This is an old rule of thumb, no more, from an experienced waitron unit.
The table that orders a starter, main and a bottle of wine – that just about breaks even for the restaurant. You can mix and match this a bit. Dessert instead of the starter, that sorta thing. But the costs of the building, the staff, the electricity, the stock that goes off, the cost of capital itself, all those things, mean that the basic restaurant experience just about covers its costs.
It’s the having the one thing extra that makes the money, the profit. A drink before the meal, having both a starter and a dessert to add to the main. The second bottle of wine, or the digestif with the coffee. This is why the waiter is so eager for you to have any one or more of these “extras”. The margin over food costs – food costs usually being around 30% of menu price – on those additions is exactly what provides a profit to the business that is the restaurant.
As to why, well, it’s the same reason that the menu prices of some well known item are going to be roughly the same across restaurants. Competition is fierce in the business. That means headline prices are pushed down to where they only just, if even that, cover costs. On exactly the same basis as Ryanair charging you spit for the seat and then a fortune for the air you breathe onboard. You get the punter in with the £20 for two steak dinners then hope like Hell they order the vanilla soup and also the vegetable ice cream in order to make your nut.
Tim Worstall, “Bar Owner Complains Of People Drinking Tap Water – Oi! Where’s My Profits?”, Continental Telegraph, 2019-05-27.
March 4, 2023
QotD: Profit margins in the restaurant trade
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