4 ms·

Every article I read about restaurants just seems to reinforce that they are powered by their owners hopes and dreams rather than any financial or business lite

Every article I read about restaurants just seems to reinforce that they are powered by their owners hopes and dreams rather than any financial or business literacy. It makes then ripe targets for exploitation.

abhiyerra 6y ago
Restaurants and mom and pop grocery stores/convenience stores are very low margin, super long hours, and stressful. Furthermore, it isn’t just places like Grubhub but also local governments with weird zoning laws and expectations that really exploit these businesses with random fees. (My parents had a grocery store. They lost it during the previous recession.)
- tick_tock_tick 6y ago
  My statement might have come across as harsh I understand that these kinds of businesses take a huge amount of blood, sweat, and tears; Especially since the ROI is often not really that great. It takes all the energy you have to run just the shop let alone comply with the city, county, state, and country regulations, source inventory, promote yourself, etc. It doesn't surprise me they are getting exploited with the overwhelming mountain of stuff they need to manage. The small margins mean it's very hard to hire staff to distribute work too.
- rahimnathwani 6y ago
  Restaurants and grocery/convenience stores are a bit different. Yes, owners of both are signing up for long hours and poor pay. But the motivation is often different: - if you buy or start a grocery store, you know you're buying yourself a job; you won't get rich, but you will make more money than you would working for someone else, e.g. if your options are limited due to discrimination, lack of fluency with local language, literacy etc. - if you open a restaurant, you might me doing it for all the same reasons as above (think an undifferentiated Chinese restaurants, or a local pizza place). But many people open restaurants because they are into food, because they think the way they make food is better than existing restaurants, and because they think the margins are going to make the restaurant ultra-profitable. (My parents also had a grocery store.)
- BeetleB 6y ago
  > Restaurants and mom and pop grocery stores/convenience stores are very low margin, super long hours, and stressful. Sorry to hijack off of your comment - none of what I say is meant as a negative about you or your parents. I've seen two types of people start these: 1. People from low income backgrounds who don't have many other options and don't have the means to gain good knowledge. I sympathize with them. 2. People who are somewhat wealthier (have a good degree, work for an engineering company, etc) who complain about how poorly people are running restaurants and how poor the food is and know for certain that they can run a restaurant that makes the food really well and everyone will come to their restaurant and business will be good. Very common for this to be about ethnic restaurants but doesn't need to be. I have little sympathy for this group. They really should know better. I've talked to them about it before they put a huge chunk of their savings into starting a restaurant. They typically do no background research. They don't ask other business owners. They have no idea about the margins (hint - the other restaurants who make food poorly do it for an economic reason - not because they can't find good chefs). Recently one of them opened a restaurant near my home. And their food was great - I would put it in the top 2 of their category in the city. But their prices were too high. Normally I order this type of food once in a while when I don't want to cook or am busy. But the price was beyond that threshold. I went there only when special friends visited me in town and took them there. And not many people went there. The reviews everywhere (Yelp, etc) were awesome. But people didn't go there. Partly because of prices, but partly because of the location. Why did they pick that location? Because there's a big company in the neighborhood. Surely there are plenty of well paid people there who would come for lunch? Yes there are and no they won't. Over the years living there I know this plaza well. It's a graveyard for restaurants - most of them likely relying on employees of that company eating there. All these guys had to do was spend time in the restaurants in that plaza prior to signing the lease to get an idea. "Ah, but they don't go to those restaurants because their food is crap!" Yes, the food is crap. No, that's not the reason. And then there's the food. Great food they made. But they weren't making a profit. So did they revise their menu to focus on items that would give good margins? No. They raised the prices. Fewer people came. They raised the prices again. Even fewer people came. This spiraled out of control. Within a year they had shut down. One of the co-owners told me there wasn't a month where they made a profit. I asked "Did you talk to any restaurant owners for their advice prior to opening?" Nope. If the food is great, people will come. These guys work (or worked) pretty good jobs prior to opening the business - sometimes in senior management roles. Is that how decisions were made at their companies?
stainforth 6y ago
No its the landowners who can hold them over the barrel for their highest overhead: rent. And those same landowners are able to do that because they have enough wealth to wait on the next person who will initially pay the high rent.
- BeetleB 6y ago
  > No its the landowners who can hold them over the barrel for their highest overhead: rent. And those same landowners are able to do that because they have enough wealth to wait on the next person who will initially pay the high rent. Yes and no. There are landowners with a lot of wealth. The majority of landowners have less wealth (and will always have less wealth) than a typical FAANG engineer. I started looking heavily into real estate last year and got to meet many of these people. The average commercial plaza in most cities? Not owned by a wealthy person - and indeed some of the business owners on the plaza are wealthier. A lot of these owners don't make enough out of it to make a living and still have a full time job. They do it because it's passive income - almost no effort. Plaza owners typically don't pay for any maintenance. They don't pay property taxes. All this is passed on to the businesses in exchange for relatively low rents. As long as he collects enough rent to pay the loan, and has some extra left over, he's happy. It's free money. (And 90-99% of land owners don't own the property free and clear. The majority of them owe more than half the value to some bank or other. That should tell you who really is making the money).
VMisTheWay 6y ago
I'm totally with you on this. People pay other money to prepare food? It's not trivial either, restaurant food is 7 to 20x more expensive than home cooked (source- Efficiency Is Everything) The only other business model for a restaurant is to sell drugs(aka alcohol and caffeine). Then your business model exploits customer addictions. I think we've spent far too much money/resources/manpower on lazy food habits.
- danpalmer 6y ago
  > restaurant food is 7 to 20x more expensive than home cooked I suspect Efficiency is Everything is measuring a very different thing. They seem to focus on calories per dollar, which is not how restaurants or home cooks typically think. The rule of thumb used in the restaurant industry is 30/30/30/10. 30% for food, labour, rent, and 10% margin. Anecdotally, for dinner I spend about £3 a meal to cook at home, and could probably buy that meal out for £8-12. As Efficiency is Everything says, you can live on $1.50 a day, but it requires using only a very limited subset of ingredients and allows little room for preference. For some people this makes no difference, for most it's a huge handicap, which is why it's limited to the min-maxing fringes.
- mennis16 6y ago
  I'm not sure laziness is the main factor here though. I suppose it depends where you are ordering from, but I enjoy picking up from restaurants still largely because I enjoy the food and would not be able to recreate it. In some cases it introduces me to new flavor combos that I wouldn't have tried otherwise and maybe will eventually make its way into my cooking. Hell, I even just occasionally crave McDonalds. If I were feeling lazy I would have Soylent or throw together a sandwich with whatever is in the house, it feels like more effort to place the McD order than do that. Food is a large source of enjoyment for a lot of people, even removing the social benefits of in-person restaurants, I don't think it is a waste. Although certainly many restaurant owners would benefit from some business training. I also think you'll find you could say the same thing about a lot of life chores- people pay other people to sew? People pay other people to mow their lawn? People pay other people to trim their hair? And so on. A lot of these things could be done sufficiently yourself, but 1) they will generally be done better by the professional and 2) as these things pile up the total time spent will become a legitimate burden. I found it interesting to read about the daily schedules of housewives back in the 50s or so, some of their tasks could be automated now or would be considered unnecessary, but even adjusting to be a bit more modern it sounded like a difficult full time job. And there are increasingly less people "employed" in this sector. So I don't know why I see so many objections to outsourcing something like cooking (not even all the time).

abhiyerra 6y ago

Restaurants and mom and pop grocery stores/convenience stores are very low margin, super long hours, and stressful. Furthermore, it isn’t just places like Grubhub but also local governments with weird zoning laws and expectations that really exploit these businesses with random fees. (My parents had a grocery store. They lost it during the previous recession.)

tick_tock_tick 6y ago
My statement might have come across as harsh I understand that these kinds of businesses take a huge amount of blood, sweat, and tears; Especially since the ROI is often not really that great. It takes all the energy you have to run just the shop let alone comply with the city, county, state, and country regulations, source inventory, promote yourself, etc. It doesn't surprise me they are getting exploited with the overwhelming mountain of stuff they need to manage. The small margins mean it's very hard to hire staff to distribute work too.
rahimnathwani 6y ago
Restaurants and grocery/convenience stores are a bit different. Yes, owners of both are signing up for long hours and poor pay. But the motivation is often different: - if you buy or start a grocery store, you know you're buying yourself a job; you won't get rich, but you will make more money than you would working for someone else, e.g. if your options are limited due to discrimination, lack of fluency with local language, literacy etc. - if you open a restaurant, you might me doing it for all the same reasons as above (think an undifferentiated Chinese restaurants, or a local pizza place). But many people open restaurants because they are into food, because they think the way they make food is better than existing restaurants, and because they think the margins are going to make the restaurant ultra-profitable. (My parents also had a grocery store.)
BeetleB 6y ago
> Restaurants and mom and pop grocery stores/convenience stores are very low margin, super long hours, and stressful. Sorry to hijack off of your comment - none of what I say is meant as a negative about you or your parents. I've seen two types of people start these: 1. People from low income backgrounds who don't have many other options and don't have the means to gain good knowledge. I sympathize with them. 2. People who are somewhat wealthier (have a good degree, work for an engineering company, etc) who complain about how poorly people are running restaurants and how poor the food is and know for certain that they can run a restaurant that makes the food really well and everyone will come to their restaurant and business will be good. Very common for this to be about ethnic restaurants but doesn't need to be. I have little sympathy for this group. They really should know better. I've talked to them about it before they put a huge chunk of their savings into starting a restaurant. They typically do no background research. They don't ask other business owners. They have no idea about the margins (hint - the other restaurants who make food poorly do it for an economic reason - not because they can't find good chefs). Recently one of them opened a restaurant near my home. And their food was great - I would put it in the top 2 of their category in the city. But their prices were too high. Normally I order this type of food once in a while when I don't want to cook or am busy. But the price was beyond that threshold. I went there only when special friends visited me in town and took them there. And not many people went there. The reviews everywhere (Yelp, etc) were awesome. But people didn't go there. Partly because of prices, but partly because of the location. Why did they pick that location? Because there's a big company in the neighborhood. Surely there are plenty of well paid people there who would come for lunch? Yes there are and no they won't. Over the years living there I know this plaza well. It's a graveyard for restaurants - most of them likely relying on employees of that company eating there. All these guys had to do was spend time in the restaurants in that plaza prior to signing the lease to get an idea. "Ah, but they don't go to those restaurants because their food is crap!" Yes, the food is crap. No, that's not the reason. And then there's the food. Great food they made. But they weren't making a profit. So did they revise their menu to focus on items that would give good margins? No. They raised the prices. Fewer people came. They raised the prices again. Even fewer people came. This spiraled out of control. Within a year they had shut down. One of the co-owners told me there wasn't a month where they made a profit. I asked "Did you talk to any restaurant owners for their advice prior to opening?" Nope. If the food is great, people will come. These guys work (or worked) pretty good jobs prior to opening the business - sometimes in senior management roles. Is that how decisions were made at their companies?

stainforth 6y ago

No its the landowners who can hold them over the barrel for their highest overhead: rent. And those same landowners are able to do that because they have enough wealth to wait on the next person who will initially pay the high rent.

BeetleB 6y ago
> No its the landowners who can hold them over the barrel for their highest overhead: rent. And those same landowners are able to do that because they have enough wealth to wait on the next person who will initially pay the high rent. Yes and no. There are landowners with a lot of wealth. The majority of landowners have less wealth (and will always have less wealth) than a typical FAANG engineer. I started looking heavily into real estate last year and got to meet many of these people. The average commercial plaza in most cities? Not owned by a wealthy person - and indeed some of the business owners on the plaza are wealthier. A lot of these owners don't make enough out of it to make a living and still have a full time job. They do it because it's passive income - almost no effort. Plaza owners typically don't pay for any maintenance. They don't pay property taxes. All this is passed on to the businesses in exchange for relatively low rents. As long as he collects enough rent to pay the loan, and has some extra left over, he's happy. It's free money. (And 90-99% of land owners don't own the property free and clear. The majority of them owe more than half the value to some bank or other. That should tell you who really is making the money).

VMisTheWay 6y ago

I'm totally with you on this. People pay other money to prepare food? It's not trivial either, restaurant food is 7 to 20x more expensive than home cooked (source- Efficiency Is Everything) The only other business model for a restaurant is to sell drugs(aka alcohol and caffeine). Then your business model exploits customer addictions. I think we've spent far too much money/resources/manpower on lazy food habits.

danpalmer 6y ago
> restaurant food is 7 to 20x more expensive than home cooked I suspect Efficiency is Everything is measuring a very different thing. They seem to focus on calories per dollar, which is not how restaurants or home cooks typically think. The rule of thumb used in the restaurant industry is 30/30/30/10. 30% for food, labour, rent, and 10% margin. Anecdotally, for dinner I spend about £3 a meal to cook at home, and could probably buy that meal out for £8-12. As Efficiency is Everything says, you can live on $1.50 a day, but it requires using only a very limited subset of ingredients and allows little room for preference. For some people this makes no difference, for most it's a huge handicap, which is why it's limited to the min-maxing fringes.
mennis16 6y ago
I'm not sure laziness is the main factor here though. I suppose it depends where you are ordering from, but I enjoy picking up from restaurants still largely because I enjoy the food and would not be able to recreate it. In some cases it introduces me to new flavor combos that I wouldn't have tried otherwise and maybe will eventually make its way into my cooking. Hell, I even just occasionally crave McDonalds. If I were feeling lazy I would have Soylent or throw together a sandwich with whatever is in the house, it feels like more effort to place the McD order than do that. Food is a large source of enjoyment for a lot of people, even removing the social benefits of in-person restaurants, I don't think it is a waste. Although certainly many restaurant owners would benefit from some business training. I also think you'll find you could say the same thing about a lot of life chores- people pay other people to sew? People pay other people to mow their lawn? People pay other people to trim their hair? And so on. A lot of these things could be done sufficiently yourself, but 1) they will generally be done better by the professional and 2) as these things pile up the total time spent will become a legitimate burden. I found it interesting to read about the daily schedules of housewives back in the 50s or so, some of their tasks could be automated now or would be considered unnecessary, but even adjusting to be a bit more modern it sounded like a difficult full time job. And there are increasingly less people "employed" in this sector. So I don't know why I see so many objections to outsourcing something like cooking (not even all the time).