Why Restaurants Are Expensive: Food

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restaurant food

Try taking one of these grocery shopping

In the first part of this series, I want to address the most basic standard of comparison on restaurant prices: food. Countless times I have heard and overheard tables say, “I could buy that for X at the grocery store.” While it is true that you can buy beef or chicken at a grocery store for less than the price of what it is on a restaurant menu, it is not always a fair comparison. There are numerous costs associated with buying food for a restaurant that do not factor into a grocery shopping bill. Addressing the differences in the way that restaurants shop for food is an enlightening first step in explaining the differences in price you pay.

The primary difference in the way a restaurant shops for food and the way you might at home is the shopping list. When you enter the grocery store, you most likely look to build meals. You think about how many people will be eating and buy enough food for each of them to eat the same meal. Restaurants do not have this luxury. They offer an entire menu worth of meals with only a rough guess of how many people will be arriving and what they will order. Restaurants succeed or fail based on their ability to estimate these trends, but in the end it is still just an estimate. They must buy enough food for every potential guest and every potential order.

This begs another question you may not have considered, “What happens to the food they don’t use?” The answer is not much different than it is at home. Food goes bad in restaurants too. The restaurant has to take a loss on the food that was not sold. This loss is passed along to the consumer in the form of higher prices. In effect, you are paying not only for the food your order, but also the food you don’t. You might think this is unfair, but it is the cost of offering the dozens of options you have at a restaurant. You demand variety and the restaurant tries to offer it. If you show up at a restaurant without a reservation, they are still able to feed you. This means that they have to order more than they sell. Of course there is a limit to how much of the cost they can pass along to their guests; this is the reason why many restaurants go out of business.

The other implication of purchasing such a large quantity of food is that they cannot run to the store and pick it up. In fact, in most areas it would be illegal for them to do so. Any parent can tell you that as you shop for more people the space it takes to transport groceries grows. Now picture yourself shopping for hundreds or thousands of people. This requires restaurants to have their food delivered in very large trucks that burn fuel at an obscene rate with a driver to unload all the food. The cost of this is passed onto the consumer. You might have the option of shopping at dozens of grocery stores, but only a handful of companies at most compete for a restaurant’s business. This lack of competition combined with the additional services make food far more expensive for the restaurant.

You also will find some great specials at grocery stores when they buy too much of a product or it approaches the expiration date. Restaurants don’t receive this benefit. They must always buy a standard product whether it is in season or not. This means that even when strawberries at ten times the summer price, the restaurant still has to stock it. They are also forced to uphold quality standards at a restaurant. You will rarely see stamps like “USDA Choice” or “USDA Prime” on steaks in a grocery store. Restaurants put these grades on their menu and order accordingly. They charge a premium price, but they serve a premium product. To compare what is on special at a grocery store to what a restaurant serves is really not a fair comparison.

The quantity and quality of food served in a restaurant is radically different than what you might bring home from the grocery store. Comparing the two on price along is not a fair comparison. As this series progresses, you will find that this is just one of the reasons why food costs more at a restaurant. In coming posts I will discuss factors such as labor, equipment, and real estate. By the end of this series you will appreciate restaurants for the value they are.

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About David Hayden

David Hayden is the creator of The Hospitality Formula Network, a series of websites dedicated to all aspects of the restaurant industry. He is also the author of the book Tips2: Tips For Improving Your Tips and Building Your Brand With Facebook.

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