Commodity Price Rises Challenge a Small Restaurant

With the costs of dairy, beef and seafood rising, local restaurants owners are forced to strategize how to keep their businesses profitable. Kai Pettaway, owner of Freda’s Caribbean & Soul Cuisine in upper Manhattan, is one of those struggling restaurant owners.

Kai Pettaway and his mother, Ellie Pettaway work in the restaurant

“I am working from 12 p.m. to 12 a.m. almost every day,” said the 36-year-old restaurant owner. He does employ four other people, but he has trimmed their hours by about 15 percent recently. “I have to cut workers’ hours. This can save me hundreds of dollars every week.”

As a result, Pettaway has been working as both waiter and cashier, along with managing the business.

Like many restaurant owners, Pettaway faces the pressure of rising commodity prices. According to the U.S. Bureau of Labor Statistics, beef and dairy products have risen about 17 percent in price in the past year, while eggs have gone up more than twice that much. Shortening and cooking oils price have risen 33% during the same time.

To counter the impact of high prices, Pettaway usually drives to Jetro, a wholesale market in the Bronx, to restock his restaurant kitchen twice a week. “They are big chain markets with lower prices,” Pettaway said. Still, he noted, “oxtail is about 30 percent higher and shrimp is up around 20 percent higher over the past year.”

“It’s hard for small business owners.” Pettaway said, “Owners have to be on site all the time and stay on top of everything.”

Cutting his employees’ hours is not the only strategy Pettaway uses to make ends meet. “We will update our menu next week. We will add one dollar to each dish on average. We have to compensate for the cost.”

This will bring an overall increase of 12% on their menu prices. Freda’s most popular dish, oxtail with rice and beans and two sides, will go to $11 from $10.

Customers fill up Freda’s on Sunday night

“We are not concerned that this change will lose us customers,” Patteway said. “We provide good food at reasonable prices. I am sure when I tell customers about the price changes, they will understand. People know food is more expensive nowadays.”

He adds that menu prices average “around four times the total cost of the ingredients. We keep our prices really low to attract customers.”

Though the market has seen a major surge in most commodity prices, some commodity prices have dropped a bit. Chicken, for example, is down 3.9% this year. The increase in prices on some chicken dishes at Freda’s will help to compensate for the increase in costs for other commodities.

Pettaway and his mother, Ellie Pettaway, have owned this restaurant for four years. Mr. Pettaway used to work for a New York State senator on transportation policies before he got laid off and started to run his restaurant as fulltime job.

Unfamiliar with the business, the Pettaways struggled to deal with contracts, payrolls and even plumbing until they joined the Restaurant Management Bootcamp program, run by the city.

Besides increasing prices and cutting employees’ hours, Mr. Pettaway is not considering cutting portion sizes. “I won’t give customers more rice and less oxtails; that feels dishonest. People are here for oxtails and they should be able to get them.”

As a frequent customer of Freda’s, Carol McBride drives from Westchester to Manhattan once every two weeks for dinner. She said the price increase won’t affect her loyalty. “They have unique food,’’ noting that she doesn’t even mind paying the tolls to be able to eat at Freda’s.

And the prices are part of the attraction. Nicole Topilow, together with three other friends from Columbia University, said they came here because of a friend’s recommendation. “They have good food with low prices.”

To boost his business, Pettaway also has used some new marketing strategies. He recently put Freda’s on Groupon and Living Social, two of the most popular deal-of-the-day online marketing companies. But, he adds, “We are not making much money out of it right now.” Pettaway limits the use of such coupons to weekdays, when the restaurant is less likely to fill up with customers.