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May 12, 2005 01:50 PM

What items give restaurants their profit?

  • s

Is it the side dishes? The starch? The drinks ($1.49 for 5 cents worth of diet soda, or $8 for $1.49 worth of wine)? The available profit margin seems pretty thin, maybe that's why the business is so Darwinian.

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  1. Bottled water (still or gas) frequently served either without a request or in response to a simple request for "water." And even more frequently glasses are refilled and new bottles opened without any request at all. Food Arts has had a couple of recent articles about how bottled water is a great profit center.

    3 Replies
    1. re: TomSwift
      JK Grence (the Cosmic Jester)

      Thankfully we don't have restaurants around here that stoop to lows like that. If I didn't order it, I'm not paying for it, pure and simple.

      There is one particularly memorable sushi restaurant here in Phoenix (ShinBay) where if you just want water, they provide complimentary bottled water... from Trader Joe's. I don't know if they do ice from TJ's bottled water too, but as fanatical as the owner is about quality, it wouldn't surprise me one bit.

      1. re: JK Grence (the Cosmic Jester)

        Now that you mention it, considering the water quality in Tempe and Scottsdale, it's surprising that more restaurants don't do that.

        1. re: Fida

          The thing is the items that make a huge profit are balancing out the items (like certain steaks) that make no profit.

    2. v
      Victoria Libin

      Lower cost, low labor items. Generally, alcohol which has costs of about 20% compared to 33% food costs (many restaurants go over that percentage into the 40% range if they have lots of luxury items on their menu). Wine is not bad either as it is in the 40% range cost wise assuming a reasonable markup but labor is low. By the time you factor fixed costs such as rent and labor into the mix, a very successful restaurant is doing 10% in profits if they are well managed. In the Bay Area restaurants are averaging 2-5% in profits...not much at all.

      1. Depends on the type of restaurant. A friend had a family dining kinda place located on the beach in a resort town. He claimed the markup on the sodas sold at the window that served beach goers was enough to send him and his wife to Europe every fall. His cost per soda was under $.05 and he charged a buck for a cup full of ice and just a few ounces of soda.

        1. Truffles and fois gras.

          1 Reply
          1. re: 2chez mike

            You're kidding right?

          2. We had a restaurant in the family one time, but with all the skimming, nobody knows where the profit and loss was. I had a friend (now deceased) who was a food service writer in San Francisco. She really knew the business. This was many years ago, but she said a regular restaurant (not hot dog stand, etc) should expect to pay 27% to 33% for food. The rest goes into rent, taxes, insurance, wages, laundry, advertising, etc. (And don't forget waste and pilferage!) I recall at a party one night we spent several hours calculating the required menu price to adjust for 50% more food on the plate. Got some interesting figures.