Very, very high over head. And the tipping economy. Basically.
Most restaurants rent their space, and commercial rents are always higher than residential. In NYC they can go as high as a million dollars a month. More typical is in the 10-50k range. To serve liquor you need a license, which is often expensive. But also pretty hefty liability insurance. Heating, and especially cooling restaurant buildings (you’re pumping tons of heat in there between cooking equipment and refrigeration) is crazy expensive. Other utilities. Imagine running your whole house at max electrical consumption for 18 hours a day. And then multiply by 10. We’re bigger, our equipment eats more power, and we have more of it. You’ve got one fridge with an integrated freezer. My restaurant has 14+ fridges and 4 freezers. Staffing eats up a lot, even as pay is pretty low/unlivable over all. Even when people are cheap, you pack enough in there and it ads up. And you need a lot of people. There are at least 5 people involved in handing you a plate of food. Most states put a serious tax burden on restaurants. The financials are complex so you have to have business management, book keepers, and accountants. Lawyers on retainer. And so forth. Food cost is really high. Food can often be cheaper at retail vs wholesale. Because your wholesale price is determined by volume of buy. Unless you have multiple locations even a small supermarket is making larger buys and getting a lower per unit price than you are. Just as an example I buy limes at retail for my bar. They’re 3 for a dollar. Wholesale at the volumes we run, they’re a buck a piece. And prices are not stable. Last year the price of eggs quadrupled over the course of 4 days. We went from paying $20 or $30 bucks a gross at the beginning of the month. To paying over $100 a gross withing 30 days. A few years back some crop failures in the Mexican citrus market drove the price of limes to four dollars each. The lime garnishing your cocktail potentially cost more than the entire contents of the glass. Beyond that quality costs. We often have customers request we sub vegetables in for a side of pasta. A side of pasta (~8oz) costs us a quarter. The equivalent amount of broccoli costs us almost 2 bucks. Now we could get broccoli for the same price as the pasta. But it’d be shitty frozen broccoli imported from wherever. Instead of nice fresh domestic broccoli. My current employer is stupid cheep to run. You can do it with like 4 employees, small place etc. Still runs $2k+ per hour to keep the doors open. A successful restaurant will remodel every 5 years or so, in my state that’s a cost of about half a mil every 5 years. And there’s about a thousand other things I can’t just pull of the top of my head. You have to compensate for all that in pricing. So a given plate might only cost us say 8 bucks to put out. But if we sold it for $16, a relatively usual 50% markup. We’d still have a negative profit margin. Instead we need to sell it at $24 minimum to breach some sort of profit. More likely it’d be $27-$30. That’s kind of universal. Regardless of where you are in the world. There are a lot of moving parts. A lot of expenses. And it just all ads up. In a market where you may be putting that money out there with out seeing any coming in at any given moment. You get a day with no customers and it can be $25k-$50k down the drain.
The thing that makes restaurants uniquely unworkable in the US is the tip system. We’ve effectively created a secondary tier of the labor market where the rules don’t apply. You aren’t eligible for the minimum wage (there’s a separate much lower one for tipped workers). You can’t get sick time. Can’t get benefits. Can’t get a bunch of major labor rights that are considered universal and necessary for every other job in the world. Effectively our restaraunt industry works by offputting a large chunk of labor costs onto the customers. Your employer effectively only pays payroll and income taxes. And all actual income comes from tips. (For front of the house).
This creates artificially low prices, and an expectation with the public with regards to pricing that erodes profit margins over all. The real and actual costs of putting a plate of food and a beer in front of you are about 20-25% higher than what you see on the bill. But those rare restos that attempt to do away with tipping. And add 20-25% surcharges or increase pricing by that amount typically find that the American public is unwilling to pay those prices for the food on offer. Its relatively impossible to convince people to go along with that approach when the next 5 places down the road still have artificially low pricing. Your $5 beer should cost $7. Your $20 entree should cost $25. And that’s how it works in European countries with costs of living and economies on the same level as the US. Profit margins there are much higher, and employees are paid much better. But the pricing is higher across the board.
So basically you’ve got a situation where expenses are extreme. But if you price to hit sensible profit margins you price yourself out of the market. So the government subsidizes that by not requiring you to pay half your staff. Its absurd. Never invest in a restaurant. Money hole. Law suit factory. Very few people make a buck in food/bev without cheating. I’ve had maybe one employer that hasn’t been constantly involved in tax and labor disputes.
First I’m with you on that. And that’s my current quandary. 2nd a large bit of my point is that the content creators/publishers are basically in the same boat. Their only viable business model is to leave them selves open to 3rd party attack, exploitation of their customers. No matter how careful they are. I don’t like the idea of passing the blame on to them when they’re getting actively screwed (like in their ability to make a living) as well.
Yeah it sounds nice and it works for individuals. But as I and others ran through above it doesn’t scale. You can support your self through patreon style donations. Often at the cost of cutting your content off to the broader world. But you most often can not run a a business on that model. It’ll pay your bills. But won’t net you enough to hire a guy to polish up your audio. More complicated hybrid models increase the scale. But often only work in non-profit markets. And also run into a wall in regards to funding for staffing or additional projects. In short NBC won’t be running itself on Patreon donations. From what Orenwolf was saying the BB crew have looked into and found that Boing Boing couldn’t even sustain itself that way.
So again all of that is fine for the individual. But when you start thinking about companies or economy wide effects they just don’t practically work out in the real world. Outside of rather specific situations.
