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As the article mentions, the margins on the restaurant business are slim enough that the wage pool is effectively fixed - it's not a hypothetical scenario, it's
by elemeno 13y ago
As the article mentions, the margins on the restaurant business are slim enough that the wage pool is effectively fixed - it's not a hypothetical scenario, it's a practical constraint.
- jf22 13y agoWages/margins/costs/expenses are far more elastic than the zero sum game the author presents. If you need to pay somebody $2 more an hour the money can come from more places. Increase a drink price, decrease tomato quality, steam clean every 3 weeks instead of 2, wash the bathroom yourself instead of hiring, call the newspaper and ask for a reduced rate, etc etc etc.
- Goronmon 13y agoIf you need to pay somebody $2 more an hour the money can come from more places. Increase a drink price, decrease tomato quality, steam clean every 3 weeks instead of 2, wash the bathroom yourself instead of hiring, call the newspaper and ask for a reduced rate, etc etc etc. Of course, you are also assuming that decisions like these (aside from the newspaper one) don't affect the revenue of the restaurant in the long run.
- dmra 13y agoThe intended point the author was trying to make still stands, which you're agreeing with, in that the margins in the industry are so small that the $2 has to come from somewhere else.
- jmagoon 13y agoIF there's a fixed cost for employee wages, then $2 more to one person would come at $2 less from another. As he states, "Theoretically, it seems like there would be ways to free up more money for labor, and there are some methods that help. In the end, though, restaurant-going is so prevelant that the expectations of the market — for price, quality, ambience, and so forth — are pretty well set in every dimension. And the cost of meeting those expectations is pretty well set, too." Which means his entire experiment is how to increase revenue that can be directly allocated to wages without decreasing the quality of his tomatoes or the cleanliness of his carpets.
- jf22 13y ago@Goronmon, right, but if it comes down to giving a fantastic cook/chef/server/manager a $2 raise or losing them you'll figure it out.
- benjamincburns 13y agoFirst, I think you mean far less elastic. In economics the more elastic two variables are with respect to one another, the less independent they are - implying the zero-sum-game the author suggests. Second, in any business if your margins are that slim chances are you're already being creative like that, making all kinds of tradeoffs wherever you can, or you're fixing to close your doors. Juggling and heroics make the variables of a business much more dependent on one another, not less.
- greedo 13y agoHave you managed or owned a restaurant? The margins are extremely slim, which is one of the reasons the wait staff wages are tip based; it allows the owner to minimize his labor expense as much as possible.
- aet 13y agoI think it is important to note that margins are slim only in the "restaurant with no bar business."
- greedo 13y agoGross margin, sure. When you isolate food or beverage cost, it looks all rosy. Then you take out your overhead (rent, insurance, depreciation, utilities, payroll, cut to investors) and that margin slims down faster than a meth head.