AUGUSTA – Ed Murphy’s recent article “Lobster prices hit record lows, but restaurants still charge top dollar” (Aug. 10) makes a statement but offers the consumer little insight or explanation regarding a restaurant’s pricing. Mr. Murphy’s article focuses solely on the cost of the meal’s star attraction: the lobster. Several ingredients must be factored into the retail-pricing discussion to understand the whole picture.

There are tremendous costs associated with serving lobster to the dining public that aren’t readily apparent to the consumer, so it is easy to understand why some might wonder how restaurants price their menu for lobster and other items. Here’s a peek inside the restaurant industry:

A well-run restaurant must operate within a range of 30 percent to 36 percent food cost in order to cover its extensive labor, energy, insurance, rent, taxes and other overhead expenses and leave the restaurant a 3 percent to 6 percent bottom line pre-tax profit (based on national averages). That is only about 5 cents for every dollar the restaurant takes in.

Historically, lobster is a product that is fragile and costly in terms of preparation and space to store, rotate, prepare and serve. Despite these challenges, the majority of Maine restaurants are committed to featuring the state’s edible icon because lobster enjoys strong consumer demand.

A typical restaurant has paid between $3.50 and $5 a pound for new-shell product this summer, depending on its source of supply, harvester price versus dealer price and proximity to the coast. Using those prices while understanding the need to maintain a 30 percent to 36 percent food cost, a typical restaurant would base its pricing on these factors:

Calculating the average lobster cost at $4.25 per pound, a 1.25-pound lobster means a $5.31 raw lobster food cost for a typically served one and a quarter pound lobster. Add drawn butter, side salad or fries and a roll and you arrive at a total food cost of $6.815. This would result in a retail price of $20.63 for the meal, with a 33 percent food cost. All of that retail price except for $1.03 (5 percent profit) goes to pay the business overhead.


When you apply the same calculations to the more expensive hard-shell lobster, with an average summer price of $6.50 a pound or more, the food cost goes to $8, and the restaurateur is looking at a menu price of $24 for the meal.

The issue of lobster roll pricing was raised in the Press Herald article. On average, a one and a quarter pound new-shell lobster will yield a quarter pound of lobster meat. Shucked lobster meat is averaging $24 to $25 per pound, or $1.50 per ounce. Most restaurateurs will allow 3 to 4 ounces of meat ($4.50 to $6) plus the accompaniments, so their cost is between $4.75 and $6.25. At the 33 percent food cost threshold, a well-operated restaurant should charge between $14.39 and $18.93 for the product. The $14.95 retail price quoted in the article was indeed on the low end of the appropriate pricing structure.

All winter long and often throughout the summer as well, most Maine restaurants charge far less for lobster meals than the aforementioned food cost “best practices” equation suggests they should. Frequently restaurants feature specials on new-shells at $14.95 and hard-shells at $19.95, and two-lobster specials are not uncommon. Their food cost in these cases averages 50 percent or more. It’s a great come-on but much higher than other items on the menu and that important contribution to profit from that meal pretty much disappears.

Last, the article never mentioned the ambiance or environment where you are enjoying that lobster. It makes a big difference whether you are sitting on your back porch cooking your own lobster or sitting 50 feet from the ocean with a spectacular view and the restaurant is paying the property taxes, maintaining an oceanfront property and parking lot and cleaning up behind you.

In so many ways, the good fortunes of lobster harvesters and restaurateurs in Maine rely on similar factors, for ours is a tourism-based economy and our summer guests identify the flavor of Maine with lobster.

We are highly supportive of the harvesters who catch them and the dealers who stock them and make them readily available to our restaurants. We are proud of the restaurant’s role in marketing and promoting lobster to more than 32 million Maine visitors at prices necessary to keep the doors open and inviting and far below what they can find when they return home.

Dick Grotton is president and CEO of the Maine Restaurant Association.

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