How much of a profit do restaurants make?
Like any business, a restaurant must balance revenues and expenses. Revenues come from customers buying food and/or alcohol. At a restaurant with a liquor license, 35 to 40 percent of the profits tend to come from liquor sales; at a BYOB, all profit comes from selling meals, which is why food prices are sometimes higher.
About a third of the profits goes straight towards food costs, and another third pays for labor. About 15 to 20 percent goes towards fixed costs like rent, insurance and something called the "Q factor": the things a restaurant must buy but doesn't actually sell, such as salt, pepper, napkins, plastic wrap, bathroom supplies, tablecloths … "That has to be worked into your menu price," said Michael Ventura, co-executive chef of The Plum & The Pear in Wyckoff. "Otherwise you're giving that money away. And it could be another 5 percent on your menu prices."
Christine Nunn, chef/owner of Picnic on the Square in Ridgewood, said that her Q factor includes Riedel wineglasses, each costing around $30. Break one, she said, and she's already lost money on your table. Nunn also spends between $800 and $1,000 a month renting napkins (15 cents each) and tablecloths ($6 each) from a linen delivery service.
A restaurant's profit margin is likely to be between 8 percent and 15 percent — and if it's at the higher end, it's doing well.
Is there seasonality for meat?
Yes, but it relies more on customers' tastes than availability. In the depths of winter, heavy dishes featuring venison, lamb and braised meats will rule, but as snow melts and temperatures warm, you're more likely to see lighter dishes like brisket, flank steak, chopped meat and pork.
"I can get anything at any time of year, but do you really want to sit down with a nice steaming bowl of beef stew when it's a 100-degree day?" asked Kevin Portscher, owner/chef of Village Green in Ridgewood. "Probably not. You'd rather have a grilled chicken breast with a salad."
Why are mixed drinks so costly?
Liquor is often viewed as the most profitable thing a restaurant can sell, and that's because it's easy to prepare and tremendously marked up — sometimes as much as 400 percent.
But when it comes to cocktails, other factors are involved, said Andrew McIntosh, resident mixologist at the Park West Tavern in Ridgewood. There are ingredients to pay for, and some, like small-batch bourbons and ryes, aren't procurable by the average consumer and are more expensive than what's found on liquor store shelves. And although anyone can pour a draft beer or glass of wine, not everyone can mix a good drink — that, McIntosh said, is a skill all its own.
"It's not something we're just throwing together willy-nilly — we're putting our time and effort into it," he said.
Why do restaurants serve pre-made desserts?
Ideally, all restaurants would serve fresh desserts made in-house, but two factors get in the way: space and cost. Ventura of The Plum & The Pear (who has, he reported, a talented salad chef prepare his desserts) said that pastries and desserts need their own space away from the line in order to prevent cross-contamination, and it can be difficult to cross-train a chef working the grill or salad station.
The money also isn't there. Kevin Kohler, chef/owner of Ramsey's Café Panache, said that if a restaurant sells 25 desserts at $8 each, the resulting $200 in profit must cover both the ingredient cost and the labor.
"It's a losing proposition financially," he said. "Restaurants choose to go to an outside bakery, or get frozen desserts, because that's their only solution to selling desserts and profiting."
What happened to the bread basket?
In Europe, bread and napkin/tablecloth charges are often tacked onto the bill automatically, but in America, we expect them for free. But it's not free … for the restaurant; Nunn said she gives out about $100 worth of bread each weekend. Still…
"I'm not going to say to someone, 'I don't mind that you're paying $38 for the lamb, but if you want bread it's another two bucks,' " she said. "You can't do it."
Portscher has his waiters deliver one piece per diner (they can always request more) — and not offer a bread basket. Therefore, at the end of the night, he doesn't have to throw out uneaten bread.
Kohler said he'd "like to smack" the first person who gave free bread because it's "the most filling item on the planet."
"A restaurant gives you an array of breads, a hunk of butter, and they start you off with that … and then when [customers] order, they don't order much, because they're full of bread."
Why is pasta on every menu?
Simple: It sells well, and restaurants make money off it. The profit margin on things like steak or other proteins is slim, but pasta sales offset that — if a steak costs a restaurant $20, many will charge $40. However, a plate of pasta that sells for $20 might have cost the restaurant $5 or less.
Plus, everyone is comfortable with it — Kohler said that many customers who find themselves bewildered by the intricate menus and unfamiliar terminology used at upscale restaurants can always fall back on a pasta dish and know they'll be full by meal's end.
Why are there so many red-sauce restaurants in Bergen County?
Blame our Italian ancestors. New Jersey has one of the highest concentrations of people of Italian descent in the country, and even those who aren't Italian have grown comfortable with red-sauce meals because it makes it easier to feed a larger number of people, said Peter Loria, owner/chef of Café Matisse in Rutherford.
"Italian-style food was a cheaper way to raise a family," Loria said.
Kohler agrees, but added customers are comfortable with red-sauce meals — especially those who aren't familiar with refined-yet-limited menus. At a red-sauce restaurant, any customer will know everything listed. "It's about comfort. They want a great big pile of food that they'll never eat in a million years, a menu with more than 30 items on it, none of it can be fresh … that's the general public."
How does a BYOB make any money?
It's not easy. Nunn of Picnic on the Square said that alcohol-serving restaurants are "making more on a bottle of Kendall Jackson chardonnay than I'm making on a plate of food." Controlling labor costs, reducing waste and counting pennies becomes crucial, and Ventura said that selling enough profitable items like homemade soups and pasta is even more important. So is customer service: Replacing a diner's overcooked steak might cost money, but it's the best way to ensure they come back, Portscher said.
Why do restaurants have prix-fixe menus?
Not all restaurants offer an a la carte menu — some favor a "prix-fixe" setup that promises several courses and a dessert, all for one price. Loria's restaurant has functioned this way since 2000, and he said the benefits are two-fold: It helps track inventory more accurately, and keeps out customers who might only want to buy one course and skip more profitable items.
"There's less guessing," he said. "Overall, it's better for the bottom line for ordering, and not [having to] throw away product and make the garbage can your friend."
Is buying wine by the bottle a better deal than by the glass?
Given the high markup on wine, yes.
"If two people are sitting down and drinking the same wine, they might have two glasses each — you're drinking a bottle right there," McIntosh said. House wines aren't typically the highest quality, either, because the restaurant is trying to satisfy all palates, and they're sometimes left open overnight.
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