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Why Restaurants Are So Fucked

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Re: Why Restaurants Are So Fucked

#451

Post by Mikeb85 »

illumin8 wrote: post #446
Mikeb85 wrote: post #265

Earlier quoted context omitted.

2) is the correct answer. Most restaurateurs in Canada (and probably the US) are simply unsophisticated. Most of the restaurants I've worked for and/or run are basically money printing machines (I've been lucky and feel I'm pretty good now) while a few crashed and burned hard (and it was always pretty obvious they would). The example in the article has many, many things wrong with it.

> The example in the article has many, many things wrong with it. Agreed. The author of the article seems to lack some basic business skills. I realize that if you're making an artisan sandwich at home you might want to use the best possible ingredients (the artisan sourdough she talks about, etc), but you can't expect to build a viable restaurant business where you are spending so much on raw materials. If I was mak…

Yup, her food cost is out of control and her fixed costs are way too high meaning her sales are low. That's just a a failure of her concept...

Re: Why Restaurants Are So Fucked

#452

Post by mtrower »

veggieburglar wrote: post #412
mtrower wrote: post #401

Earlier quoted context omitted.

Syrup is cheap, water is cheap, C02 is cheap... for a fountain drink, you are indeed correct. The margins here are crazy. I assumed this vendor was selling bottled or canned soft drinks. Why that is, I couldn't say (just as I couldn't say why they're renting a dishwasher, why they're paying a linen cleaning service rather than purchasing a washing machine, etc...).

It’s very common to rent a dishwasher. High volume dishwashers break down all the time and need very regular servicing and cleaning. At every establishment I have been associated with (wine industry) I’ve been on a first name basis with my dishwasher service rep. With linen, when you go through a big volume, it is infinitely easier to use a linen company than to do it yourself on site. You’d have to buy industrial wa…

Hmm, pulling from past experience from the fast-food industry... I never saw our commercial dishwasher[0] break down in year after year of service. It really seemed like a simple, reliable machine to me. The kind of thing I'd be shocked if I couldn't disassemble, understand and repair myself if necessary. (Okay, it was old, and a bit crotchety; there was some component which regularly acted up. However, it was simple enough to "fix" it and move along, so we never really minded). However, alright, lets say that maintenance is a major issue, and so renting is financially attractive. I defer to your experience in this arena.

> With linen, when you go through a big volume, it is infinitely easier to use a linen company than to do it yourself on site. You’d have to buy industrial washers, pay rent on space to keep them, know how to service them, pay staff to operate them, etc...

How much volume could a small restaurant like this need for cleaning towels? More than a McDonald's doing top sales in the state? They get by just fine on a single washing unit[1]. Dump the dirty towel buckets in the washer, add detergent, run. When it's clean, distribute them into buckets of sanitizer so they're ready to use. Takes a few minutes, that's it; usually you'd do it during downtime. It's been too many years to remember now, but that machine was probably run a few times a day (maybe once every 4-6 hours). The process was very streamlined and efficient, and I can't imagine what involving a third party would bring to the table (perhaps if there was legitimately not floor space for a single washing unit in your building?).

I guess if it's common, it's common. I must not understand the business constraints involved, or maybe it's prevalent in certain areas and not in others. The U.S. is a very large and varied place, after all, to say nothing of the rest of the world. I'll have to ask my friend what her family restaurant does for a small-scale perspective.

[0] this type here, more or less: https://4.imimg.com/data4/DW/DT/MY-9292814/dishwasher-500x50...

[1] it was a lot like this (with the coin mechanism removed). Not glamorous, but got the job done just fine: http://i.ebayimg.com/images/i/271466627178-0-1/s-l1000.jpg

Re: Why Restaurants Are So Fucked

#453

Post by sneak »

kevingadd wrote: post #256
sneak wrote: post #149

Earlier quoted context omitted.

So, this is a refutation of one of the author’s points: either you differentiate, or is is unskilled labor (and the iron law of wages is nipping at your toes). It’s possible to differentiate purely on marketing and not just food alone, too. But it’s madness to expect to make your money on volume in the restaurant biz and make any significant money without double-digit location counts and significant capital reserves;…

"either you differentiate, or is is unskilled labor" I don't think this assertion holds up, especially if you look at other industries. A car mechanic doesn't have much room for differentiation beyond "I can service more car brands" and "I'm cheaper" or "I'm faster". Anyone can match your offering as long as they can balance the trade-offs involved (sufficient resources, etc). That doesn't make being a car mechanic u…

Sorry, I was totally unclear. Either you differentiate, or you can expect to be paid like unskilled labor (which is what undifferentiated cooking results for sale pays), which is always very close to zero (thanks to the iron law of wages).

Simply expecting people to pay more for what amounts to an undifferentiated near-commodity product is a pipe dream so long as anyone out of work can be taught to work a grill in a couple days.

Re: Why Restaurants Are So Fucked

#454

Post by kinkrtyavimoodh »

smabie wrote: post #293
Causality1 wrote: post #273

Earlier quoted context omitted.

Any agreement between competing sellers to maintain prices at a certain level is price fixing. That's the dictionary definition. Any restaurant or group of restaurants who heed her call to collectively raise prices to create a higher profit margin are engaged in price fixing. Perhaps morally justifiable price fixing, but they're still opting-out of competing with each other on price. I'll pay higher prices for restau…

Her writing that restaurants should raise prices and another restaurant owner reading it and deciding that's a good idea doesn't constitute price fixings, as there is no agreement or dialogue in place. She's merely putting out information that is being read and acted upon by someone else. For it to be price fixing, her and the other restaurant owner would need to mutually come to some agreement to both raise prices.

Also accusations of price fixing just break apart when you literally have tens of thousands of uncoordinated players. The generic restaurant gets as close to a commodity product as it can get while still being a pretty large undertaking.

Re: Why Restaurants Are So Fucked

#455

Post by kinkrtyavimoodh »

jlokier wrote: post #434
gambiting wrote: post #254

Earlier quoted context omitted.

Yes, seems obvious, right. But every time I tell HR that we have to pay more or we won't find candidates it's always the same - "that's the standard industry pay, there's nothing wrong with it, we've done our research and programmers in comparable positions are paid this much or less"

Both statements are true at the same time. So my answer to HR's answer is: If we offer industry standard pay for games companies, we get industry standard hiring crisis and candidate quality, as seen at other games companies. Have you researched hiring success at other companies and not just salaries? Experience suggests the answer to that from HR would be cultural inertia though, so it's not really them you'd need t…

Right, HRs exist to do the bidding of the execs, not be independent critical thinkers. They couldn't personally care less how much people are paid, they only need to be seen as doing broadly what the execs have approved.

Re: Why Restaurants Are So Fucked

#456

Post by mattkrause »

darren_ wrote: post #317
MattGaiser wrote: post #237

Earlier quoted context omitted.

> it reads as the typical piece from the "bro culture" that massively ignores the rest of the world. Why should articles need to be generalized to the world? It certainly fits the Canadian and US markets. You can't have comprehensive coverage of everything and everyone in an article.

When their title is "Why Restaurants Are So Fucked" instead of "Why Restaurants In America Are So Fucked" is why.

Perhaps because the author (and restaurant) are Canadian?

Re: Why Restaurants Are So Fucked

#457

Post by URSpider94 »

chii wrote: post #160
URSpider94 wrote: post #44

Earlier quoted context omitted.

Everybody keeps repeating that landlords can write off rent not received as a tax deduction. You can’t, and if you think about it for a minute, you’ll see it doesn’t make any sense. Imagine a landlord with 10 properties that rent for $100 per month. That’s $1,000 per month rental income, or $12,000 per year. Assume 10% tax rate, the landlord clears $11,000 after tax. Imagine now that half of them are vacant. The land…

if the properties weren't leveraged, then yes. But if you leveraged to buy the property, then you deduct the interest payment from the rental income. In the case of a vacant property, the interest cost will get deducted from another source (other rental income perhaps). Then, come tax time, you net out the rental income. If they do it exactly right, it could net out to zero. And so pay no taxes since they did not mak…

Yes, you can deduct expenses from your rental income and you only pay taxes on the profit (income minus expenses). Of course. But if you have a mortgage, you have to pay it whether you receive rent or not, so it’s totally irrelevant to the discussion - there is still never a case where you are better off, tax-wise, to not earn rent than to earn it.

Then you mention capital appreciation. Same thing. If I sell a property at a profit, then I’m always better off having earned rent from it while I owned it than not. Additionally, you don’t “claim a value” on a property when you sell it, someone pays you for it based on fair market value. For commercial property, the key measure of value is the rental income - when you buy or sell it, you advertise the cap rate (annual percent of investment made back in profits after expenses) and also the vacancy rate. Buyers get a copy of your income statement for the property going back a few years. If the property has been sitting half-vacant, then it will almost always sell for less money, since it’s not earning.

Bottom line, taxes are calculated as a percentage of profits. Outside of some esoteric situations, the money you save on taxes is less than the money you lose in profit.

Re: Why Restaurants Are So Fucked

#458

Post by URSpider94 »

econcon wrote: post #263
chii wrote: post #160

Earlier quoted context omitted.

if the properties weren't leveraged, then yes. But if you leveraged to buy the property, then you deduct the interest payment from the rental income. In the case of a vacant property, the interest cost will get deducted from another source (other rental income perhaps). Then, come tax time, you net out the rental income. If they do it exactly right, it could net out to zero. And so pay no taxes since they did not mak…

what if you rent for shorterm off records and show it's vacant on paper like accepting cash for Airbnb like deal yet claiming it was forever empty?

Then you are committing tax fraud. Also, Airbnb issues 1099’s for their payments to you above a certain amount, which they also helpfully furnish to the IRS. Wouldn’t recommend leaving Airbnb income off your taxes.

Re: Why Restaurants Are So Fucked

#459

Post by WalterBright »

jlokier wrote: post #443
WalterBright wrote: post #316

Earlier quoted context omitted.

> Not nearly as much. If at all. Have you looked over their books? Landlords have to pay: 1. taxes 2. maintenance 3. insurance 4. mortgage costs (they're usually leveraged) 5. legal and lawyer fees for contracts and disputes 6. costs of unrented space 7. accounting costs 8. costs of just keeping track of all the changing laws 9. depreciation In Seattle, landlords are considered an unlimited source of funds for social…

>> [Cost have not risen] nearly as much. If at all. Your counterargument: > Have you looked over their books? > Landlords have to pay: > 1. taxes 2. maintenance 3. insurance 4. mortgage costs (they're usually leveraged) 5. legal and lawyer fees for contracts and disputes 6. costs of unrented space 7. accounting costs 8. costs of just keeping track of all the changing laws 9. depreciation I think your argument is "the…

You can't know these costs have not risen by guesswork. You have to actually look into the business and their P&L statements. And I was responding to a line of "if at all".

Dismissing depreciation is a serious mistake. All buildings deteriorate, become obsolete, become inefficient and maladapted to modern conditions, and simply "wear out" over time. It's pretty obvious if you look at a city and notice that there aren't many old buildings. Old buildings get knocked down and replaced all the time.

Just think what happens when the city says you have to install fire sprinkers. Or do earthquake upgrades. Or tear all the cladding off because it's been ruled a fire hazard. Or your HVAC system is obsolete. Or the wiring isn't up to code anymore. These all happen.

The generally accepted rule is buildings have a 30 year life.

But think of it another way. Businesses are subject to supply&demand, too. If there was some high margin low risk business, entrepreneurs would rush into it, thereby erasing the high margins. If this is not happening, it's usually because the government via regulation or law, has prevented competition.

There's nothing about property management that suggests it is immune from these forces.

Re: Why Restaurants Are So Fucked

#460

Post by ric2b »

aoeu12332 wrote: post #409
simonebrunozzi wrote: post #215

I really dislike the way in which this article has been written - it reads as the typical piece from the "bro culture" that massively ignores the rest of the world. Besides this, which is not the point... 1) most restaurants in US and high-end Europe that survive and thrive do so by having big margins on alcohol. Their margins are not single-digits. (edit: just saw other comments mentioning this). 2) Many restaurateu…

0) I kind of wonder how anything that reads as a typical piece from a certain culture could not be criticized for massively ignoring the rest of the world. 1) In France most restaurants sell the same desserts that they buy from the same wholesale Metro that's open only to food professionals. They buy it less than a euro and sell it more than five, with a bit of an english cream they buy by liters. 2) Not sure what's…

> But maybe Simone is right: if COVID killed your business then it's because you're not "good enough".

Individuals are supposed to save at least 6 months expenses in case they lose their job or there's an unexpected large expense.

But for restaurants it's fine to have so little money that you go bankrupt with a month or two of no business? We're not talking about multinationals, there are lots of reasons why you might need to close a restaurant for a significant period of time or pay for expenses.

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