo de Chão
Fogo de Chão's meaty all-you-can eat experience is currently $52 prix fixe per person, complete with an extensive Market Table filled with salads, appetizers and seasonal specialties. Guests can also make a meal of the Market Table and add on a cut of meat for another $6-$8.
Fogo has raised menu prices only 2.5% from 2019-2022, and while McGowan expects supply to be tight, he has several cost-control strategies in place. He buys on a 90-day rolling market, leveraging strong partnerships with his suppliers and his distributor to get the best price and quality. “They help move beef that they need to move,” he said.
The restaurants also do all their butchering in-house, sourcing sub-primals that trained team members cut down. Waste is minimal as the trim is ground for Fogo’s signature Picanha Burger ($9 at lunch) and put into the Feijoda (Brazilian black bean stew) and empanadas served on the Market Table.
Fogo de Chão sources sub-primals and butchers the beef in house, which not only reduces cost, it reduces waste. | Photo courtesy Fogo de Chão
And since the churassco experience is based on a variety of meats, McGowan is growing other categories. He’s brought on a center-cut pork chop, chicken thighs and lamb culotte steak from New Zealand.
Chicken and pork are in much better supply than beef, according to Good, and both are below last year’s prices.
In 2024, McGowan is looking at adding duck, whole-roasted seafood and perhaps more grass-fed beef from South America. “The variety and flexibility of the menu is a draw for every demographic. “We have had 10 years of positive traffic growth and while I may have to eat some margin [next year], I will make up with it through traffic,” he said.
Playing up the experience
The “joy factor” also plays in Fogo de Chão's favor. The restaurants offer a unique, interactive experience, and McGowan continues to invest in labor and menu innovation to improve that experience.
Orlando-based Charley’s Steak House is a high-end, celebratory kind of place that also counts on the experience as a draw.
The three-location independent has taken two menu price hikes in the past two years, said Vice President and COO Seth Miller; steaks start at $58 and peak at $175 for an American Wagyu ribeye. But the restaurants’ clientele of business travelers, convention attendees and locals marking special occasions see value in the experience. “We pay lots of attention to training, presentation and hospitality,” he said. “Guests continue to see value in a special occasion restaurant.”
Charley's cuts steaks to a uniform 1 1/2-inch thickness regardless of weight and cooks the meat over live fire. | Photo courtesy of Charley's.
Even at those prices, margins can suffer if beef costs get out of hand. Charley’s also butchers meat in-house to mitigate those costs and improve yields.
“We get in primal loins and cut steaks to a certain thickness for consistency and quality,” said Clark Woodsby, Charley’s executive VP and third-generation operator with parent company Talk of the Town. “If you cut to weight, the steak can be too thin and we will not serve a steak less than 1½ inches thick.” Everyone is trained to cut steaks, from the managers to the COO. “The further away you get from the whole animal, the more it will cost you,” Woodsby added.
The restaurants also work with several suppliers, one of whom has one of the largest dry-aging rooms in the U.S., and they buy every week. “We can change our menu in a day. If steak prices go up 20%, we can raise the price of a wine, martini, appetizer or sauce to protect the center of the plate,” said Miller. “The majority of our business is filets, and they are the most stable price of all.”
But beef purchasers from upscale steakhouses on down agree that being nimble is the most important thing in the year ahead. “Compared to Covid, this is not as scary a time,” said Woodsby. “There are cycles and we know our team is capable of coming out on the other side.”