5 ms·

> ultimately going to the airport as rent, not to the CIBO food vendor as profit. In food services in general there's this weird thing that the ultimate price

> ultimately going to the airport as rent, not to the CIBO food vendor as profit. In food services in general there's this weird thing that the ultimate price on the product doesn't matter. The food-selling place will have paper-thin margins regardless. It will either be rent, or equipment and cutlery, or the need for highly trained and specialised staff, or... (and often all of those, and more, coupled together).

LegitShady 3y ago
this hasn't been my experience at all - usually the cost of food is 1/3 overhead (rent, staff), 1/3 ingredients, and 1/3 profit. At least in places that last.
- csomar 3y ago
  That’s spot on the calculation. A relative runs a place and he just multiplies ingredients by x3.
- crazygringo 3y ago
  Average profit margins in restaurants are 2–6%. Not 33%. The actual rule of thumb is one third ingredients, one third labor, and one third overhead including rent. And you hope to have a tiny sliver of profit left over, by making them a hair less than a third. But that's also just a rule of thumb, as both labor costs and rental costs have a great deal of geographic variation compared to ingredient costs.
  - LegitShady 3y ago
    average profits in the realm of 2% are for grocery stores not restaurants. Lets say you're a moderately successful restaurant that sells 200 breakfasts at $10 each. At 2% profit that means the total profit on 200 breakfasts is just $40 for the whole morning. You're just out to lunch and those are not the correct profit margins or realistic. You might be thinking about grocery stores whose net margins might be in that realm of 2-4%. I don't know where you got your understanding of how the pricing works but please don't run a restaurant. Your mistake is that you have separated overhead and labour, when they're out of the same 1/3. 1/3 overhead including rent, 1/3 ingredients, 1/3 in the pocket.
    - illiarian 3y ago
      Net profit margins for full-service restaurants are 2-3%. 2018 was an exceptional year with margins rising to 6%, but I doubt this continued. https://www.forbes.com/sites/sageworks/2018/01/26/restaurants-margins-are-fatter-but-competition-is-fierce/ https://www.forbes.com/sites/sageworks/2018/01/26/restaurant... Australia cites 4.2% https://treasury.gov.au/sites/default/files/2019-03/360985-Restaurant-and-Catering-Industry-Association.pdf https://treasury.gov.au/sites/default/files/2019-03/360985-R... etc.
      - LegitShady 3y ago
        That includes things like failed restaurants that didn't make money and closed as well as fast food restaurants that operate on margins impossible for other restaurants and essentially act as real estate companies. If you want to run a restaurant and not join the tens of thousands that close each year you can't run them the way you're saying. Doing $2000 in business and making $40 isn't sustainable. Successful restaurants don't run that way.

LegitShady 3y ago

this hasn't been my experience at all - usually the cost of food is 1/3 overhead (rent, staff), 1/3 ingredients, and 1/3 profit. At least in places that last.

csomar 3y ago
That’s spot on the calculation. A relative runs a place and he just multiplies ingredients by x3.
crazygringo 3y ago
Average profit margins in restaurants are 2–6%. Not 33%. The actual rule of thumb is one third ingredients, one third labor, and one third overhead including rent. And you hope to have a tiny sliver of profit left over, by making them a hair less than a third. But that's also just a rule of thumb, as both labor costs and rental costs have a great deal of geographic variation compared to ingredient costs.
- LegitShady 3y ago
  average profits in the realm of 2% are for grocery stores not restaurants. Lets say you're a moderately successful restaurant that sells 200 breakfasts at $10 each. At 2% profit that means the total profit on 200 breakfasts is just $40 for the whole morning. You're just out to lunch and those are not the correct profit margins or realistic. You might be thinking about grocery stores whose net margins might be in that realm of 2-4%. I don't know where you got your understanding of how the pricing works but please don't run a restaurant. Your mistake is that you have separated overhead and labour, when they're out of the same 1/3. 1/3 overhead including rent, 1/3 ingredients, 1/3 in the pocket.
  - illiarian 3y ago
    Net profit margins for full-service restaurants are 2-3%. 2018 was an exceptional year with margins rising to 6%, but I doubt this continued. https://www.forbes.com/sites/sageworks/2018/01/26/restaurants-margins-are-fatter-but-competition-is-fierce/ https://www.forbes.com/sites/sageworks/2018/01/26/restaurant... Australia cites 4.2% https://treasury.gov.au/sites/default/files/2019-03/360985-Restaurant-and-Catering-Industry-Association.pdf https://treasury.gov.au/sites/default/files/2019-03/360985-R... etc.
    - LegitShady 3y ago
      That includes things like failed restaurants that didn't make money and closed as well as fast food restaurants that operate on margins impossible for other restaurants and essentially act as real estate companies. If you want to run a restaurant and not join the tens of thousands that close each year you can't run them the way you're saying. Doing $2000 in business and making $40 isn't sustainable. Successful restaurants don't run that way.