Restaurant Prices

[TexLaw]

I don't see restaurant prices fluctuate much at all. They HATE raising prices, but they still have to put up with fluctuating (and often increasing) costs. They are happy to take some extra profits when costs are lower to make up for times when costs are higher.

As for BBQ and burgers, folks are lining up around the block for that sort of thing. That's what someone else mentioned, i.e., folks pay it. Beef prices still haven't come down, also. They are predicted to come down over the year, so let's see what happens.

The nasty salad buffet has been holding the line at $9 for years.

As far as oysters go, this was a bad year in Galveston Bay.

Yep, I'm happy to enjoy some of the lower prices I'm seeing at the grocery store.

 

[ackvil]

Gas prices may have gone down but other prices have gone up. Labor is one of the two major expenses of any restaurant. Examples of labor costs include salaries, wages, benefits, unemployment taxes and service commissions. These costs have climbed in recent years as many companies have had to find ways to offset other expenses which have gone up and which they have no control over. For example, taxes, insurance, employment expenses, rent, etc. have all climbed in recent years. With the move to increase minimum wages in certain locations and to disallow tip credit, the employment costs have increased.

In addition, the cost of new equipment or repairs have increased significiantly.

Beleive it or not, most restaurants have a profit margin of less than 3%.

 

[4ever3]

Beleive it or not, most restaurants have a profit margin of less than 3%.

Ive read and heard this may times, and every time I think about the times I've paid $4.95 for a side house salad with a bit of iceberg lettuce, a cherry tomato and a squirt of dressing. If there were really less than 3% margins I can't imagine why anyone would bother opening one...

 

[alpster]

Beleive it or not, most restaurants have a profit margin of less than 3%.

I literally have a hard time swallowing this. LOL If eating establishments are are only making 3%, they aren't controlling their costs very well. Restaurant "A" sells a bottle of beer for 500% more than the "retail" liquor store "B" in the same shopping center (quite common here), who pays the same rent per/sf and insurance and employees, etc. somethings amiss. Realizing the cost of doing business is not the same, I humbly doubt that any business can operate on a 3% margin. The slightest fluctuation in costs, materials or regulation would doom the business. JMHO.

 

[davent]

Grocery stores, just over 1% profit margin.

https://www.google.ca/webhp?sourcei...=1&ie=UTF-8#q=profit+margin+of+grocery+stores

 

[ackvil]

I literally have a hard time swallowing this. LOL If eating establishments are are only making 3%, they aren't controlling their costs very well. Restaurant "A" sells a bottle of beer for 500% more than the "retail" liquor store "B" in the same shopping center (quite common here), who pays the same rent per/sf and insurance and employees, etc. somethings amiss. Realizing the cost of doing business is not the same, I humbly doubt that any business can operate on a 3% margin. The slightest fluctuation in costs, materials or regulation would doom the business. JMHO.

You can read the figures here. The 3% figure is net, before taxes. Some successful, high profile restaurants may have a higher rate of return than other restaurants such as some of the fast food chains. Keep in mind that according to a study by Cornell Universty more than 60% of restaurants fail in the first year. they are open and the bankruptcy rate for restaurants is extremely high. Also, your assumption that all rental rates are the same per square foot.is not accurate. A large retailer such as Wal-Mart, Target, grocery chains, etc. pay far less per square foot than smaller retailers and other retailers do. There are many variables in rental rates and everything is up to negotiation.

In addition, insurance and employment costs are not the same for everyone. Certain enterprises have much higher insurance rates because, for example, of their worker compensation experience, the number of employees needed, etc. A self-service retailer or specialty retailer such as a jewelry store use far fewer employees than a restaurant. I worked for a large retailer for many years. This company had general merchandise stores as well as specialty stores. The variance in employment cost was incredible and dependent on the nature of the retail establishment. Even interst rates banks charge vary according to the nature of the business.

Net margin rates differ significantly. As davent points out, grocery stores have the lowest profit margins at 1%. When you sell $10 million worth of merchandise, 1% gives a nice profit. On the other hand, some retailers such as jewelry stores have profit margins of about 50%.

 

[DoctorShavegood]

After working my butt off last weekend at the cookoff smoking brisket, ribs and chicken, I've learned the value of a why brisket is $20 a pound.

....good brisket is worth every cent.

 

[ackvil]

After working my butt off last weekend at the cookoff smoking brisket, ribs and chicken, I've learned the value of a why brisket is $20 a pound.

....good brisket is worth every cent.

Brisket is great smoked. Love it.

 

[ouch]

Whenever I hear the old saw about 3%, two things immediately come to mind.

1) I have no doubt that restaurants, particularly those that receive a good portion of their receipt in cash, are absolutely 100% above board in reporting their finances accurately.
2) Why would anyone have a business that took in a million a year in revenue if they were to only net the same 30K they would get make working long hours at MacDonald's?

The simple answer is that it's bull****. Having said that, there is no doubt whatsoever that the restaurant business is hard, grueling, thankless work. When you eat a brisket sandwich, you're not only paying for the food on your plate, you're paying for all the trimmings that were thrown away as well as for the guy who hauls off the trash. You're paying for latex gloves that were used once plus the deodorant to get the stank out of the men's room. The list of expenses is endless.

 

[DoctorShavegood]

Whenever I hear the old saw about 3%, two things immediately come to mind.

1) I have no doubt that restaurants, particularly those that receive a good portion of their receipt in cash, are absolutely 100% above board in reporting their finances accurately.
2) Why would anyone have a business that took in a million a year in revenue if they were to only net the same 30K they would get make working long hours at MacDonald's?

The simple answer is that it's bull****. Having said that, there is no doubt whatsoever that the restaurant business is hard, grueling, thankless work. When you eat a brisket sandwich, you're not only paying for the food on your plate, you're paying for all the trimmings that were thrown away as well as for the guy who hauls off the trash. You're paying for latex gloves that were used once plus the deodorant to get the stank out of the men's room. The list of expenses is endless.

My latex gloves had holes in them at the end of the cookoff. I need a pair of chainmaille gloves.

 

[ackvil]

Whenever I hear the old saw about 3%, two things immediately come to mind.

1) I have no doubt that restaurants, particularly those that receive a good portion of their receipt in cash, are absolutely 100% above board in reporting their finances accurately.
2) Why would anyone have a business that took in a million a year in revenue if they were to only net the same 30K they would get make working long hours at MacDonald's?

The simple answer is that it's bull****. Having said that, there is no doubt whatsoever that the restaurant business is hard, grueling, thankless work. When you eat a brisket sandwich, you're not only paying for the food on your plate, you're paying for all the trimmings that were thrown away as well as for the guy who hauls off the trash. You're paying for latex gloves that were used once plus the deodorant to get the stank out of the men's room. The list of expenses is endless.

So if it's such a cash-rich business, why do so many go out of business within 3 years and so many fail the first year? And as far as cash, does anyone go to a higher price high priced restaurant and pay cash? Other than Peter Luger, I don't know of many restaurants that survive on a cash business. Keep in mind that the restaurants in the NYC metro area are not typical of what is the case throughout the U.S. The typical restaurant in the U.S. cannot charge $100 for a steak dinner and still be in business as some can do in Manhattan or some other big cities.

McDonald's in the restaurant industry is an example of what the figures look like. The average McDonald's restaurant does $2.7 million in business. The average operating income of such a restaurant is $153,900. The retail company I worked for at one time was the largest franchisee of Burger Kings in the U.S., operated coffee shops type of diners in retail stores, cafeteria, bargeque restaurants, and other retail concepts. Most of the business in these restaurants was cash and since this was part of a large retail chain was rung up through a cash register.

As an example, this is what McDonald's shows to persons who plan to invest in one of their restaurants.

Because there are so many fast food restaurants I am sure they drive down the average profit margin. However, preconceived notions and subjective opinions without actual figures don't carry much weight.

 

[cleanshaved]

Not trying to dispute the figures but this leaves me thinking someone is doing well from it.

http://www.dailymail.co.uk/news/art...as-use-Lamborghini-Ferrari-deliver-meals.html

 

[Dachshund63]

To answer your question gas is only part of the cost of it. And the lower prices do help. The main problem(s) has been the droughts in Texas and California, two of the bigger areas for our beef industry, there was also flooding in Australia a few years back and they are a big beef producer. Combined with several waves of things like swine flu and bird flu which destroyed a lot of livestock and therefore raw product. The result has been a lower supply for an increasing demand as many countries around the world have also increased their beef, poultry and pork intakes. The droughts have also effected vegetable and fruit crops as well. Gas is only a part of it.

 

[Deltaboy]

I am seeing more coupons for Restaurants in my area in the Sunday Paper.

 

[auk1124]

When you eat a brisket sandwich, you're not only paying for the food on your plate, you're paying for all the trimmings that were thrown away as well as for the guy who hauls off the trash. You're paying for latex gloves that were used once plus the deodorant to get the stank out of the men's room. The list of expenses is endless.

You are obviously eating at a different class of BBQ joint than I am, if yours are spending money on latex gloves and bathroom cleaner.

 

[DoctorShavegood]

You are obviously eating at a different class of BBQ joint than I am, if yours are spending money on latex gloves and bathroom cleaner.

+1 Most good BBQ joint's around here don't have a bathroom...or a roof for that matter.

 

[ouch]

So if it's such a cash-rich business, why do so many go out of business within 3 years and so many fail the first year? And as far as cash, does anyone go to a higher price high priced restaurant and pay cash? Other than Peter Luger, I don't know of many restaurants that survive on a cash business. Keep in mind that the restaurants in the NYC metro area are not typical of what is the case throughout the U.S. The typical restaurant in the U.S. cannot charge $100 for a steak dinner and still be in business as some can do in Manhattan or some other big cities.

McDonald's in the restaurant industry is an example of what the figures look like. The average McDonald's restaurant does $2.7 million in business. The average operating income of such a restaurant is $153,900. The retail company I worked for at one time was the largest franchisee of Burger Kings in the U.S., operated coffee shops type of diners in retail stores, cafeteria, bargeque restaurants, and other retail concepts. Most of the business in these restaurants was cash and since this was part of a large retail chain was rung up through a cash register.
As an example, this is what McDonald's shows to persons who plan to invest in one of their restaurants.

I agree with those figure 100%. Why, I would estimate that my local McDonald's must spend at least $5,400 on linen for me alone.

 

[ddown]

Livestock doesn't eat gas. Corn's still up Federal subsidies are base on gas prices before this slide. Corn affect feed, which affects meat,milk,baked goods and cereals. full circle.

 

[Deltaboy]

I have noticed that Fast Food has gone up some with all that we need more pay movement.

 

[Edcculus]

I literally have a hard time swallowing this. LOL If eating establishments are are only making 3%, they aren't controlling their costs very well. Restaurant "A" sells a bottle of beer for 500% more than the "retail" liquor store "B" in the same shopping center (quite common here), who pays the same rent per/sf and insurance and employees, etc. somethings amiss. Realizing the cost of doing business is not the same, I humbly doubt that any business can operate on a 3% margin. The slightest fluctuation in costs, materials or regulation would doom the business. JMHO.

Alcohol markup is actually the only thing restaurants really make any money on. We recently went to a pizza place in town that doesn't serve alcohol. I actually didn't know before going, or else we would not have gone! I was telling my mother in law about it because she is in the restaurant biz. Her reply was "wow, how they make money?"