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Restaurants are "high margin"? I don't think restaurants pervasively discount because they can afford to - I think it's more to do with it being a brutally com
by fookyong 12y ago
Restaurants are "high margin"?
I don't think restaurants pervasively discount because they can afford to - I think it's more to do with it being a brutally competitive industry.
That said you may be right in that the type of restaurants that use daily deal sites tend to be the higher profit ones, the corporate-run chains that have economies of scale or the ones that have lower running costs like Korean BBQs where the customer cooks their own food.
- rahimnathwani 12y ago> Restaurants are "high margin"? Yes, restaurants are high margin. I didn't say they are high profit. Restaurants have high fixed costs (rent and staff) and low variable costs (the ingredients and beverages cost 30% to 50% of the price paid by the customer). Because they have high gross margins, they are still better off with an additional customer who pays 20% less than the sticker price of a meal. It's better than an empty table. To understand the difference, compare this with a high _profit_ but low _margin_ business like UK supermarkets. Tesco makes about 5bn USD per year, but its gross margin is less than 7%. If Tesco gave a 20% discount to entice a customer away from a rival supermarket, Tesco would lose money on the sale.
- seanmcdirmid 12y ago> It's better than an empty table. This only applies to restaurants that have empty tables. Try going to Sunshine Kitchen around lunch or dinner...they aren't going to give us a deal (but there is delivery via online services so...).
- rahimnathwani 12y agoI am in Sunshine Kitchen on Chaoyang Lu right now (12:40pm) and I can see 5 empty tables.