That is what I was trying to express by “high risk”: most restaurants fail. We are probably saying the same thing.
I also find your remarks about bars being less risk (the people I new who got rich were running a bar) and chain of restaurants being the main way to make money. An enlightening discussion, thank you.
Well my contention was more with the “high return” and hard work being rewarded part. Something like 60% of US restaurants shutter within the first year. And 70% in 5. NYC is even worse with 80% closing within 3 years.
Not all of those that remain bring “high reward”. Most of them are in the “some one’s making a middle class income” bracket. So in terms of an investment restaurants are incredibly high risk for low to moderate return at best. And the ones that survive and succeed can’t be the only ones where people are working their asses off, or the places where people are working hardest. Those numbers are just too high. There’s very little way to guarantee or make your bar or restaurant successful.
Just as an example how rich did you’re friends get? Cause noone’s becoming a billionaire in the restaurant business (without founding a Starbucks or Chili’s style chain).
In terms of how restaurants are as an investment its likely they would have come out much richer having simply dumped the same amount of money over that time span into simple investments like index funds. I know that largely wasn’t your point, but I’m interested in countering this persistent idea that restaurants are money makers. I run into dozens of people a month who think restaurants are a safe or smart place to put their money. Or who think a restaurant is a sensible way to get out of the rat race. Take what you’ve earned, quit your job and live the high life in the restaurant business they say!
The thing to remember is that unless you are in the resto business currently, and plan to stay there forever. Never put money into a restaurant. Cause that money will be GONE.
This is true for any industry, really. Especially when you consider the limited downside: an index fund could go to $0 before you have a chance to cash out, but it won’t go below that, whereas a restaurant (or factory, or office) will keep racking up expenses long after the capital investment is gone.
[quote=“Ryuthrowsstuff, post:50, topic:99152, full:true”]
Just as an example how rich did you’re friends get?[/quote]
Enough to buy a dozen flats or so and live from the rents.
But that was 40 years ago and they could own the place where they worked. Which is what I wanted to say: this kind of job is inherently high reward (if you belong to the few who are successful - high risk!), but in today’s economy the potential reward go to the landlords. Basically, we don’t disagree: I describe then when you describe now.
That’s the thing I don’t think it is. I think its inherently low reward. With occasional exceptions. 40 years ago things were much different. I had an uncle who did the same thing 50 years ago using the proceeds from a 15 year stint with the NYPD. Land was significantly cheaper then, and he was smart enough to snap up rental buildings and vacant lots in areas adjacent to brisk tourist areas (that weren’t tourist areas themselves yet). I have another uncle who owned a very successful Irish Pub in the NYC area during the same time period. He did very well for himself. Put 4 kids through college, owned multiple homes. And spent the last 25 to 30 years working exclusively as a professional bagpiper (not a job that pays). But he was hardly “rich” by most conceptions of the word. Upper middle class more like.
So, adjusted for inflation, someone now who worked really hard and got really lucky could possibly put 2 kids through community college, rent a 2 bedroom apartment, and retire by 85?
When I was young, I worked with an older grocery store stocker who had put 2 or 3 kids through college, bought a house or two, and vacationed in the Caribbean every year. On a grocery store stocker’s pay. Sounded relatively rich to me at the time, and I can’t imagine that happening now.
I think there’s also an issue that eating out, which should be a luxury / occasional expense, is an everyday thing here. Because of the fuckeduptededness in our economy, where we subsidize one area and offset another, stuff that shouldn’t be profitable is, and vice-versa.
Hell- I like to cook, and still end up eating out 10 times a week, largely because of time and money issues.
As always, a lot of nuance disappears under the label “middle class”.
To me, middle class means “if you’re thrifty, lucky and work hard, you might be able to pay off the mortgage on an inexpensive basic home over a thirty year period”.
If you can afford a down payment, you’re already better off than most. If “investment property” is a feature of your life, you’re well on the way to petty aristocracy.
It’s highly subjective, of course. Where would you put the upper boundary of “middle class”?
Where ecconomists put it.
The concept of a middle class is not bound by being either in the middle of the distribution. Nor by how many of them there are. Otherwise we wouldn’t be talking about a shrinking middle class. So “having more than most” does not disqualify one as middle class. So much as a middle class person having more than most indicates a problem with income distribution. The middle class by definition are those who are not rich but also not poor.
And the point of those stories is that what’s possible on a middle class income is vastly different than it was even a few decades ago. These are guys, recently passed away in their 90’s. Who never made an income more than about $60k adjusted for inflation during their active careers. The one with the properties made well more than that when he “retired” early to be a land lord. And his properties jumped in value starting in the 80’s and 90’s. Neither would have been able to pull off what they did today, at the same incomes, in the same places.
In terms of “rich” we’re typically talking about people with wealth large enough to be well off before they approach retirement. For whom these things are not a lucky break or a smart move or a way up and out, but the default. Taxation, politics, economists. Tend to put that at over $250k a year or higher. And with household wealth in excess of a million bucks. Though those would be the lowest possible numbers to categorize them by. Its what we talk about with the 1%, and their buddies in the next bracket down. Whether that be the 5% or 10% or whatever. We’re talking the sort of people who worry about the estate tax. Hereditary wealthy. And all that.
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