A disgruntled customer recently enquired as to why we don’t just add a flat $10 mark up on wine prices instead of blatant profiteering and mark ups of four times cost price. As I was tired, disinclined to engage and lacking in cognitive function, I ham-fistedly mumbled something about gross profit percentages, enquired as to how he enjoyed the rest of his meal and sloped back to the kitchen. This isn’t the only time that a customer’s basic understanding of restaurant economics has surprised me.
Now that I’m not under the stress of an imminent service and my synapses are firing at a far greater rate, I will try to explain why not only are these notions wrong, but why they are so utterly wrong that thinking about them actually makes me, and most other members of our industry, really damn angry.
What these diners fail to take into account, other than the items on their plate or thein their glass, is the sheer scale of the extra costs that are shouldered by restaurants in order for the punter to enjoy a meal. It has nothing to do with profiteering, and everything to do with staying in business.
We’ll begin with the absolute basics and try some back-of napkin economics. Let’s assume that the restaurant turns over $1m a year. Before I head down to the Porsche dealership, let’s give the landlord and the government their cut, because theirs, naturally, is the largest. Say goodbye to $250,000.
Suppliers like to be paid too, so working to a pretty generous gross margin of 75% across wet and dry sales: there goes another quarter of a million bucks and lo, my bank manager and financial backer are only bhalf as pleased as they were a moment ago.
It took 12 people to create and serve the meal that you’ve just eaten, and even in this notoriously badly paid industry, that’s still a lot of people wh need a monthly pay check – so wave goodbye to a further $300,000. And the plates, bowls, cutlery and glassware – all of which are far nicer than anything you have at home – all need to be purchased, washed (in a machine that costs a fortune to maintain and run), polished, stored and replaced when they are cracked, chipped or smashed. Gas, electricity an water tend to be pretty pricey these days too, and when all the bills are in I won’t be getting much change out of $50,000.
The menu that changes every day according to what produce is at its absolute best in my pursuit of the highest possible standards needs to be re-printed, sometimes twice a day. Paper and ink costs add up, and then the used menus have to be thrown away, along with all the empty wine bottles, food waste, coffee grounds and tons of used paper towels. At a cost of another $10,000 a year.
OK – we’ve dealt with the numbers that are a little more obvious to the casual observer – but what about the fi nal $100,000 still sitting pretty in the bank account at the end of the year? That’s still enough to buy that Porsche? Even if it is a pre-owned one?
In the space of three weeks earlier this year I lost two fridges, the pilot light assembly on a solid top cooking range and the boiler. The knock-on effect? Loss of sales, either due to full closure or temporarily limited bookings, and the costs of repairing or replacing. Both routes are expensive: a new low boy of reasonable quality is $5,000. A heated gantry another $2,000. Best case scenario on a repair job? A minimum of $300, assuming it isn’t serious. A mandatory professional clean of the extraction ducting is another $1,000. Cleaning products for the year are about the same. And it’s wise to have a fund in place just in case something really serious happens.
Finally, the accountant – he charges $500 a month to tell me that if I want to make any money, I should probably think about putting the prices up.
