The article claims that 20 years ago, restaurant margins were 3x higher than today's 3-9% (e.g. 10-25%). I can't find evidence that restaurant margins were ever that massive. In fact the first few Google search results e.g. [1] confirms what I suspected: margins were low single digits even 10+ years back.
Therefore, this makes it less likely that there is a paradise lost of high restaurant margins we can return to, and more likely that some fundamental parameters that make the economic equilibrium of restaurant margins really low.
A guess for these parameters include:
- High competition: there are dozens if not hundreds of different restaurants I could walk to in 10 minutes (living in a US city).
- Low barriers to entry: a good minority of the population can learn how to operate an okay restaurant.
- A lot of owners get "passion utility" out of running a restaurant -- this means they are willing to be paid less in cash.
- Lastly but maybe most importantly, incredibly price sensitive customers. Just like the retailing industry, individuals are incredibly brutal about price. We can exhort day and night about the bad practices of Amazon, Walmart, boycott country X, but at the end of the day price wins. The author here is making a "boycott low margins" appeal which doesn't seem practical.
Restaurants will re-equilibriate. Likely a bunch will go out of business sadly. If social distancing requires there to be fewer customers, and customers are more cautious and eat out less, the bright side of the thin margins is that the restaurants will just pass this cost onto the customers since the ones that don't will be out of business.
Since all restaurants will automatically cost more resources (square foot per customer, overhead) to operate, they will have a common force uniting their upward push in prices too.
[1] https://www.forbes.com/sites/sageworks/2014/06/22/us-restaur...