TANSTAAFL
January 17, 2018 1:34 PM   Subscribe

How much do restaurants really make from food orders? Washington City Paper's Young and Hungry asked restaurants to break down the costs of some of their most popular dishes.

From the article: "A dish’s food cost percentage is calculated by dividing the per-portion cost of ingredients by the price the restaurant sells it for on the menu—the lower the food cost percentage, the more money the restaurant makes. For example, if a sandwich’s ingredients cost $1 and the restaurant sells it for $4, the food cost percentage is 25 percent.

But food cost is only one part of calculating a restaurant’s bottom line. Operators must also shell out for labor, rent, utilities, and other fixed costs that quickly add up. Because of razor-thin profit margins, especially in a high-cost city like D.C., running a successful restaurant can seem more like a magic trick than a money-making enterprise.

Alcohol has long been the panacea for making up the difference. 'Liquor is everything,' [restaurateur Tom] Healy says. 'The best thing you can do for a restaurant is order a vodka soda.' Baan Thai marks up rail liquor as much as 1,428 percent to make ends meet."
posted by capricorn (62 comments total) 21 users marked this as a favorite
 
The first photo made me go "I want to eat that immediately and forever" but then the restaurant owner says that they don't make any profit off it, so I'm sorry to hear that but bring me another serving please, and I'll be fine with just water.
posted by turbid dahlia at 1:40 PM on January 17, 2018 [2 favorites]


Resteraunts are a bonkers business model with razor thin margins dependent on quasi slave labor up and down the supply chain - food goes really well with economies of scale, I’ve always wanted some kind of city cafeteria system to ensure everyone has access to good food, it’s not like people are making huge profits anyway and we could ask they source from local farms so the money stays within the community (I think I described it once as a Dorm meal plan but for the entire city
posted by The Whelk at 1:49 PM on January 17, 2018 [50 favorites]


Eighteen bucks for a hoagie?

Come to Philly. Six bucks at Wawa, $9 at Primo.
posted by sixpack at 1:53 PM on January 17, 2018 [2 favorites]


Because of razor-thin profit margins, especially in a high-cost city like D.C., running a successful restaurant can seem more like a magic trick than a money-making enterprise.

"And now I will make your investment disappear."
posted by Query at 1:56 PM on January 17, 2018 [8 favorites]


Alcohol has long been the panacea for making up the difference.

In this as in so much else.
posted by chavenet at 1:56 PM on January 17, 2018 [35 favorites]


I've always wondered how BYOB restaurants survive without the extra income from alcohol sales.
posted by octothorpe at 2:00 PM on January 17, 2018 [1 favorite]


> but then the restaurant owner says that they don't make any profit off it

Why don't they raise the price, then? If it's the most popular item on the menu, people aren't going to stop ordering it.
posted by languagehat at 2:02 PM on January 17, 2018 [2 favorites]


I can't remember where I picked it up (a podcast?) but recently-ish I heard someone describe restaurant ownership as "the less-extremely-high-net-worth person's version of owning a sports team," and that really is the perfect analogy. As a business, it's borderline insane unless you're deriving satisfaction from ownership that goes beyond raw ROI.
posted by Tomorrowful at 2:05 PM on January 17, 2018 [8 favorites]


Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor.
posted by Wetterschneider at 2:07 PM on January 17, 2018 [28 favorites]


A guy who had owned several restaurants told a friend of mine that putting all of his savings into a paper bag and setting it on fire would be a sounder investment than getting into the biz.
posted by rodlymight at 2:15 PM on January 17, 2018 [5 favorites]


>> but then the restaurant owner says that they don't make any profit off it
> Why don't they raise the price, then? If it's the most popular item on the menu, people aren't going to stop ordering it.


This
I'd guess a $15 -> $15.75 hike would have a minor influence on the sale of the most popular thingumy, but it doubles the margin.
posted by farlukar at 2:53 PM on January 17, 2018 [3 favorites]


I've always wondered how BYOB restaurants survive without the extra income from alcohol sales.

Corkage?
posted by chavenet at 2:55 PM on January 17, 2018 [4 favorites]


Not just liquor; soft drinks have a nice, healthy margin as well. The restaurant pays practically nothing, depending on the deal they get from the distributor.

They mentioned the cost of ingredients making substitutions more expensive. But there's also a slightly elevated labor cost. It takes less time for a cook to assemble a standard dish that they make on autopilot a hundred times a week than it does to make a customized version.
posted by The Underpants Monster at 3:03 PM on January 17, 2018 [2 favorites]


I remember a friend of mine who started a pizza restaurant more than 20 years ago (still profitable so far as I know) told me that a banker he was talking to about a loan told him that "pizza restaurants and donut shops always make it."
posted by smcameron at 3:09 PM on January 17, 2018 [1 favorite]


"pizza restaurants and donut shops always make it."

Yes, I have always heard the conventional entrepreneurial wisdom was "start a unique business" but my town seems to support 3 or 4 new pizza places every year and I've seldom seen a pizza place here close due to lack of business.
posted by Cookiebastard at 3:24 PM on January 17, 2018 [1 favorite]


I'm surprised this doesn't discuss dessert. I thought it was a profitable thing, though not as much as drinks.
posted by Nancy Lebovitz at 3:30 PM on January 17, 2018


Only the Baan Thai dish includes all of the associated non-food costs. The food costs are only $7.58. More than the pizza and hoagie, but not that much.

Also I would like to eat all of those things immediately, please and thank you.
posted by quaking fajita at 3:50 PM on January 17, 2018 [2 favorites]


The price of cheese makes/breaks pizzarias.
posted by porpoise at 3:51 PM on January 17, 2018




The itemized breakdown is really interesting. I didn't love how quick many of the owners were to blame labor costs. On every one of the dishes other than the fettucine (which gave an honestly bonkers number that's hard to believe), labor is between 10 and 20% of the total cost, and adding 30% or whatever it's going to take when the minimum wage is $15 doesn't really make an enormous difference. It's about 50 cents on a $15 item. I think the problem is that labor is perceived to be a more flexible cost than some of the others, since it's a lot easier to pay a few individuals much less than the value of their work than it is to get shrimp for 50% cheaper or get your landlord to lower your rent.
posted by Copronymus at 4:18 PM on January 17, 2018 [11 favorites]


In my experience labor is the number one cost. Followed by rent/lease/services. Then food.

If your food costs are a significant fraction of your list sale price you're probably doing it very wrong. Even when you're running very lean and mean there's inherently a lot of waste in food service, and outside of expensive proteins or other special or bespoke ingredients there's almost always more than enough extra food to feed all your staff very well and send them home with leftovers.

Drinks are king of the profits, though, especially alcohol, soft drinks and coffee. Hell, the profit on a latte is pretty ridiculous. Maybe .10-15 for the cup, about .25 for the espresso and maybe another .25 for regular milk. Maybe .50 in multitasking labor. So, call it a 1.00. Large 16-20 oz lattes are 4.00 and up just about everywhere.

And a $5-6 decent bottled beer goes for about 0.90-1.25 or even less depending on your distributor, even in orders as small as a single case with the right distro. A $4-5 well shot can have a pour price as cheap as .25 cents of booze, not counting rent/labor/licensing and all that.

The huge problem with food/bev service and running restaurants is that none of your actual sales is reliably predictable. You look at the sales stats of any given restaurant, bar or coffee house and there's wild peak busy times and then hours of downtime between rushes. It's insanely difficult to staff appropriately, so you're almost always burning cash on being overstaffed and trying to get them to do lean forward busywork or you're direly understaffed even though everyone showed up on time with bells on, just because there's an unplanned 20 top throwing weird special tickets at the kitchen for the last two hours and knocking everyone and everything deep into the weeds.

And these kinds of rushes and doldrums map to weekly, monthly and yearly stats. Depending on where you are, winters tend to be very sparse for most restaurants, even with the holidays. Even larger cities like Seattle tend to have a lot more summer business due to tourism and people staying up and outside much later.

And if you pay attention to pricing, most successful restaurants, cafes and bars usually have a material cost/price factor of at least 3 on everything, if not 4 or more, and even then that's usually really slim and just doing some basic fair, equitable business of the sort where the boss/owner might actually take home less net pay than many of their staff and all the bills are getting paid, if only just in time.

I used to think that kind of price factor was ridiculous, profiteering price gouging but it's really not. It's barely squeaking by.

And if you've ever met any successful small restaurant owners, they basically run around with their hair on fire from the moment they wake up to whenever they go to sleep. I've seen one of my ex bosses go through crap like having to drive 2 hours to costco while she's basically continuously on the phone or voice to text ordering from sysco, trying to find replacements for one or more people calling in sick, tracking down due invoices for catering, trying to find replacements for ingredients that didn't get delivered by sysco that can't be bought at costco, making sure the band shows up and so on and on.

All. Day. Every. Day. 4-5 in the morning until it's done. Midnight? It's totally insane what some restaurant owners do and put up with. Two, three days of that kind of schedule and my head would spontaneously explode like a cup of icewater in a smoking hot pan of oil. I would just go "pop" like a fuse and there'd just be a whisp of smoke left where I was standing.

There's a reason why a lot of food/bev staff try to only work part time or fractional shifts, it's a crazy amount of work and stress. Doing it as a restaurant owner is all of that times ten, and you're basically "on" all the time shifting between guests, FoH, the backline and kitchen, suppliers, creditors and everything else. As an owner you have to switch between your warm and welcoming happy customer service face, your what the hell is wrong with my prep cook today face and your where the hell is Sysco face a dozen times a day, split seconds apart, as quick as walking through a set of swinging doors.

The truth is a lot of people do this and are successful at it because they're at least slightly insane workaholics and they actually get a lot of enjoyment out of a full house full of fat, happy people.

If you're doing it as an investment scheme, yeah, light your money and free time on fire. Hell, you might as well light yourself on fire while you're at it, because it's not an if but when until you get a burn scar you'll remember.

Actually, come to think of it... lighting a big pile of hard earned cash on fire, diving into it naked and rolling around in it while people scream the most alarmingly creative obscenities at you and whip you with floggers before having buckets full of lemon juice, pickle brine and boiling hot soup stock dumped on you to put it all out might be a really accurate distilled and condensed version of the experience of owning a restaurant.

That actually sounds like it might be more fun.
posted by loquacious at 4:24 PM on January 17, 2018 [59 favorites]


I remember a friend of mine who started a pizza restaurant more than 20 years ago (still profitable so far as I know) told me that a banker he was talking to about a loan told him that "pizza restaurants and donut shops always make it."

I grew up 10 houses down from a storefront that had 6-7 different pizza places in 20 years. Numero Uno (a successful chain at the time) spent the money to put in the pizza oven, then eventually went out of business. Over the next 17 or years, dumbass after dumbass said "pizza restaurants [...] always make it!, plus it already has an oven!".

The current place started out with pizza, but pivoted to Mexican food after a year because turns out that just having a pizza oven doesn't mean you aren't a restaurant dumbass.
posted by sideshow at 4:28 PM on January 17, 2018 [4 favorites]


WaPo suggests desserts aren't super profitable once you consider everything.

It seems like the big factor is table time, which makes sense -- if a dessert turns a $25 per person meal that takes 50 minutes into a $32 per person meal that takes 80 minutes, then the restaurant is losing out. However, this is only true if the table would otherwise be occupied. If you arrived at 5:30 and there's a line out the door, the restaurant could easily lose money serving you dessert, even if it's profitable when ordered at the end of the lunch rush or at 8:30 when there are only a handful of lingerers.
posted by Homeboy Trouble at 4:32 PM on January 17, 2018 [2 favorites]


this post is bad because it introduced me to the paper's sandwich review section and even though i just moments ago finished dinner i now want at least 11 sandwiches
posted by poffin boffin at 4:33 PM on January 17, 2018 [12 favorites]


How is there 40 cents worth of garlic in the baan thai vermicelli? Are they using half a bulb and just paying supermarket prices?
posted by skewed at 4:33 PM on January 17, 2018 [2 favorites]


really tho the fact that someone would look at a 1-2 dollar price increase, knowing full well it was to offset the cost of the minimum wage rising, allowing hundreds of thousands of other people to earn a living wage, and say not "welp, i guess i can't afford to have this as often as i'd like" but instead "I WILL BOYCOTT YOU LOUDLY AND ANGRILY" is not particularly unexpected to hear but it's still fucking gross and stupid.
posted by poffin boffin at 4:43 PM on January 17, 2018 [16 favorites]


At the deli I saw someone say the teenaged teller about price increases “boy you guys must be making a killing” and the teen teller snapped and went “yeah that’s why my 70 year old grandfather works 8 hours a day here Cause we’re doing so well.”
posted by The Whelk at 5:27 PM on January 17, 2018 [40 favorites]


How is there 40 cents worth of garlic in the baan thai vermicelli? Are they using half a bulb and just paying supermarket prices?

Yeah, I'm going to go with the idea and experience that some of these are wildly inaccurate or inflated. Owners/cooks tend to naturally try to estimate unit cost prices up in their head for good reasons.

It's also not uncommon of to think in terms of prep time or wastage in cost estimates.

This is what good kitchen managers and caterers do, is to naturally think of the full sunk cost estimate, not just material/food cost. Because they have a working knowledge of how much time/work it takes to prep or do just about anything in a kitchen, because you have to be able to do this in order to write marching orders and prep sheets to, say, make prime rib and baked potatoes happen for 300 people at the same time. There's a lot of timing and work flow involved.

That baan thai vermicelli looks pretty fancy, but not 40 cents worth of bespoke magic garlic fancy, and the rest of the list looks rather inflated. They're probably using the pre-minced or pre-peeled stuff in a jar like most kitchens do.

Honestly I have never seen anyone actually peel or dice garlic in a commercial kitchen unless it was like, whole roasted garlic heads or some aesthetic need for unprepared garlic, which is basically never. It's not just you in your home kitchen, garlic is just a huge time suck and pain in the ass and most kitchens don't have time for that. Onions, shallots and stuff, sure, kitchens prep them because they store better that way, but peeled and pre-diced garlic is a thing for a reason, because it's honestly better to let machines peel it for you when you can go through a whole gallon jar of pre-peeled garlic cloves in a week or less.

I'm guessing, but I wouldn't even be surprised at all to find out that Sysco doesn't actually carry unpeeled/dry garlic on their main produce catalog list. I've never even seen unpeeled garlic in the produce walk-in of a kitchen. I'm guessing it exists at really upscale craft-centric restaurants, but I doubt you'll find it in most commercial kitchens at anything below the $30-40 plate or entree level. It just takes way too much damn time.
posted by loquacious at 5:33 PM on January 17, 2018 [16 favorites]


One missing piece is "market segmentation"... You need your cheap stuff for your cost-conscious crowd, your touch of luxury for your it's-a-treat crowd, etc., and low markups on super popular items can be isn't as good as a.moderately well selling item with a higher mark up...And, as locquacious says, labour costs include all the slow time when your just setting up, cleaning up, etc.
posted by chapps at 6:08 PM on January 17, 2018 [1 favorite]


Heinlein reference FTW
posted by NedKoppel at 6:21 PM on January 17, 2018


I find this kind of detailed cost analysis absolutely fascinating, and I've been deeply interested in the art and science of food for 20 years now. You'd think those two things would go together to say "follow your bliss and open a restaurant!!" but instead they end up more settling out to "the absolute most senseless thing you could do, as a person with bills and the hope of a future, would be to open a restaurant."
posted by penduluum at 6:25 PM on January 17, 2018 [3 favorites]


And if you've ever met any successful small restaurant owners, they basically run around with their hair on fire from the moment they wake up to whenever they go to sleep.

Also there's this, which is gospel truth.
posted by penduluum at 6:27 PM on January 17, 2018 [3 favorites]


I've never worked in a restaurant, but I've always been interested as an outside observer in watching how different restaurants grapple with the problem of profitability.

There are two guys in my neighborhood who have opened a string of successful restaurants around town. In some cases, they open 2+ locations of the same place, but mostly they're doing different concepts at each. But they had one location, right in between their first and second store, that they could never make work. It started out as a combination of Southern and Mexican food (this is in Texas, so not as weird as it sounds). Then they reconcepted it to be an Italian place. Then a pizza joint. Then a bar that served, like 3 kinds of pizzas and nothing else. It was obvious they were looking for the magic formula and never found it. That location is still a restaurant, but not theirs. It seems to be doing well (it's pretty expensive), but the way traffic flows around it makes the location a bit of a challenge.

There's the wine-bar/restaurant that started out with a limited but interesting menu, and every time I went there, they had chopped a few items off the menu. I think they're down to maybe 5 items. It seems that not just cost of food but diversity of food is a big driver of overall costs. A lot of places seem to experiment with menu design, looking for ways to do more with less. They don't want to stock any ingredients that goes on just one dish that not everyone is ordering.

There's the cafe that serves a dish I love, with pasta and chicken and sun-dried tomatoes in cream sauce. Every time I would go there, I'd order it. Starting with the Great Recession, I noticed that every time there would be a little less chicken and a little less tomato. Eventually I stopped going there.

There are all the newer places that simply don't have full table service, to cut down on staffing needs.

There's one place that specializes in burgers. Incredibly popular. They have an order counter, and they clearly have done some kind of sophisticated workflow and traffic-management analysis because they move customers through that joint like an assembly line. They've got a lot of staff dedicated just to customer-wrangling, but it seems to be working. I've only been there once when there wasn't a line out the door.

There's one place in town that has gone in the opposite direction: they went from having an order counter to full table service. They also don't allow tipping (there's no tip row on credit-card slips). Their prices do look a little high at first, but they're all upfront. They always seem to be busy.

And I remember going to a place in another town, a beloved little restaurant that gets written up in all those "10 places to eat" lists. They had no concept of efficiency. They'd seat you (after your hour-long wait) and only a while later think to bring you a menu. They were leaving money on the table, figuratively speaking.
posted by adamrice at 7:15 PM on January 17, 2018 [2 favorites]


Their prices do look a little high at first, but they're all upfront.

When I was a kid I liked going to Orange Julius because their menu prices were tax-included.
posted by The Underpants Monster at 7:40 PM on January 17, 2018 [1 favorite]


Now we need to look at the cost breakdown of the food wholesalers. I wonder how much profit they're taking that drives up restaurant costs. From what I've read there aren't many players in that business so they have quite a bit of power to set prices (see the mentions of Sysco in this thread).
posted by HarshLanguage at 7:49 PM on January 17, 2018 [3 favorites]


I worked bar and restaurant for 25 years. Given the choice, I would never do food. Overhead, labor, inventory control and start-up costs are a killer. Without maniacal controls in place you will fail. Bars are dead stupid easy in comparison. And far more profitable. But if someone held a gun to my head, I would opt for a hash house. Grill, fryer, a set and unchanging menu, simple inventory with low perishability and several superb short-order cooks...
posted by jim in austin at 7:53 PM on January 17, 2018 [3 favorites]


But if someone held a gun to my head, I would opt for a hash house. Grill, fryer, a set and unchanging menu, simple inventory with low perishability and several superb short-order cooks...

Dan's Place 2, around the corner from my house is a perfect example. Here's their grill.
posted by mikelieman at 8:43 PM on January 17, 2018 [1 favorite]


Dan's Place 2, around the corner from my house is a perfect example. Here's their grill.

That looks like the line my first job was at. There were things I enjoyed about that job, but grease burns and stink weren't among them.

I made my way up to running a restaurant. I left that to drive dump truck. Driving truck is a much better job. I wouldn't mind owning a restaurant, in theory. There's a certain cachet to it, after all. Would never again want to run one, though.
posted by Pogo_Fuzzybutt at 9:20 PM on January 17, 2018 [3 favorites]


The price of cheese makes/breaks pizzarias.

the king of mozzarella, previously
posted by j_curiouser at 2:16 AM on January 18, 2018 [2 favorites]


Eighteen bucks for a hoagie? Come to Philly. Six bucks at Wawa, $9 at Primo.

Mangialardo's provides the best Italian sub in the area (Washington Post link) and offers a huge delicious cold cut sandwich for $8. Their hours can be a little inconvenient though.
posted by exogenous at 6:08 AM on January 18, 2018 [2 favorites]


chavenet: "I've always wondered how BYOB restaurants survive without the extra income from alcohol sales.

Corkage?
"

Yeah but that's usually only $5 a table vs. the huge markup that restaurants who can afford to serve alcohol charge you for a bottle of wine.
posted by octothorpe at 6:13 AM on January 18, 2018


When restaurants have BYOB/corkage that almost always means they failed to obtain a liquor license, either by failing or being denied on application or running out of money to pay the fees before opening.

It's never a first choice, and the corkage fees are definitely trying to recapture lost revenue from drink sales, as well as remain attractive and marketable to customers.

I've sat in on at least three bullshit/brainstorm sessions with restaurant owners either as an employee, potential employee or friend where the phrase "Well, we could do BYOB/corkage..." is used and it's always been in response to "We're not getting our liquor license in time or at all, we're due to open, we're burning cash so what the fuck do we do now?"

If a restaurant previously had a liquor license and moves to a BYOB or no alcohol business model, it usually means they screwed up pretty bad and ran afoul of serving laws and regulations. Which in most counties is really hard to do, like you have to have multiple violations and fines against your license to have it revoked while operating. And/or they're running out of money. Considering how relatively small the fees are on most licenses and how important liquor is as a profit center this is also usually a sign of a restaurant doomed to fail soon.
posted by loquacious at 7:01 AM on January 18, 2018 [4 favorites]


Mangialardo's provides the best Italian sub in the area (Washington Post link) and offers a huge delicious cold cut sandwich for $8. Their hours can be a little inconvenient though.

Future meetup idea: Mangialardo's v A Litteri THROWDOWN???
posted by capricorn at 7:15 AM on January 18, 2018


(also v The Italian Store in Arlington)
posted by capricorn at 7:16 AM on January 18, 2018 [1 favorite]


Also (I'm allowed to derail my own FPP to talk about Italian subs, right?) I realize both A Litteri and The Italian Store are in TFA that you linked, exogenous, but Italian Store deserves another chance with the hard roll. That place is so good that after one visit, my uncle immediately had something like 40 lbs of meat shipped from it to his home in Washington. That's Washington state.
posted by capricorn at 7:20 AM on January 18, 2018


When restaurants have BYOB/corkage that almost always means they failed to obtain a liquor license, either by failing or being denied on application or running out of money to pay the fees before opening.

Here in PA a liquor licence can cost as much as $250,000 so lots of places don't have that kind of capital.
posted by octothorpe at 7:23 AM on January 18, 2018 [5 favorites]


A DC area Italian sub meetup sounds great! There's no dine-in at Mangialardo's but we could convene elsewhere with subs from the contenders. I know several of the local breweries allow outside food. It'd have to be a weekday since Mangialardo's is only open then.

Regarding corkage, the last time I did that, the restaurant charged $20 (Rose's Luxury in DC which has a liquor license). It was a nice garage wine from my brother's production — the server appreciated a small glass of it as well.
posted by exogenous at 7:40 AM on January 18, 2018 [2 favorites]


Here in PA a liquor licence can cost as much as $250,000 so lots of places don't have that kind of capital.

Right, I was going to note artificial scarcity and dry counties, but these tend to be extreme cases.

The license and insurance isn't a small cost in most other jurisdictions, either, but I'm specifically talking about venues that planned on having a license in their business plan and profit models.

Failing to obtain the license or having it revoked while operating is effectively a restaurant torpedo. It'll sink most venues in a hurry.
posted by loquacious at 7:46 AM on January 18, 2018


Pizza....

The second best Mexican food restaurant in Shady Cove was the last of three Mexican food places to inhabit the building that went tits up. Now the building houses a thriving Pizza joint.
posted by mule98J at 10:46 AM on January 18, 2018


The owners who are most successful here in my home town all have several restaurants that are very specialized. There'll be the gourmet place that is expensive and only serves one or two set menus. The fish place that has maybe 4-5 appetizers and 5-8 entrees. The pizza place that has pizza and salad and maybe three pre-made desserts. Etc. So they minimize waste by making guests choose in advance what they want to eat. And yes, they mark up the drinks outrageously. At the end of the day, it gets very safe and a bit bland, but it is great for going out with friends — everyone knows the deal and if you don't like pizza you don't go for the pizza place party. Also service get living wages so you don't have to worry about tipping.
posted by mumimor at 12:09 PM on January 18, 2018 [1 favorite]


Menu pricing? This is where I am a Viking.* I ran a very short lived place in Tokyo (building got torn down just as things were really getting good), then another short lived place (terrible choice in partner spawned by desperation). Handmade sausages, burgers, and pulled pork. Menu pricing got to the point where I could do it in my head, and since Mrs. Ghidorah and I were the only staff, labor costs weren't included (which, in hindsight is stupid, never do that to yourself).

Pulled pork sandwich:
Bun: ¥41
Coleslaw:¥10-15
Homemade BBQ sauce: ¥10-15
Fries: ¥28
80g of pulled pork: holy shit, how long do you have?

Pork shoulder goes up and down throughout the year, but a case of Canadian pork from Costco goes between ¥75~¥100/100g. Let's say ¥85 as a base price. The process of smoking pulled pork is very, very lossy, leaving you with a finished product roughly 59% of green weight. That means that, by weight, you're losing 41% of the meat you bought, due to evaporation, squiggly bits you don't want in the meat, and so on. So let's say my I'm able to run seven pork shoulders in one go. That's about 16kg of pork shoulder, at ¥13600. That's a seven hour cook with two smokers running, so let's say I'm going to use 6kg of charcoal, at ¥640. I'll be using a mix of apple and hickory to smoke it, so I'm looking at two blocks of each out of three block sets that run ¥400 each, so we're looking at ¥533 for just the smoke wood. There's the spice rub, which I'm going to be honest, I really, really should have gotten around to pricing, but...

What I'm left with is ¥14773 for 9.44kg of meat, which takes roughly 9-10 hours to produce (pulling pork is terribly time consuming, while smoking it allows you to do other things, like making sausage), but we're doing this ourselves, so hey, no labor costs. That gives us pulled pork at ¥156.5/100g, or nearly twice the cost of the pork, again, all without labor costs of any kind. So that 80g of pulled pork, that's ¥125.

Total cost of our (really, really popular, once called the best in Tokyo) pulled poem sandwich: ¥224ish. We sold it for ¥1000, which was a great profit margin, but also tried to take into account how much (unpaid) work went into it. Having the profit margin on our pork sandwiches allowed us to bear the cost of our burgers (our most popular burger was a bacon cheese burger topped with pulled pork and jalapeños, with everything hand made except the bun) which were regularly over the target of 30% or lower. As for suggestions of just raising prices a bit, people will complain about your prices at any level, but will become incensed at any price increase.

Through a weird confluence of events, I'm in the middle of writing a series for the Japan Times on how opening a restaurant is a terrible idea (there's a link in my profile page to the first one). The editor asked to me to rework my last article on how hard it is to find staff because it was too bleak and offered no hope.
posted by Ghidorah at 5:53 PM on January 18, 2018 [15 favorites]


The editor asked to me to rework my last article on how hard it is to find staff because it was too bleak and offered no hope.

I see the editor is blissfully unaware of the true nature of the restaurant industry. That must be really nice.
posted by loquacious at 6:25 PM on January 18, 2018 [5 favorites]


I am sure that Ghidorah's pulled poem sandwich was truly, best beloved, a gustatory treasure beyond price, tho
posted by mwhybark at 6:48 PM on January 18, 2018 [6 favorites]


> but then the restaurant owner says that they don't make any profit off it

Why don't they raise the price, then? If it's the most popular item on the menu, people aren't going to stop ordering it.


Most likely because yes they are making a profit off of it.
posted by 922257033c4a0f3cecdbd819a46d626999d1af4a at 7:12 PM on January 18, 2018


(Typing on phones gets tricky after a certain point with the mobile site and the text window, especially if you try to scroll back up to edit. Also, autocorrect. Also also, the pulled poem sandwich gets all the awards, is studied by college students for years, yet never, ever brings in any money)
posted by Ghidorah at 7:14 PM on January 18, 2018 [7 favorites]


Most likely because yes they are making a profit off of it.

I know reflexive denialism is popular, but maybe we could take the facts stated in the article as true until evidence gets presented saying otherwise? (More directly: You're calling them a liar? Where's your proof?)

More likely is that they're treating it as a loss leader and are hoping that the people who order it will also order alcohol, appetizers, and maybe even dessert.
posted by Lexica at 7:41 PM on January 18, 2018 [4 favorites]


As Lexica says, the loss leader is a long standing part of pretty much any business built on getting people to physical come to a place, retail, restaurant, whatever. If they're barely breaking even on that dish, hopefully they're making it up with their other dishes, sides, and drinks, because otherwise, they're screwed. I've seen incredibly busy restaurants go under because they can't manage a profit, even with the volume of sales. Meanwhile, any time you raise prices, you lose customers, deal with complaints online, and now even more importantly, you see your ratings on Yelp and other sites slide. That's why it's incredibly important to set your prices well early on, and why changes in the market can outright kill you. Right now in Japan, we're dealing with the after effects of a rainy season where it didn't rain, followed by the hot and dry season that was cold and featured unending rain. For most people, that's a nuisance. For a reataurant, that means you're looking at a single head of lettuce going from ¥200 to ¥500, with similar jumps for most vegetables. Given the razor thin margins, and how careful you need to be when calculating your prices, a sudden price increase like that can end you. In general, food prices have been soaring over the last twenty years, and restaurants are bearing the brunt of that, with customers that cry foul at any price increase.

The basic fact is that people have been spoiled by unsustainably low prices for dining out. The low cost of dining out has been built on the backs of people grinding their bodies to dust for minimum wage or just above. If people are at all interested in the idea of a liveable minimum wage, they need to understand that prices will need to rise.
posted by Ghidorah at 8:43 PM on January 18, 2018 [5 favorites]


I'd guess a $15 -> $15.75 hike would have a minor influence on the sale of the most popular thingumy, but it doubles the margin.

Coming in late but didn't see anyone address this in detail.

When most of the costs are fixed costs, as in these examples, the cost per sale goes up if sales go down at all. So the level of the "minor influence" is critical.

If you make the simple guess that upping the price by 5% reduces sales by 5%, that all your fixed costs (calculated per sale) go up by a little more than 5%. Assume per the article 25% as "food costs" in the article and everything else is basically fixed in the short term. Then your margin go from 75 cents per sale to a dollar per sale with this increase.

Not horrible but the kicker is it doesn't make much to make your margins go negative. If you keep 90% of your customers you'd make a smaller profit per sale, and if you keep 85% you are now losing money with each sale.

Actually I lied, the real kicker is how hard it must be to know what's going on. Sales vary by day, week, month and season. I couldn't handle it. A 10% swing in customers can kill you but you are getting more variation than that week to week already. What's a trend? When do you panic? If you are an independent owner struggling how do you know if you raise prices or lower prices? Does shutting down for a day each week make sense?

I completely get the owner who said they want lines out the door every day. It must give a sense of predictability to have the feeling there's a lot of extra demand.

really tho the fact that someone would look at a 1-2 dollar price increase, knowing full well it was to offset the cost of the minimum wage rising, allowing hundreds of thousands of other people to earn a living wage . . .

The owner in the article seems sincere but in general I don't trust businesses who say "give me an extra two bucks and it's all going to go to my employees." So knowing full well may not be governing attitudes. There's a specific example with a local shop I know that added a 15% Obamacare surcharge that I reacted quite negatively to, although in retrospect my feeling the owners were quite wealthy was totally evidence free.
posted by mark k at 10:19 PM on January 18, 2018


mark k, in terms of how hard it is to wonder what's happening, there's nothing worse as an owner/operator of a restaurant than waiting for someone, anyone to walk through the door. The longer it lasts, the more crushing it becomes. Turning around the open/closed sign and sitting there, wondering how long you're going to endure encroaching bankruptcy, slow death, and the humiliation of realizing just how foolish you've let yourself be... it's not anything I'd wish on anyone.
posted by Ghidorah at 6:44 AM on January 19, 2018


I started reading the comments and my former self that was a restaurant GM in a major city for years started to get pretty angry and I started the draft of a massive comment to set the record straight on the wildly wrong misconceptions being tossed about here.

Then I got to loquacious's comment. Nailed it.

In conclusion - restaurants aren't the problem. The requirement to eat what would be a ~$60 sandwich (if FOH and BOH staff were treated humanely with wages and insurance, if food was ensured to be of a minimum quality and sources were somewhat ethical, and if owners and managers could earn a reliable living and not be psychotic basket cases all the time from the stress) for $12 is the problem.

We won't pay what it costs for a sustainable restaurant industry. We are instead chewing through human capital and exploitative food sourcing systems in order to enjoy the short term benefits. In this, as in so much else.
posted by lazaruslong at 7:10 AM on January 19, 2018 [4 favorites]


The basic fact is that people have been spoiled by unsustainably low prices for dining out. The low cost of dining out has been built on the backs of people grinding their bodies to dust for minimum wage or just above.
jumping off that, and in affirmation of lazaruslong's comment above, in my case it wasn't so much the whole body as just the liver
posted by iffthen at 6:19 AM on January 20, 2018 [2 favorites]


Heard that. It's only now, a year and change free from the industry, aided by better mental meds, that I've been able to start repairing the damage that 10 years, 4 as GM, did to me. Getting alcohol under control was priority #1. As it turns out, not every visit to a bar has to include an opening fernet, a second fernet with the bartender, and one (possibly two) closing fernets peppered in among the pints. The stress was poison, the hours insane (70+ is pretty normal in management), the culture frequently toxically intolerant, and all for...what?
posted by lazaruslong at 5:23 PM on January 20, 2018 [2 favorites]


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