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Why Restaurants Are So Fucked

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Re: Why Restaurants Are So Fucked

#111

Post by solatic »

sokoloff wrote: post #76
greedo wrote: post #27

Earlier quoted context omitted.

Your local McDonalds sure is paying for TV advertising, in two ways. One is through franchise fees for national advertising, and the second is through co-op advertising in a region where franchisee's pool their advertising dollars. The only reason fast-food franchises are better commercial tenants is because they're usually better capitalized than bespoke restaurants. (McDonalds franchises also don't worry about rent…

How do they “not worry about rent”? The local franchise pays rent to the parent company.

Yes, but the McDonald's Corporation has a vested interest in making sure that the rent is affordable for running a McDonald's franchise on. MDC isn't going to spike the rent to force a franchisee out of business in the hopes that somebody else comes along willing to pay the rent spike.

Re: Why Restaurants Are So Fucked

#112

Post by every »

I worked bar and restaurant for 25 years. I would never, ever open or own a restaurant voluntarily. The margins are minuscule and require huge up-front costs with micro-managed inventory, labor and quality control to break even.

Bars however are a dream. Inventory control is simply tracking portions and comps. Outside of garnishes nothing rots or goes bad. And assuming tips are good, labor is no worry either. We had a saying: "In good times the bar business is good. In bad times it's even better because everyone needs to cry into their beer..."

Re: Why Restaurants Are So Fucked

#113

Post by jbay808 »

patothon wrote: post #45
virtualritz wrote: post #41

Amazing. 11 USD for a döner! A döner is between 2.5 and 5.0 EUR in Berlin (roughly 2.75 to 5.5 USD). That's takeaway or eat in at a place with a few tables but w/o table service. Meraba, which uses high quality organic meat from the region, comparable to the quality of the protein stated in the article, asks 4.5 EUR. A whole plate is 10 EUR.[1] If order to your doorstep it's 6.5 EUR.[2] [1] https://www.top10berlin.de…

11 dollars is probably in SF or NYC where average pay is 2 to 3x the one in Berlin.

This is in Ottawa.

Re: Why Restaurants Are So Fucked

#114

Post by fouc »

542458 wrote: post #99
fouc wrote: post #94

I eat out every meal in thailand, but I eat at small mom'n'pop shops, fresh cooked meals for $1 each. It would be nice if we moved away from the big restaurants and moved towards smaller shops that are more kitchen than restaurant. Restaurants should stop wasting money on signage, interior design, and fancy tables or dishes. Let's go back to simple, plain, and cheap.

A few things here: - In NA, if you’re “just a kitchen” you’re essentially fast food/takeaway - and putting myself directly into competition with McDonalds+etc doesn’t sound like an awesome proposition to me. (Obviously this will vary by culture and local competition) - Signage, fancy tables and dishes are way cheaper than you’d expect at commercial scales, especially once you amortize them over their estimated lifesp…

Yeah I'm really talking about a sole proprietorship/self-employed sort of restaurant. The owner is also the cook. (that level of scale)

Would be nice if there were more smaller businesses. And less barriers to entry.

Re: Why Restaurants Are So Fucked

#115

Post by mark-r »

IAmGraydon wrote: post #107
mark-r wrote: post #88

Earlier quoted context omitted.

Landlords, like any other business, are out to maximize their profits. Their goal is to capture 100% of the profit of businesses that rent from them. Given that the mechanisms for doing this are very crude, there's a chance that they could be getting 101% or more and that spells death for your business.

A landlord’s goal is to capture 100% of their tenants profits? That’s quite a misinformed statement. Their goal is to create sustainable, long term income on their investments. Taking everything they can from their tenants would not foster sustainability. I’m also really curious about your last sentence. Can you elaborate?

The goal is to maximize income, and the maximum you can get sustainably is 100% of your lesee's profits. If you take less then you're leaving money on the table. If you take more than that (e.g. 101%) they will inevitably go out of business.

If you guess wrong and drive a place out of business, your hope is that the next tenant is more profitable and can handle the overhead. Chain restaurants are typically pretty good about this because they know their revenue potential accurately ahead of time.

Re: Why Restaurants Are So Fucked

#116

Post by PaulDavisThe1st »

dehrmann wrote: post #75

> So, why are the margins so bad anyway? Well, it starts with the fact that the industry as a whole shot itself in the foot when it started competing on price. Started? You're always competing on price until you hit a certain status. Restaurants are low-margin if they offer a commoditized product. They're also up against time. People lose interest in restaurants, and if they can't maintain enough business a few years…

And yet this is not (so) true in Europe, where (1) people eat out less but (2) people pay more for restaurant food.

What's the difference? Is it really just too many food vendors thinking that the $1 happy meal is their competition? Or what?

EDIT: a better formulation, from a reply I wrote below: I'll restate it somewhat differently: eating out in Europe more accurately reflects the full cost of everyone involved making close to a living wage.

Re: Why Restaurants Are So Fucked

#117

Post by PaulDavisThe1st »

8f2ab37a-ed6c wrote: post #58
teddyh wrote: post #54

> It’s very simple: let’s reset our expectations and restore respectable margins. If restaurants in general raise their prices, what’s to stop landlords from doing the same and raise rents to match?

Or, who's going to pay $15 or $20 for a sandwich? Most people will pass.

Why will they pass? What's the calculus? "I could make it myself for less" ? "It used to be less" ? "It shouldn't cost that much " ?

Isn't it more likely to be true that they will pass because they've become accustomed to crazy low prizes for prepared foods?

Re: Why Restaurants Are So Fucked

#118

Post by fh973 »

culturestate wrote: post #104
sokoloff wrote: post #76

Earlier quoted context omitted.

How do they “not worry about rent”? The local franchise pays rent to the parent company.

I think their point is that most McDonald's franchisees in the U.S. don't need to be concerned about sudden, drastic rent increases because they aren't beholden to a third-party commercial landlord - McDonald's is their landlord, and thus is unlikely to boot them out just to lease the space at a higher rate to e.g. Burger King.

That's interesting, and suggested by the movie. However I wonder how that works in Europe for inner city locations. Here in Germany both in large and small cities, I can't recall any that I can imagine being owned by McDonald's.

Re: Why Restaurants Are So Fucked

#119

Post by maxk42 »

sokoloff wrote: post #76
greedo wrote: post #27

Earlier quoted context omitted.

Your local McDonalds sure is paying for TV advertising, in two ways. One is through franchise fees for national advertising, and the second is through co-op advertising in a region where franchisee's pool their advertising dollars. The only reason fast-food franchises are better commercial tenants is because they're usually better capitalized than bespoke restaurants. (McDonalds franchises also don't worry about rent…

How do they “not worry about rent”? The local franchise pays rent to the parent company.

I have to point out that many if not most franchisees most own or lease the property independently of the parent company. Some parent companies own the property but most don't.

Re: Why Restaurants Are So Fucked

#120

Post by PaulDavisThe1st »

djrogers wrote: post #55
Melting_Harps wrote: post #46

Earlier quoted context omitted.

> The bizarre thing is that even before the pandemic I've seen popular Bay Area restaurants close down due to huge rent increases and then the spaces are still vacant years later. I don't understand what commercial landlords are thinking? If its anything like what I saw in Boulder, most are held by large companies (TEBO) who can write off the losses come tax year because they have other more profitable locations/site…

> most are held by large companies (TEBO) who can write off the losses come tax year because they have other more profitable locations/sites. That’s not how taxes and “write-offs” work. You deduct your expenses from your income, and pay tax on a percentage of what’s left. Having more income is always better than having more expenses.

The landlords are gambling. Their bet is that N months with no tenant followed by a tenant paying X% more than the going-rate tenant will net out to more than renting at the going rate. They also bet that by nudging rents higher, they will cumulatively ratchet rents up over time, to the benefit of all landlords (they hope).

I don't know how often this bet comes true - it is truly remarkable to see retail properties empty for so long sometimes. But it's just a bet, not a tax strategy.

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