How a Natural Disaster Effects Your Favourite Burger
You hear it in the news - “Queensland is being effected by a drought, the farmers are doing it tough” or how a “Cyclone has damaged farmland in tropical Queensland”. The farmer’s definitely are doing it tough, believe me. They can lose their entire revenue for the year overnight in a storm and have no income for next year’s seed and harvest stage.
Now, that’s at the very top of the tree, so you’re thinking how does that effect a little burger joint in Penrith?
Supply and demand.
People don’t suddenly stop wanting tomatoes in their food. We still need to purchase them and when there’s less to go around the price sky rockets. In recent times the flooding in Queensland resulted in the prices for our tomatoes QUINTUPLING in cost over 2 months. In an industry where margins are already tight enough natural disaster can result in business’ profitability being smashed!
Now tomatoes are only a minor blip on the radar for a price increase. How about something that is at the very core of our business. Say beef?
The drought in parts of Australia and floods in other parts resulted in a lot of farmers losing a lot of their cattle, an issue that was well out of their hands and nothing could have been done to prevent it but that still didn’t stop the people wanting a juicy T-Bone or a burger for dinner and just like the tomatoes supply and demand shot the price of beef up.
The brisket we use in our burgers went from $7 a kilo up to $10.90 a kilo within a few months. Now you may think ehhhhh $3.90 a kilo that doesn’t sound too bad BUT let’s say for example We’re going through 100 kilos of beef a week.
Our “beef bill” a week went from $700 up to $1090 that’s a difference of $390, easy maths, you’re still with me.
Now that $390 in extra costs doesn’t result in more sales, it doesn’t result in increased efficiency, it doesn’t result in reduced labour costs. It’s simply an extra cost. The only result is $390 wiped off of our bottom line and our profitability as a business is directly effected.
When establishing the price of our burgers for the menu it is based off a common formula that gets to an industry standard percentage. However, when a product as important as beef sky rockets that percentage gets thrown well out of wack.
Many businesses face the battle of raising their prices or keeping them the same. It’s a double edged sword as increasing prices to allow for the increase cost can piss of customers and not increasing prices can annihilate a businesses profitability.
If a restaurant you frequent undergoes a price increase we ask you not to kick up a stink but to support your local business as more often than not, it’s out of their hands and to support farmers where possible.