The Economics of Everyday Things - 82. Chain Restaurant Recipes

0:04At first glance, the Shake Shack in New York City's West Village looks like any other fast-casual restaurant. When you peek through the window, you'll see customers eating burgers, chicken sandwiches, and crinkle-cut french fries. But in the back of the building, you'll find a staircase that leads down to a secret kitchen. Down here, underneath the city, chefs are busy inventing Shake Shack's next big menu item. The ideas for a new item can come from anywhere, anyone, The innovation kitchen is the place we'll dissect those ideas and look for ways in which we can explore them. That's John Caranjas, the vice president of culinary innovation at Shake Shack. He's in charge of the menu at the restaurant chain's nearly 600 locations worldwide. He oversees a team of around 10 people who work in the chain's test kitchen, the place where many of their famous burgers are born.

1:00I kind of gravitate to the smoke shack, which is a delicious simple bacon cheeseburger. Oh yeah. It has some cherry peppers on it, which gives it just the right amount of heat and acidity to balance out some of the richness. It might not seem so tough to cook up something like a bacon cheeseburger, but creating a delicious new menu item that can be served consistently and cost effectively thousands of times a day around the world, that's a different story.

1:29We're tweaking, we're honing, we're refining. Our process requires lots of specialists from several teams to make sure it all comes together. It takes about a year and a half from idea to actual launch on a menu. For the Freakonomics Radio Network, this is the Economics of Everyday Things. I'm Zachary Kraken. Today, chain restaurant recipes.

2:01There are more than a million restaurants in the United States. Most of them are single unit operations, like your neighborhood diner or your local Italian joint. These restaurants have a little flexibility when it comes to planning their menus. John Caranges says that the relatively small production volume allows owners to serve a dish based on a family recipe or switch up the menu every few weeks.

2:26If you're an independent restaurant, you may have one or two people that are responsible for cooking. And usually the person that's cooking is purchasing the ingredients. But America is also home to more than 137,000 restaurants that are a part of a big chain. Think the Cheesecake Factory, Olive Garden, McDonald's, Taco Bell, or Shake Shack. And their cooking process looks a lot different. When you start branching out into different operations, different states, different countries, you are producing food at such a high scale. There's a lot of variables that come into play. A restaurant chain like Shake Shack has to produce extraordinarily large quantities of food. Across its locations, it serves thousands of burgers a day. Every single one of those burgers has to be consistent, both in terms of quality for the customer and cost for the chain. So,

3:28Introducing a new item to the menu requires a lot of planning. At Shake Shack, the menu development process typically begins with the marketing team. They constantly scan through consumer trends and social media to find the next hot item. If something is being shared on social, if there's been a lot of great reaction to certain things, we'll do everything we can to evaluate that. And we'll explore it. We'll cook the item. We'll taste it. We'll discuss it.

3:58From there, a potential menu item will go to Shake Shack's Innovation Kitchen, a culinary Frankenstein lab where they'll experiment with different ingredients and recipes. If we're going to develop a trio of winter citrus beverages, then we would go and develop maybe eight to ten different exciting, colorful, flavorful beverage items. And we'd want to make sure that these are items that guests would want to purchase from us.

4:26Shake Shack assesses this by running internal focus groups and surveys with its employees. The company also has a real restaurant right above its test kitchen. And on occasion, they'll put something new on the menu to see what kind of reception it gets. But there are also a slew of practical considerations that go beyond how customers react to a new menu item. For starters, a new dish has to be vetted by the supply chain team. They're responsible for procuring ingredients for recipes and distributing them to all locations. And if they can't get an ingredient of consistent quality to every restaurant, the product might not make it to the menu.

5:17raw and unadulterated right alongside a beautiful rib eye steak. And I just thought it made sense if we were going to make a burger to add a little bit of watercress on top of it. It has this great peppery flavor profile and it has great texture and such. But we couldn't get it in all parts of our country. We tried different lettuce and just didn't make sense for us. And so we're stuck on that right now. Another major consideration is the cost of ingredients.

5:46Because of the sheer scale of production, choosing a lettuce that's 10 cents more per head could have a sizable financial impact. We sell hundreds of one item in a shack. And if you sort of aggregate that out, and you can find the savings some way, we want to take every opportunity to evaluate that really closely. Caranches says the chefs at Shake Shack often have to find ways to include high quality ingredients without breaking the bank.

6:15If they're developing a citrus juice and want to give customers a taste of very expensive yuzu lemon, they might create a more affordable blend. There are creative ways to make a luxury item accessible for our guests. A Japanese citrus fruit maybe that gets blended with a mandarin orange and then you have a really exciting citrus beverage that isn't all of the expensive ingredient but has enough of it to enhance its flavor profile.

6:44Caranjas says this challenge came up recently when his team at Shake Shack developed three specialty burgers incorporating black truffle, an ingredient that can sell for hundreds or even thousands of dollars per pound. I knew you couldn't use a $3,000 a pound.

7:02truffle to make a sauce out of but the base of the sauce is actually what they call a duxelle, which is using real domestic mushrooms and making a puree out of them. So the thought there was if we make a duxelle using domestic mushrooms and we got a really good all-natural truffle oil, we can homogenize them and make a delicious sauce with them. We put it in a blender.

7:29And we drizzle the oil in as if you were making a mayonnaise with that duck cell mushroom as the base. And before you know it, you have this rich, creamy, unctuous umami bomb of fresh truffle. But turning a profit on a menu item is about more than the cost of ingredients. A successful recipe also has to be cooked quickly and consistently. And pulling this off at hundreds of locations, with thousands of different food service employees, can be a tall order. If you've got 200 locations weighing sugar and they're all off an ounce, that's 200 ounces every day, right? The number's that up. That's coming up. Some restaurant chains, like Shake Shack, prefer to do all of their recipe development in-house. But others choose to bring in outside help.

8:25My name is Walter Zoromsky. I'm the owner and chief culinary officer of the Chef Services Group located in Rotunda, West Florida. Zoromsky grew up working in his family's diner in Rhode Island. He went to culinary school in New York, then worked his way through the ranks in hotel restaurants, where he learned the art of cooking in huge volumes. For the past 30 years, he's been a restaurant consultant. We're either writing a recipe, a formula, or we're sourcing ingredients to improve functionality, quality and profitability. There's a lot of things that have to be considered, you know, the staffing, the skill sets, their procurement practices, what kind of raw materials they bring into the building. There's different equipment and different capabilities, and all of that has to be measured. When you think about your favorite meal at a restaurant, you think about the taste, texture, appearance, maybe even how much it'll fill you up.

9:25But Soromsky sees each plate of food as an equation. When you think about recipe development on a restaurant level, it involves the plate and the prep. Say it's just a club sandwich, you know, so a club sandwich has bread, it has lettuce, tomato, bacon, mayonnaise, and it may be turkey or chicken. That's your plate build recipe.

9:52And all those ingredients have to have specific amounts that go on the plate so that it's managed and the cost parameters are adhered to. Zaromsky says chain restaurants often have a manual of sorts for each dish. A lot of the chains will write a plate build and then we'll actually plate it and take a picture of it to ensure consistency. And then we'll also write training manuals for a service. So the server knows what the allergens are on the plate. They'll know what utensils to serve with the dish. It's all part of the training. But a lot of the work around efficiency in the kitchen is engineered into the ingredients themselves. Elements of a chain restaurant's menu are often prepared with a cooking technique called speed scratch, where chefs will combine fresh and pre-made ingredients. For example,

10:46Instead of making a Chipotle sauce entirely from scratch, the chain might use a name brand ranch dressing as a base. So speed scratch for, you know, a Mexican or a Southwestern type of flavor profile. All we have to do is add some Chipotle base, some cilantro lime juice to the ranch dressing that's already made. Something like a croissant or a pizza dough might be ordered in bulk, partially baked and frozen. And we're going to cook it in a rapid cooking oven.

11:16You've probably seen them, they're called turbo chefs. Dunkin' Donuts and Starbucks, you know, they zap your egg sandwich in a minute and it's boiling hot because they use microwave heat and impingement heat so that you get the browning from the impingement and then you get the heat penetration from the microwave. And so you can cook a pizza in a minute and 30 seconds. And at most quick service restaurants, it's likely the meat wasn't cooked there either.

11:43Raw chicken just has only a limited shelf life and it's a bit to handle. So a lot of the restaurant chains are sourcing a fully cooked chicken. They're not cooking it at the store level. Taco Bell has their taco meat manufactured by a producer because they go through millions of pounds of meat and basically they heat it to prepare it so it's ready. A few years ago, Zeromsky was hired by a restaurant chain to improve a recipe for seafood chowder. The chain was preparing around 30,000 pounds of the soup each year, and everything was being prepped on site in the kitchens. They're bringing in, you know, cream, fish, the clam broth, potatoes. There's like 11 ingredients. That's all the raw materials that they were bringing in, all their locations, and think about all the touch points that they have just to make that one soup.

12:39So what I did was I went into their restaurant, we made the soup, I understood what they did, and we made a scalable formula out of their soup. Soromsky helped the chain create a cook-chill version of its soup. Rather than being prepped on site, it was cooked in bulk at a food manufacturing facility and distributed to the restaurants frozen, where it only had to be thawed and heated before being served.

13:06We went through a freeze-thaw test and basically the soup stood the test of all of those processes and we took the prep of that soup out of 10 restaurants. We minimized the inventory to just one ingredient versus like 12 and the economics worked for them. They took that soup and they ran with it and it was very successful. When you're at a chain restaurant, you might notice that the same ingredients feature in a lot of different dishes on the menu.

13:34That's a financial decision, the result of a process that Zuromsky calls value engineering. When you're buying ingredients, you don't want single-use ingredients being brought in on your inventory. If it is calamari and it's only in one place on the menu and you're not like doing a seafood pasta and incorporating calamari into the seafood pasta and serving calamari as an appetizer, then don't bring calamari in because it needs to be used somewhere else.

14:06Chains might buy large quantities of ingredients in advance at a fixed price to hedge against any future supply chain issues. Like, say, a tariff placed on Mexican avocados or a bird flu that causes a shortage of eggs. Zoromsky says when ordering something like lobster in bulk, a chain might also be able to negotiate custom packing options that can save money and time. I can remember having a conversation with a supplier And I said, look, I need you to pack the CKL, claw, knuckle, and leg meat in one-pound packages for our restaurants. Oh, we only do three-pound packages. I said, what if I could guarantee you 40,000 pounds a month of lobster? Would you change your mind and give me a one-pound packet? We'll pack it in one pound. We'll pack it in eight ounce. We'll pack it in whatever you want, chef. No problem. End of story. At Shake Shack, John Caranches.

15:03says that even if everything goes smoothly, designing a new menu item is costly. And the chain tends to be cautious about making that investment. If you just inundate your menu with too many things, it could slow down production, it could hamper the operation. So there's always that push and pull of doing everything we can to offer a variety of items for our guests, but do it in a way where it doesn't create or allow for any negative experiences.

15:32But Walter Zyromsky, he says that all the recipe testing, supply chain wrangling, and kitchen training is a relatively small price to pay for giving diners an exciting new menu option. After all, even the most economical and high volume hamburger can only be so complicated. I mean, it's not rocket science, you know, we're not sending rockets to the moon or anything. It's just food at the end of the day. For the economics of everyday things, I'm Zachary Kraken. This episode was produced by Morgan Levy and Sarah Lilly, and mixed by Jeremy Johnston. We had help from Daniel Moritz Rapsit. I guess I'm kind of alluding some of the answers because I can't breach my NDA.