The popularity of organic foods and the restaurants that serve them has skyrocketed in recent years. A once niche market is now a burgeoning billion-dollar industry. Though demand is growing, running an organic restaurant is not easy. Organic foods are intrinsically more expensive than processed foods, driving up a restaurateur's costs. Organic foods are also often in short supply. Still it is possible to succeed in the marketplace if several rules are taken under consideration. This guide will explain how to survive and ultimately succeed in the organic restaurant business.
1. Prepare for growth and higher start-up costs.
Though the prolonged economic downturn continues to dampen consumer confidence in all industries, the organic foods trade currently remains relatively optimistic. According to the Organic Trade Organization (OTA), organic food sales increased by 5.1 percent in 2009 as compared to conventional food sales, which only saw a 1.6 percent increase. With that said, managing an organic restaurant requires a successful implementation of two objectives--flexibility and perception control.
In an industry that has seen incredible growth over the last two decades (the OTA reports organic food and beverage sales were at $1 billion in 1990 and $20 billion as recent as 2007), there are some questions as to whether escalation can continue at that pace. Those who own and invest in an organic restaurant must understand the risks involved and be prepared to take losses in some years.
The old paradigm of a long-haired, social activist vegetarian has given way to a new stereotype: The superior over-achiever. In order to maintain a consistent customer base, restaurant owners must work vehemently to dispel any myths of elitism.
Industry trade firm restaurantowners.com lists the average price of start-up costs for a new place at $451,000. Of course that's just an average and doesn't take in to consideration any specific details such as size, location and cuisine. For an organic restaurant the same variables apply but you will have to add on additional 10 percent to 20 percent according to Sarma Melngailis, proprietor and co-founder of Pure Food & Wine, a renowned gourmet and raw foods restaurant in New York City. She cites big-ticket purchases like high quality water filtration systems and compostable takeaway materials as reasons for the jump in price.
However, there is some upside for prices once an organic establishment is off the ground. Restaurants that serve organic meat and poultry still face price concerns but vegetarian places often benefit from their inherent advantage. "We luck out on our insurance premiums by not having oven or stoves," Melngailis explains. "Because we're a raw place there are no fires hazards and, unless someone cuts themselves with a knife, insurance-wise we're good."
2. Expect price fluctuations.
Managing an organic establishment requires a high level of ingenuity—you'll have to use everything that you know about restaurants and quickly become an expert on consumer marketing. "The more organic the food, the more we have to raise our costs and the more creative you have to become. It's very hard to convince people that a plate of tofu or carrot rissotto should be more than a steak," says Amanda Cohen, owner and head chef of Dirt Candy, New York City's premier vegetarian restaurants. "For example, lemons are always expensive because we don't grow them in the city. On top of that if you buy organic lemons there are only so few places that grow them and they are usually much further away and of course grown seasonally. Sometimes we'll order a case of lemons that aren't organic and they're 30 dollars and when we order organic its 60 dollars. Those are real costs we have to factor."
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3. Embrace menu changes.
Organic restaurants have to go to great lengths to maintain a consistent menu, especially in a tough economy. Keep it the same as long as possible says Jana Keith-Jennings, Pure Food & Wine executive pastry chef, but do not be afraid to make hard choices. "When the price of maple syrup went up, I had to cut down our use of it. We've adjusted a lot of our recipes because of that. You have to remain confident that you can still make good food even if you don't have your usual ingredients," she explains.
As not to disappoint or confuse customers, chefs are reticent to constantly change their menus, but in this business elasticity is paramount. "Things get really exorbitant when they get out of season," Cohen explains. "In a few weeks when tomatoes aren't as plentiful and the price goes up too high we will just take them off the menu. That's one of the things we struggle with is changing our menu. We know that in three weeks peas aren't going to be fresh anymore so we will have to change the soup. Otherwise the quality won't be as good and I'll really start losing money." The guarantee of available products in this industry simply does not exist and chefs have to prepare for change whenever it presents itself.
However, she does advise against making too many exceptions, stating that a common-sense approach to even cost cutting must be heeded. Cutting back on expensive ingredients in favor of cheaper ones will only work sometimes. "We don't use refined sugars in our food, but sometimes we have to use agave," Cohen says. "Agave always stays in liquid form so if I want to make a crisp cookie I have to use maple. In order to retain quality you have to be prepared to change whole recipes entirely."
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4. Know your customers.
"If you want to be successful you have to step out of making typical vegetarian foods. Only half of our customers are vegetarian. I think that vegetarian restaurants that just cater to vegetarians is not a recipe for success," says Cohen. "We appeal to carnivores and omnivores, because more so than any other kind of consumers, vegetarians don't always stay vegetarian. You'll want to make sure that even if they change their diets they still want to come back."
It's also important to know the differences in food categories. For instance, anything considered "raw" must be cooked at a temperature of 116 degree or less. While a food item like a sauce or pie must have at least 70 percent strictly organic ingredients to garner the "made with organic ingredients" (and 95 percent to be considered wholly organic) label according to the USDA. Knowing the different specificities will validate your restaurant amongst people who take the organic title seriously.
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5. Convince the non-believers.
Comedian Bill Maher often refers to the natural food retail giant Whole Foods as "whole paycheck" due to its expensive prices. His reference reflects a general perception that is often a reality for many people. The Organic Food Association cites the price of organic versus conventional can be anywhere from 15 to 100 percent higher. With that price difference, organic food can feel more like a luxury than a necessity. The Food and Drug Administration (FDA) defines organic in the procedures that farmers grow and process food. Because these terms are more stringent than conventional farming the practices are much more labor intensive. Additionally, shunning the use of products like pesticides and synthetic growth hormones often results in lower product yield, which leads to smaller amounts of food that farmers can bring to market. The consequence of this supply and demand paradigm is the inevitable price hike of organic foods.
A 2009 study by the National Restaurant Association (NRA) cites that 76 percent of adults are trying to eat healthier at restaurants than they were just two years ago. That study was determined over several demographics signaling an overall shift in the dietary consciousness of Americans. The NRA completed another recent study in which sustainability, local sourcing and nutrition are cited as some of the most popular culinary themes.
Additionally, in wake of the recent egg recall, the OTA reports an increase in the sale and demand of organic eggs. Seemingly people are getting the message, the problem is whether the prices can remain static. There is an understanding amongst sectors of the public that organic prices will always be higher but there is a breaking point. As organic food prices continue to ascend, people may shy away from the marketplace.
"In the beginning a lot of people didn't understand this kind of food and still there are concerns. People say things like they don't understand why it was so expensive, you just serve vegetables," says Melngailis. "People don't know that when you use all organic ingredients that it's not here, it's not grown locally. So when we have to import something from Italy, these foods are hard to find and highly perishable and that makes it that much more expensive. Not to mention the process of how we cook takes a long time."
Price concerns are a true decision-making factor for anyone who aspires to work in this industry. There are organic restaurants like Sprout's in Chicago and Nora's in Washington D.C where a dinner for two can reach triple digits with ease. Sprouts offers their cuisine at a price fixed amount of $60 while Nora's offers appetizers for as much as $15 dollars and entrees in the $29-$35 range. Of course, not every organic place will have those prices (like organic fast-food restaurants). There are several variables to consider but on average customers can expect a price difference to be anywhere from 10 to 30 percent higher than at conventional places.
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6. Avoid vegan stereotypes.
Melngailis knows how to shake up the monotony sometimes prevalent in the organic restaurant world by mixing staff personalities. She mentions that in some places she has seen, everybody has a similar make-up, and that creates an elitist attitude. When that notion permeates through a workplace, it discourages potential customers, as people are generally sensitive to spend money in an eatery where they feel they are being judged. "A lot of the staff members here are not vegetarian and I did that on purpose," she says. "It's better for the restaurant to have different mentalities present. It creates a more open vibe, which helps business because we want to reach a more open audience."
Melngailis cautions organic restaurant owners from allowing their establishments to sink into what she calls "pretentious" behavior. "We stay away from the whole 'perfect, we're so environmental, this is what we do to be sustainable' thing," she says. "There's too much of that. There's a place that I know of and they make great food but they have a sign in the window that says if you wear fur you're not welcome. That's really bold and aggressive. That's the stereotypical angry Vegan." Potential restaurateurs can talk politics or volunteer for PETA in their spare time. At your restaurant, serving customers should be first and foremost in your mind.
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7. Value supplier relationships.
Organic farms are at a premium and playing hardball may not be the wisest option. Due to the finite nature inherent in organic farming giving ultimatums and deadlines may not bring your business any closer to acquiring the products you need. Both the restaurant owner and the farmer have expectations they are working to fulfill and it is patience that is key here. This is not to say that the organic food industry doesn't have the same market demands as any other industry. Exceptions are sometimes part of this business, especially during difficult economic times. "Sometimes we pass the price on a little to the customer. We try not to push the prices up too much but we don't want to compromise our standards and we want to use the best quality products and ingredients," Keith-Jennings says.
The best way to overcome the demands of an uneven market, Keith-Jennings says, is by sticking by the people you trust the most. "Everybody wants to work together but it's frustrating when you can't compete in the market. With this current downturn, we've lost vendors because we couldn't afford their products. We generally try and stay committed to the farmers we've been with for years. And they stay committed with us. Sometimes they are more lenient in letting us stretch the bill out a little longer."
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8. Think long-term.
While initial news of a raw foods restaurant helped save marketing money by creating its own word of mouth buzz, Melngailis knew she needed a long-term strategy. Under her umbrella organization One Lucky Duck, she manages an online organic lifestyle boutique where she sells many of the items on her Pure Food & Wine menu. "When people go back to Arizona or London or wherever they're from they can find our stuff online and that's how we tie the businesses together and continue to grow. That way people don't have to come here and have this isolated experience and leave and not have a way to find this kind of food again."
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