30% Restaurant Rule Of Thumb

I had the opportunity to have a colleague who was formerly an executive chef at a few fine establishments, (and some that were not so fine). This trade - which is glamourized on TV and on various cable network channels - is actually quite demanding and low-paying with certain exceptions. At the end of the day, it is very much a part of the retail trade, where cost management is critical.

One rule of thumb is to contain the costs to be roughly 1/3 of the total menu price. This ratio incorporates the fixed and variable costs related to preparing and serving the food, as well as having the facilities covered. The reason that many restaurants go under within a few months of their opening is because they do not hold fast to this ratio.

This rule can be altered if certain costs are covered. For example, in a family business where brother and sister don't need to be paid minimum wage, the labour component can be reduced. Alternatively if the location and facility cost is absorbed, that can work to the restaurant's advantage.

So what this really means is that the $12-15 meal that you get at your favorite pub or restaurant has an intrinsic value of $4-5, with the rest being overhead and service. This ratio is especially true if the restaurant is a busy place, as the food value will be more constant. If you are eating out several times a week, a large percentage of your spending is being diverted.

The essence of thrift is to get the most value for your money. What can you do to get the value of a restaurant (or specialty coffee) without overpaying to fund someone's rent or livelihood.

1. Learn to prepare the food or cuisine yourself:
When seen as an investment, the opportunity to expand your kitchen to have top quality appliances and equipment can increase your enthusiasm to cook and prepare meals (even just to use the fancy gadgets), and will open your palate to new experiences. This will also save time (another precious commodity) as you will no longer have to be kept waiting for your meal.

2. Increase your internal spending at home:
This is the "steak vs. bologna" equation where it is actually less expensive to purchase a mid-tier steak than the cheapest cold cut. Most conventional cuts of beef, pork, or chicken are priced at under $10 per kilogram. This translates to $1 per 100g, which is roughly the price of the lower-end cold cuts like bologna. Wealth is not just an asset count, it is a mentality and experience. Would a wealthy person be more inclined to eat a bologna sandwich or a steak dinner? Taking this logic further, for the same price as the cheapest sandwich at a cafe or take-out place, an individual can prepare a fine sirloin meal at home and bring it on where they can be enjoyed.

3. Have pot luck with your colleagues:
This can have several advantages including team-building, appreciation of diverse cultures, and international dining within a price point. At an average of $4-5 per person, a pot-luck ensemble can cover a wide range of enjoyable dishes with abundant quantities and variations. You can also create your dish to reflect the tastes and preferences of your group (i.e. extra spicy, low fat).

4. Look for deals with places having reduced overhead:
You will get more food for your restaurant dollar when you go to places where there are compromises in location, service, or restaurant overhead. This can range from selecting from set meals or "specials", participating in the unlimited buffets or service, enjoying self-serve or take-out, or even bringing your own beverages which you can enjoy for a "corking fee".

The lesson is that thrift does not necessarily imply sacrifice or abstinence. By making smart decisions and necessary preparations, decisions of thrift could actually lead to a more enjoyable life. If you create the meals and beverages, you control your meals, and improve your cuisine skills. It is less expensive and more satisfying, and it also develops your tastes so that you can properly enjoy your prosperity.