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A restaurants greatest costs aren't labor but rent. They pay huge amounts to landlords, amounts higher than the landlords mortgage costs. A restaurants low-wa

A restaurants greatest costs aren't labor but rent. They pay huge amounts to landlords, amounts higher than the landlords mortgage costs. A restaurants low-wage employees then pay 50+% of their wages to other landlords to cover other mortgages. That's the real problem killing the business model: too many people shovelling too much money in exchange for permission to work/live at a particular location. A more normal situation would be where rents are again cheaper than mortgages, when rent represents less than 50% of expenses. Then the restaurant business model starts making sense.

PaulDavisThe1st 5y ago
This randomly selected but high-google-ranked page disagrees with you: https://www.caminofinancial.com/restaurant-costs/ https://www.caminofinancial.com/restaurant-costs/ So does this one: https://www.7shifts.com/blog/restaurant-costs/ https://www.7shifts.com/blog/restaurant-costs/ and this one: https://www.touchbistro.com/blog/restaurant-operating-costs/ https://www.touchbistro.com/blog/restaurant-operating-costs/
- sandworm101 5y ago
  And how much of the labor costs in fact goes to the rent paid by those workers? My point is that rents, payments to landlords, take little pieces out of everything.
  - PaulDavisThe1st 5y ago
    But then your observation isn't really about restaurants at all, and is instead a general complaint that mixes various amounts of: 1) "the rent's too damn high" 2) too much renting going on, not enough <something else> I'm not sure I disagree with either, but it doesn't seem that can explain the situation in restaurants, since it affects huge chunks of the population and the economy.
Choco31415 5y ago
If landlords are charging significantly more then the mortgage costs, then what if the rent model was switched to an auction with a minimum set at the landlord mortgage costs plus some percentage on top? That way the landlord gets what they need and the pricing is not arbitrary, but at least fixed to some realistic measure. Note: I’m not very familiar with the situation, just ideating.
- sandworm101 5y ago
  Why should rent be higher than mortgage costs? Why should renters pay down principal, effectively purchasing the property for the landlord? In the past, landlords owned property and rented it out. If there was a mortgage, rent covered the interest payments rather than principal (interest rates were once far higher than today) and rents were generally lower than mortgage costs. If rent is higher than mortgage costs, the renter would be better off purchasing the property. A landlord that is asking rents higher than their mortgage is simply leveraging their better credit rating, renting out an asset for higher than someone with similar credit could purchase it.
  - skt5 5y ago
    In cases where rent exceeds the mortgage, I think the reasons would be to cover the cost of capital, risk, and operational expenses. In this case, the long term expected value of the property might be flat or growing at a lower than average rate so future expected gains can't be used to offset short term losses. If this wasn't the case, in theory renters would just become buyers themselves.
    - Red_Leaves_Flyy 5y ago
      Renters can’t become owners when multi billion investment firms are buying or own large percentages of the market. The market is incredibly distorted and inherently dysfunctional in its current state. Families should be living in housing they own our mortgage not paying someone else’s mortgage or profit to the investment class.

PaulDavisThe1st 5y ago

This randomly selected but high-google-ranked page disagrees with you: https://www.caminofinancial.com/restaurant-costs/ https://www.caminofinancial.com/restaurant-costs/ So does this one: https://www.7shifts.com/blog/restaurant-costs/ https://www.7shifts.com/blog/restaurant-costs/ and this one: https://www.touchbistro.com/blog/restaurant-operating-costs/ https://www.touchbistro.com/blog/restaurant-operating-costs/

sandworm101 5y ago
And how much of the labor costs in fact goes to the rent paid by those workers? My point is that rents, payments to landlords, take little pieces out of everything.
- PaulDavisThe1st 5y ago
  But then your observation isn't really about restaurants at all, and is instead a general complaint that mixes various amounts of: 1) "the rent's too damn high" 2) too much renting going on, not enough <something else> I'm not sure I disagree with either, but it doesn't seem that can explain the situation in restaurants, since it affects huge chunks of the population and the economy.

Choco31415 5y ago

If landlords are charging significantly more then the mortgage costs, then what if the rent model was switched to an auction with a minimum set at the landlord mortgage costs plus some percentage on top? That way the landlord gets what they need and the pricing is not arbitrary, but at least fixed to some realistic measure. Note: I’m not very familiar with the situation, just ideating.

sandworm101 5y ago
Why should rent be higher than mortgage costs? Why should renters pay down principal, effectively purchasing the property for the landlord? In the past, landlords owned property and rented it out. If there was a mortgage, rent covered the interest payments rather than principal (interest rates were once far higher than today) and rents were generally lower than mortgage costs. If rent is higher than mortgage costs, the renter would be better off purchasing the property. A landlord that is asking rents higher than their mortgage is simply leveraging their better credit rating, renting out an asset for higher than someone with similar credit could purchase it.
- skt5 5y ago
  In cases where rent exceeds the mortgage, I think the reasons would be to cover the cost of capital, risk, and operational expenses. In this case, the long term expected value of the property might be flat or growing at a lower than average rate so future expected gains can't be used to offset short term losses. If this wasn't the case, in theory renters would just become buyers themselves.
  - Red_Leaves_Flyy 5y ago
    Renters can’t become owners when multi billion investment firms are buying or own large percentages of the market. The market is incredibly distorted and inherently dysfunctional in its current state. Families should be living in housing they own our mortgage not paying someone else’s mortgage or profit to the investment class.