Paper Chase

Both takeout demand and packaging costs are on the rise.

By Erin J. Shea, Associate Editor -- Restaurants & Institutions, 10/1/2006

At Rickshaw Dumpling Bar in New York City, the importance of takeout business makes investment in quality takeout packaging a must.

Building a brand isn’t easy. Distinguishing a restaurant from the competition takes strategy, consistency and, when takeout sales are important, user-friendly packaging that echoes the brand.

“A professor told me that food that is placed in high-quality packages often is perceived by customers to taste better,” says Kenny Lao, co-owner of Rickshaw Dumpling Bar in New York City. “We pay a premium for our packaging, but the trade-off is worth it.”

For Lao’s operation, where all takeout items are served in traditional Chinese-restaurant cardboard containers, meeting rising prices for paper goods is balanced with the need to maintain a quality brand image and customer satisfaction.

With plans to open additional locations, Lao’s challenge was to convince manufacturers that any price breaks he could get would pay off for suppliers in the long run. “I had to make them realize that we have a stable concept that needs low pricing,” he says. “Communicating our vision for the long haul helps us lock in our costs.”

One of the advantages of Lao’s limited menu—six steamed or pan-fried dumpling choices served with entrée salad or soup—is that his need for packaging sizes is limited. “We only have two different-sized boxes and a noodle-soup container,” he explains.

To offset costs, Lao uses stickers to identify the dumplings in a container as well as to advertise the brand. “When someone walks out, you want a good container with good signage,” he says. “What customers leave your restaurant with says something about what you do.”

Lao isn’t alone in having to reevaluate packaging investments. Weighing the cost of paper goods against the role they play in an operation is forcing operators to make difficult choices and get tougher when negotiating with packaging vendors.

“Over the past two years paper-goods costs have exploded,” says Jeff Yarmuth, president and COO of Sonny’s Real Pit Bar-B-Q, based in Maitland, Fla. “In the past you could shop around, but you just can’t take that tack anymore.”

With 150 units, Sonny’s has to be aggressive when it comes to managing paper-goods costs.

“It’s a seller’s market right now,” Yarmuth explains. “A few years ago, you could tell manufacturers that you wouldn’t accept a price and go elsewhere. You can’t do that anymore.”

The consolidation of packaging manufacturers has made negotiation a practice of the past, Yarmuth says. Previously, he would sign two- to three-month contracts; now he looks to lock in pricing for nine months with manufacturers.

“There just isn’t a lot of relief, so we do our best to hedge our bets with a company and get a contract as long as we can,” he says.

Stan Klaus, purchasing director for Up The Creek Fish Camp & Grill, a 13-unit chain based in Duluth, Ga., says that cutting out middlemen has helped defray paper-goods cost increases.

“I had to be proactive in establishing a relationship with manufacturers instead of the supply houses if I wanted to find new ways to cut costs,” he says. “Today our costs are 0.2% less as a result.”

At the two units of New York Burger Co., Madeline Poley’s fast-casual concept in New York City, the question is how to free capital for growth without making sacrifices that diminish product quality.

“We had to take a good look at all of the paper goods we were using,” she explains. “Some things aren’t negotiable if you’re going to maintain a certain image,” she says.

Poley looks to subtle packaging alternatives. For instance, the restaurant’s hearty portions of scratch-made french fries now are served in brown paper bags instead of white.

“White paper bags are more expensive,” she explains. “We put the fries in a cup into the bag; and we’re thinking about getting rid of the cup in order to save a little bit more.

“It’s a never-ending battle. In the long run, you can find ways to shave corners and make it fun, but it’s tricky,” she explains. “There is a point where you can’t compromise any further because it’ll chip into your image.”

Training Time

Selecting the right inventory of paper goods for an operation is important. Getting employees to properly and wisely use those products is equally important.

“One of the major things we focus on is making sure our employees use the right product for the right application,” explains Stan Klaus, purchasing director for Duluth, Ga.-based Up The Creek Fish Camp & Grill. “We have to save money any way we can.”
At Maitland, Fla.-based Sonny’s Real Pit Bar-B-Q, an internal audit of its 17 company-owned locations found that inconsistent package use was rampant. “Certain catering items were being packaged with twice the paper goods needed,” says President-COO Jeff Yarmuth. “Our standards needed to be the same for what product goes in which container. The audit corrected that.
“We’ve addressed the problem over the last six months by stepping up the education we give our employees on the costs of paper goods.”