Along came COVID. It was both a catalyst and an accelerator. Patrons wanted to eat outdoors. That is, those who were willing to venture out at all. Rather, third party delivery services thrived. I’m trying to figure out how an industry with a 10% bottom line can afford to pay 30% to a third party to deliver their goods. Some New York City operators formed ghost kitchens that existed only online. Their prices were suspiciously 20% to 30% higher than their normal menu pricing to absorb the fees from third parties. The viable numbers in the restaurant industry have changed drastically. Diners used to be open 24 hours a day. Operators couldn’t afford these elevated rates. They have significantly cut back their 168-hour work weeks, and 50% of diners are closing altogether. While the front-of-the-house wages rose, the back of the house demanded more as well. The $10/hour line cook who used to work 60 hours a week, now was raised to $15, but became unaffordable at the $22.50 overtime rate. an hour as payroll. In the decade since, we’re looking at an almost tripling of wages to the front of the house. Funny thing -- I haven’t seen anyone working three times as hard or performing their duties three times as fast. Effectively, the increased minimum wage served to eliminate jobs. Back in 2014, a front-of-the-house employee in New York received a minimum of $5
There is a limit on just how much of the costs can be passed through to the consumer. There is a strong pushback as fast food meal prices approached the promotional prices being offered by casual dining. Anyone who has been to a supermarket has seen significant increases in the cost of commodities. The sale prices are higher than the pre-COVID prices on just about everything. The price of eggs doubled. Rack of lamb used to sell for $8.99 per pound; currently it’s $16.99. Before COVID, you could buy a steak for substantially less than today. Let’s review some of the basic restaurant metrics. Are you buying whole chickens and butchering them? That saves food cost but raises labor cost. I don’t care what your food cost is; I don’t care what your labor cost is. But I care very much what is your food plus labor cost -- your prime cost. Ideally, that was about 30% food and 30% labor for a prime cost of 60%.
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