How Fatbacks BBQ and Blazing Star BBQ Are Managing Cash Flow and Supply Chain Shortages

How Fatbacks BBQ and Blazing Star BBQ Are Managing Cash Flow and Supply Chain Shortages
For Fatbacks BBQ and Blazing Star BBQ, managing cash flow amid changing cost of goods has been a challenge. Hear from them on how they're navigating changing costs and supply chain shortages.
by Deborah Findling Aug 25, 2021 — 4 min read
How Fatbacks BBQ and Blazing Star BBQ Are Managing Cash Flow and Supply Chain Shortages

Summer can mean big business for barbecue restaurants, but recent reopenings and changing mask mandates have made those surges in business less predictable. Changing customer ebbs and flows as well as the macro effect of the pandemic have affected small businesses that count on the bump in seasonality.

“The past two weeks, we’ve had an interesting low couple of hours on a day where we normally work. I’m chalking that up to the fact that most businesses are slowing down, and that’s what some of our vendors are saying,” said Fatbacks BBQ’s Chief Marketing Officer Devin Osborne. “I do think it’s becoming much more of a year-round business, even though it’s especially nice when you sit outside in the summer,” Osborne adds that, for their business, barbecue goes way beyond the summer season.

Fatbacks BBQ is a family-owned-and-run barbecue restaurant based in Quincy, Illinois. What started as a dream for Osborne’s father has become a reality today, and the whole family has joined in on building the business. This June the restaurant celebrated its ninth anniversary. Osborne credits their success to a passion for making quality food.

“We’re kind of foodies. We like to try food wherever we go, and frankly, it’s upsetting to us when there’s such limited options,” says Osborne. “We decided that we wanted to add to that scene and contribute — brighten other people’s days by creating foods that they could smile about when they ate.”

In the months following the pandemic, meat prices rose dramatically as U.S. meat exports and meat processing plants went into hibernation. Between March and June 2020, beef prices saw an increase of about 20% for consumers. Despite changing costs, Fatbacks BBQ is focused most on quality over quantity.

“About two or three years ago, we actually started supplementing that [brisket] with burnt ends, and those are also from the beef brisket,”says Osborne.

Although it is a more time-intensive process to pull off, he says that burnt ends are hard to find on menus in the area and have proven to be a favorite with customers. By using the entirety of the meat and highlighting a hard to find favorite, Fatbacks BBQ has been able to make the best of a hard situation.

Meats aren’t the only star menu item — Fatbacks also focuses on the sides, all of which are handmade. Osborne says the price of sides has risen over the years from $2.75 to $3.50 and $4-5 for a premium side. They’ve prioritized maintaining lower side prices, a delicate balancing act that keeps their loyal customers coming back for more. Sides like baked beans, collard greens, made from scratch mac and cheese, and a mixed daily coleslaw.

“Problem is, you know, when you look at a grocery store and you attend the grocery store, those prices, those tags are changing once, twice a week — sometimes more often if it is really volatile,” said Osborne. Grocery stores, he says, have the leverage to navigate that volatility better. For restaurants, changing signage to reflect new costs can be expensive, and customers become irritated when the price of a meal changes suddenly.

“Even just to tell them, ‘Hey, we’re going to have to raise these prices. Maybe not forever, but for a few weeks,’ it’s not very stable. I can understand. I don’t like to pay any more for stuff, but when the brisket price is raised to amount to 300% of what it was, it’s not very easy to maintain,” said Osborne.

Inflationary prices aren’t the only obstacle. At times the cost remains steady but there are supply issues. Recently, despite remaining steady in cost, chickens were in short supply. Osborne says that the key to their business has been to price it out so that their cost of goods remains in the 50 to 70% range of the overall price, a margin that’s been hard to hold steady with fluctuating costs of meat.

Overcoming supply chain shortages

Supply chain issues can cause an unexpected series of setbacks. For Pahrump, Nevada-based Blazing Star BBQ, the business saw huge success with their Reaper Rub, selling out in the first ten days of June. An unexpected $7,000 in sales caused Blazing Star BBQ founder Michael Starr to scramble to restock, but they had trouble doing so quickly with looming supply chain issues.

“I wasn’t able to restock the Reaper Rub fast enough, and so when that happened and that went out of stock, people wanted to buy everything,” said Starr. Customers instead decided they’d wait for the restock of the rub before making a purchase that included the rub along with several other items. “Then all of a sudden sales drop, ‘cause I’d lost momentum.”

The business’ barbecue sauces have seen success on social media, but with the popularity of videos being hard to predict, so is stocking the right inventory.

“I actually had an order in place before [the video] went viral. Unfortunately, times right now, especially with co-packing companies, it could take six to eight weeks to turn around unless I have control over myself, meaning if I’m doing all the co-packing,” said Starr.

Managing your business’ cash flow

From keeping track of fluctuating cost of goods to stocking inventory that can meet customer demand without creating a surplus, managing cash flow can be key for navigating the ebbs and flows of returning business.

“You know, if it’s costing you $3, you’d like to be able to sell it for $9,” says Starr, adding that for his business he wants the product base to be three to one. “But there’s so many things involved with it, especially early on, and a product-based business like barbecue sauces and seasonings … to get your price point down, your volume needs to be, like, a hundred thousand units of each product.” He says scaling a business can unlock not only the ability to lower the price points for products but also other levers, such as co-packers with the bandwidth for larger batch orders.

As small business owners navigate re-openings and changing mask mandates, business decisions and customer needs will affect one another more than ever so tracking your costs can make the greatest impact on forecasting for the future.

Deborah Findling
Deborah Findling is an Executive Managing Editor at Square. She also writes about investment, finance, accounting and other existing and emerging payment methods and technologies.


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