3 ms·

Or, who's going to pay $15 or $20 for a sandwich? Most people will pass.

by 8f2ab37a-ed6c 7y ago

yellowapple 7y ago
I mean, if it's a really good sandwich I might.
- bkanber 7y ago
  I'd pay $13-15 for the doner in the article for sure. (NYC)
  - avolcano 7y ago
    You'll find a $16 doner in the comically overpriced food court in City Point, or a $15 currywurst at a place Chelsea Market. This is, of course, a comically grim state of affairs compared to the 4 euro doner or currywurst you can get in Berlin. Though I will say NYC halal carts might be the best _common_ street food in the US, and that hasn't yet made it above the $6 sandwich/$7 plate mark... yet.
PaulDavisThe1st 7y ago
Why will they pass? What's the calculus? "I could make it myself for less" ? "It used to be less" ? "It shouldn't cost that much <handwave>" ? Isn't it more likely to be true that they will pass because they've become accustomed to crazy low prizes for prepared foods?
- soup10 7y ago
  People are fine with making their own food. It has a big benefit in that you can make it exactly how you want. Restaurant food makes the most sense for things which are difficult to make or require expensive equipment or the most prep.
- 013a 7y ago
  I don't feel its a matter of people passing or not. Its a matter of how often they pass. People, in aggregate, will just eat out less. Whether this means restaurants will, at the end of the month, make more or less money, I don't know (I suspect its less, because it seems most of the costs are pretty constant; the food itself is a minority of the pie).
- chii 7y ago
  why should consumer over pay for anything? If another restaurant can make a profit by increasing efficiency and keep prices low, they win over one that doesn't. And restaurants have no real business moat - recipes for most things are known, and it's mighty hard to invent something totally new. Let's imagine that all restaurants raise their prices like the article claims. Suddenly, the margins at 19%. Let's also assume that consumers are willing to pay, but if they find something of similar quality but cheaper, the will move. Then one self-interested restaurant owner could simply lower their price by a bit, and they will make more money than their competition. And so all restaurants have to do the same. So the margin of 5-9% is what you end up with. TBH, as an investor, if you're given a 9% return on investment, i think they would be ok. It's not great, but it's not the worst. 19% margin is too high: most junk bonds are returning something like 8-10% (sure some are like 20%). Is running a restaurant riskier than junk bonds?
  - PaulDavisThe1st 7y ago
    The main way businesses that use labor reduce cost and/or increase profit is to reduce the cost of labor. Efficiency wins are generally small compared to labor costs. So the reality is that, as the article noted, restaurants have been in a battle for a decade or two focused on cost reduction, which means mostly labor cost reduction. In short: the cost of eating out is relatively low because we pay most of the people involved as little as possible. That might be good for our eating out, but it's far from clear that it's good for the rest of our lives.
- hnick 7y ago
  Personally I think it's mostly the last one: I know what sandwiches are "worth" and you are trying to fleece me, or your high price is because you are bad at running a business and it's not my problem. No one likes to be conned or make up for someone else's mistakes, that stings a lot more than just paying a few dollars more. I've noticed a vaguer version of that train of thought in my own head more than once.
- mtrower 7y ago
  The calculus is, what percentage of Americans can afford $15-$20 per sandwich on a regular basis? And how does that revenue compare to current revenues? edit: Though, this throwing around of prices is perhaps not very effective. Reasonable prices for sandwiches in SFC, NYC, or Seattle will be much higher than a midwest capital, which will still be higher than some rural diner. The point stands, however, that there's a breaking point which has nothing to do with principles or indignation and everything to do with household economics.
kevindong 7y ago
As an occasional thing, I'd probably buy a $15-20 sandwich if I really like it. As a daily or even weekly thing? No.
meddlepal 7y ago
That's not that far off from what some sandwich shops are already getting in Boston at least.

Or, who's going to pay $15 or $20 for a sandwich? Most people will pass.

yellowapple 7y ago

I mean, if it's a really good sandwich I might.

bkanber 7y ago
I'd pay $13-15 for the doner in the article for sure. (NYC)
- avolcano 7y ago
  You'll find a $16 doner in the comically overpriced food court in City Point, or a $15 currywurst at a place Chelsea Market. This is, of course, a comically grim state of affairs compared to the 4 euro doner or currywurst you can get in Berlin. Though I will say NYC halal carts might be the best _common_ street food in the US, and that hasn't yet made it above the $6 sandwich/$7 plate mark... yet.

PaulDavisThe1st 7y ago

Why will they pass? What's the calculus? "I could make it myself for less" ? "It used to be less" ? "It shouldn't cost that much <handwave>" ? Isn't it more likely to be true that they will pass because they've become accustomed to crazy low prizes for prepared foods?

soup10 7y ago
People are fine with making their own food. It has a big benefit in that you can make it exactly how you want. Restaurant food makes the most sense for things which are difficult to make or require expensive equipment or the most prep.
013a 7y ago
I don't feel its a matter of people passing or not. Its a matter of how often they pass. People, in aggregate, will just eat out less. Whether this means restaurants will, at the end of the month, make more or less money, I don't know (I suspect its less, because it seems most of the costs are pretty constant; the food itself is a minority of the pie).
chii 7y ago
why should consumer over pay for anything? If another restaurant can make a profit by increasing efficiency and keep prices low, they win over one that doesn't. And restaurants have no real business moat - recipes for most things are known, and it's mighty hard to invent something totally new. Let's imagine that all restaurants raise their prices like the article claims. Suddenly, the margins at 19%. Let's also assume that consumers are willing to pay, but if they find something of similar quality but cheaper, the will move. Then one self-interested restaurant owner could simply lower their price by a bit, and they will make more money than their competition. And so all restaurants have to do the same. So the margin of 5-9% is what you end up with. TBH, as an investor, if you're given a 9% return on investment, i think they would be ok. It's not great, but it's not the worst. 19% margin is too high: most junk bonds are returning something like 8-10% (sure some are like 20%). Is running a restaurant riskier than junk bonds?
- PaulDavisThe1st 7y ago
  The main way businesses that use labor reduce cost and/or increase profit is to reduce the cost of labor. Efficiency wins are generally small compared to labor costs. So the reality is that, as the article noted, restaurants have been in a battle for a decade or two focused on cost reduction, which means mostly labor cost reduction. In short: the cost of eating out is relatively low because we pay most of the people involved as little as possible. That might be good for our eating out, but it's far from clear that it's good for the rest of our lives.
hnick 7y ago
Personally I think it's mostly the last one: I know what sandwiches are "worth" and you are trying to fleece me, or your high price is because you are bad at running a business and it's not my problem. No one likes to be conned or make up for someone else's mistakes, that stings a lot more than just paying a few dollars more. I've noticed a vaguer version of that train of thought in my own head more than once.
mtrower 7y ago
The calculus is, what percentage of Americans can afford $15-$20 per sandwich on a regular basis? And how does that revenue compare to current revenues? edit: Though, this throwing around of prices is perhaps not very effective. Reasonable prices for sandwiches in SFC, NYC, or Seattle will be much higher than a midwest capital, which will still be higher than some rural diner. The point stands, however, that there's a breaking point which has nothing to do with principles or indignation and everything to do with household economics.

kevindong 7y ago

As an occasional thing, I'd probably buy a $15-20 sandwich if I really like it. As a daily or even weekly thing? No.

meddlepal 7y ago

That's not that far off from what some sandwich shops are already getting in Boston at least.