Food prices in general are pretty high here in Canada, a big mac combo down the street costs $9.69.
Also, as someone who lives ~4 blocks from the restaurant in question (Wolf Down in Ottawa) I can confirm that the Doner is completely unparalleled. You can tell that they use top quality ingredients and all of the portions are super generous.
tl;dr, while $11 may be expensive for a different doner in a different city, its pretty reasonable for Wolf Down in Ottawa.
Restaurants are fucked but the underlying costs associated with real estate are insane. Where I live, treasured restaurants close at a regular cadence due to rent hikes. Nobody can afford to run a restaurant at the prices being charged here. The end result is a cocktail that is $25 or a pint thats $10. High real estate prices are essentially forcing every commercial space to become a chain restaurant unless they can be just a super busy bar in a controlled neighborhood.
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?
This makes sense in aggregate. If you have 100 properties and raise the rent 10% on all of them and only close 5 locations... you're better off on average and actually just added additional rentable units to your inventory.
> I don't understand what commercial landlords are thinking?
Financial engineering/optimization. I'm not well versed in it myself, but from my understanding:
Commercial landlords can harvest a paper loss from a vacant unit. If you were renting a unit out at $100 per square foot per month, being able to take a $100 sq/ft/month write off from a vacancy may be more advantageous than dropping your rate to $50 sq/ft/month and getting it occupied. Particularly useful if you have a large enough portfolio to withstand the loss in cash flow.
Leasing a unit out at a lower rate can also have other implications on financing (and I believe valuations) for commercial real estate, by essentially re-establishing the cash flow potential of the unit less than what it was (and still is on paper, until you re-lease it at a lower rate).
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 landlord is now bringing in $500 per month, or $6000 per year. Is it your expectation that the landlord can somehow deduct the other $6k in rent not paid and pay $0 per year in taxes??? No, the landlord would now pay $600 a year in taxes on that $6k in rental income. Naturally the landlord doesn’t pay taxes on money they didn’t receive, but it’s always better to have 90% of the rent after tax, than 0% of it. It is always always more profitable to receive rent than not.
Now, as others have mentioned, it may be worthwhile to lose a few months of rent in return for signing a higher-dollar lease over a 10 year term.
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 make any money.
On paper this sounds bad. But because the expectation that property grows in value, they gain capital growth. This isn't taxed until sale time, but capital gains tax is very favourably taxed in most juristictions. Not to mention depreciation over time (a paper loss tbh) can deduct taxation.
After a few more years, they sell the property, using the old (high) rental income value as the valuation figure, pocketing the capital growth while paying little in taxes from the rental (which goes into the cost of debt).
This is why rents would remain high - you need high rents to value the property as high value.
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.
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.
Lease length also factors into this a bit. In NYC, for example, a lot of restaurant leases are 10 years long with an option to renew for another 5 at a new rate at the end. Each year, the rent increases by a percentage (3ish is common).
For a 30% increase, locked in for at least 10 years (assuming the restaurant survives), landlords are willing to let a property sit vacant for a while.
> For a 30% increase, locked in for at least 10 years (assuming the restaurant survives), landlords are willing to let a property sit vacant for a while.
The thing that puzzles me is how willing landlords are to let properties stay vacant. I live in NYC and all of the newer high rise apartment buildings in my neighborhood have retail spaces at the ground floor and usually a few floors above the ground floor also for retail/commercial use. As far as I can tell, almost every building has utterly failed to get any tenants in the ~5 years since the buildings have been built.
One of the things I have noticed is that a lot of the City of San Francisco has prohibitions on new liquor licenses. In many cases this makes wholly new businesses of some types, like nightclubs or bars, impossible or seriously squeezes the margins on new restaurants.
> 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/sites.
The restaurant I came out of retirement on in 2018 has been vacant since Summer of 2018, just to give context that building was $13k/month before operational costs, which were immense due to it be an incredibly old building. I personally had to patch up the pipesdue to massive leaks as our dishwasher wasn't getting enough pressure and my station was getting all the run off I had run to FOH get some wine cork to plug the holes and used a bunch of duct tape until the plumber could get there for the next week of service.
I think I overheard the Sous and Execs saying where I last worked that rent was 20k/month for the flagship, which on a busy night we could clear in a single days (day/night) service.
The further this has gone on, Colorado only just lifted its stay at home order today, the more I think I've hung up my whites and knives professionally for good this time.
By contrast, this is what is happening in Hong Kong, as they have captured the loyalty of their patrons and are months ahead of most country in terms of Covid19 recovery [1]:
> 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.
> 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.
Does that apply to all properties, including commercial buildings? I only said that because a close friend of Tebo's wife (that's his actual name, and he named his business after himself from striking it big in collectors Coins) was a trainer at the gym I went to and we'd often talk about how all the property surrounding the area was owned by him and a lot are vacant, he said that was her rationale. He could be wrong or made it up, I suppose.
He literately is a Feudal Lord in Boulder and has obscene amounts of holdings, its actually alarming how much clout the guy has a result of it and the effect it has on the local population.
I learnt about two ways, but I am sure there are many more. First you can manage the losses of selected businesses of yours such that you break the tax progression and second if you own the property you rent to yourself (this means to your company) such that the deduction of rent leads to a higher reduction of taxes than the increase by the rent income.
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.
> I don't understand what commercial landlords are thinking?
The value of a commercial property is (generally, if it has development potential that may be the main factor in valuation) usually multiple of the rental income that it can generate. If landlords accept lower rents then that lowers the value of their property.
> High real estate prices are essentially forcing every commercial space to become a chain restaurant...
How? Is rent lower for chain restaurants? Do they charge more than non-chain for the same food? And they still have the franchise fees on top of the same costs as the non-chain restaurants. How are chain restaurants surviving and others not?
I'd expect what nradov describes: That the space stays empty.
They have way better efficiency on goods and marketing. Your local mcdonalds isn’t advertising on TV. They pay franchise fees but its not a 1:1 cost to benefit. Depending on the size of the chain, they can also negotiate discounts by buying at predictable and high volumes.
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 since the parent corporation owns all the land).
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.
> I wonder how that works in Europe for inner city locations
I don't have any specific insight into the EU, but in the other global markets I'm familiar with (mostly China, Hong Kong, Singapore, and Japan) locations are either owned by McDonald's directly or franchised by large corporations that have significant bargaining power with (and sometimes are) landlords.
The China/HK franchise, for example, is operated by CITIC (a Chinese SOE) and Carlyle.
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.
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.
Margin. McDonald's average profit margin for the past five years has been 23%.
Sometimes they increase margin on price. But more often, they do it on labor and cost of goods. McDonalds takes no-skill workers, applies its systems, and spits out 5 billion cheeseburgers at five nines consistency. And then it buys in quantities that move world markets, unlike your locavore restaurant.
Five Guys will have lower margins, but still be 4-10x the margin of a one-off restaurant. Same for Cheesecake Factories, and all the Darden-owned restaurants.
sounds like to me that one-off restaurants' owners want to be artisans and craftsman, not running a business. It's like an engineer who values good code and high quality engineering, but is beaten out by massive outsourced labour that optimizes for business value.
The silliest one I've been to was an upscale pizza joint that sold tiny $28 pizzas because they were "artisanal". They didn't make it 6 months. I walked in, looked at the portions and the price and walked out.
Not really, it's just simple economies of scale. Large chains have a natural advantage in the restaurant business just like they have a natural advantage in any other field. A small restaurant simply cannot have as high a margin as McDonalds because they don't have the same bargaining power with their suppliers - they need to pay more for everything.
There is a retail development near me that sat largely empty for years. They kept it up and clean, but word was the prices were sky high. It still has a huge number of vacancies ... we're talking 5+ years after it was built.
Meanwhile other retail places had shops closing, word was the rent kept climbing.
I almost want to suggest that the local city come up with a concept that somehow would encourage actual occupancy. Granted that could be complex but it seems a real waste to have these spaces empty / taking up space with high rents where maybe some business could try to run if rents were lower...
It is a weird dynamic. It's like every spot is just waiting for a Chipotle or Noodles & Company or some small fitness fad / chain and if not that ... nothing.
You can't "make something insolvent". A project is either solvent or it isn't. You can make a mistake about estimating solvency, but that's the fault of your poor estimation skills and your inability to read the situation accurately, not the situation itself.
If a project isn't objectively solvent and banks are still lending on it, then the problem is higher up the food chain - a lending "market" based on moral hazard which encourages poor decisions that blow up later.
This is one of those situations where the people on the ground - shopkeepers, small restaurant entrepreneurs, and their customers - are being punished for policy errors in the financial and real estate industries.
Harvard Square in Cambridge, MA, has trended towards being one of these places in recent years. Restaurant or other long-standing business can no longer afford the rent, and it’s either replaced by nothing or a bank. It says the lifeblood out of the area.
From what I understand, the owners of the buildings are holding out for the high cost renters... like a bank.
A city government could provide incentives to ensure these places don’t sit vacant, and that formerly thriving areas stay interesting and have shopping for most people, not just those with massive wallets or looking for a bank.
Harvard Square isn't a good example because Harvard owns so much of the property. That's why Davis/Porter/Central all have liquor/wine stores but Harvard doesn't. Businesses exist because Harvard allows it--not a free market within that limited zone.
> I almost want to suggest that the local city come up with a concept that somehow would encourage actual occupancy. Granted that could be complex but it seems a real waste to have these spaces empty / taking up space with high rents where maybe some business could try to run if rents were lower...
Land value tax. Shift away from taxing the value of buildings and towards taxing the value of the land they're built on; that way you encourage appropriate and efficient development / land use.
The real estate sector hasn't made sense to me in years. No matter what happens, prices either stay intact or go up. Nothing seems to move the prices down.
The article kind of misses the point, it's not 'margins' it's about the variability of costs.
If a restaurant has x% less business, they can buy x% less 'proteins' and x% fewer servers.
But they are screwed on the fixed costs, which is mostly rent.
The thing is, these are not normal conditions. Real-estate owners everywhere are as worried as anyone about their business.
If restaurants and other such businesses start collapsing - they will take a whole chunk of businesses with them - and maybe even risk the viability of some banks.
If one major bank has been doing stupid things, like Bear Sterns, and collapses, it could take the whole system down.
(Don't want to chastise but HNers could develop a stronger appreciation for how all of this stuff is connected and there are some really scary outcomes from this economic meltdown)
So - there might be a kind of reckoning.
Restauranteurs could legit approach landlords and say: "If my rents stay the same, we go bankrupt, you won't see a dime, and you will not rent this place for a year, and when you do, it will be for 20% less"
That's a credible premise.
In other words - the property is really worth a lot less.
So it's hopefully an opportunity for some hard bargaining.
It is but it doesn’t matter, unless the rent is 20% less in the future because next year a restaurant just as good will pop up and they can charge 10-15% less because their rent is lower and the original restaurant is still screwed.
This post misses the forest for the trees. The reason for the low margins in the restaurant business is the lack of differentiation. Their products are largely commoditized, so they have no competitive advantage or market power. Peter Thiel discussed this in a lecture for YC, where he said that you can work very hard to make the best restaurant in a city, but it doesn't give you much pricing power, because the second best is still pretty good.[1]
My great-grandfather was in the restaurant business back east, but my grandfather saw how unprofitable it was and became a mechanic rather than continue the family business. (He got fired once as a short-order chef in the 50's from a Howard Johnsons for cooking too well.)
Restaurants must relocate to cheaper areas like warehouses and shift to a delivery-first distribution model, which Uber, Lyft, and Google Express could help dispatch. It sucks from a customer-interaction perspective, but it's necessary. Other businesses like Pret in London were already using a hybrid centralized preparation with small, hyperlocal retail sales model.
If you want to make money, you can't think and do what everyone else is doing in all respects.
> Consistency is a big deal in restaurants because mismatched expectations drives bad experiences.
It could also be that the expo/chefs valued speed over anything else, I've never been or eaten at a Howards Johnoson's, but I can easily see it being an issue if you're trying to make an effort while being behind on a ton of tickets and management prioritizes volume over quality and it they're seen as the bottle neck.
I admit speed is not my strong point, but my presentation and knife skills are strong so I make up for it that way and I'm organized and clean--its what got me to work under a 3 star Michelin chef (total nightmare, he finally got fired a months after I left) despite focusing mainly on Farm to table concepts for most of my career.
But I've been judged negatively in other kitchens for playing to my strengths and believing/saying that speed comes with time--in the last place I proved that is the case and trained 4 people due to that philosophy/results.
But patience isn't exactly easily found in kitchens or tolerated amongst a bunch of fast talking, high-strung adrenaline/stress junkies which is what most chefs are, myself included.
>Restaurants must relocate to cheaper areas like warehouses and shift to a delivery-first distribution model, which Uber, Lyft, and Google Express could help dispatch. It sucks from a customer-interaction perspective, but it's necessary. Other businesses like Pret in London were already using a hybrid centralized preparation with small, hyperlocal retail sales model.
Yes. Let's just kill all community space. Great idea. I too enjoy being a pod person.
Chain coffee houses are doing fine. And ever been to a McDonald's on a weekday morning? Community still has places, even if independent restaurants are likely going to reduce in number.
It might be helpful to differentiate "community space" from "restaurant". Or perhaps to differentiate "restaurant that is primarily selling convenience", which is the kind the article seems to be describing, from "restaurant that is primarily selling a dining experience in a community space". I would expect margins on the latter type of restaurant to be significantly higher.
But only restaurants that can be this are famous ones which have a lot of celebrity pull. So the remaining ones that don't have such pull will need to adapt, or die.
It's not that all restaurants will die - just the ones who aren't celebrity/famous and can sell an experience.
> all restaurants want to be a 'dining experience'.
Wanting to be a dining experience, and having "be a dining experience" be your primary business model, are two different things.
I'm sure the author of the article would like his restaurant to be a "dining experience", but that's not his primary business model. His primary business model is selling convenience. His customers buy his food because it's more convenient than preparing it themselves, not because they need to have the "experience" of dining in his restaurant. His restaurant could just as easily be a truck parked at the curb--as many sellers of food actually do in large cities--and his customers probably wouldn't care as long as the food was the same and was available as quickly.
Sure, if you ask the customers, they'll say they prefer the restaurant space to a truck at the curb, but unless they're willing to pay more for the former than they would for the latter, there's no business value in the former. And the fact that customers aren't willing to pay enough to support a restaurant space, but what they're willing to pay probably would be enough to support a truck at the curb, is precisely why the author is struggling to find ways to cut costs--because he mistakenly thinks the space itself is part of his business model, when it actually isn't. He'd like it to be, but it isn't, because his customers aren't willing to pay extra to support it.
Because it's so much easier to fundamentally change a huge and enduring societal institution (the concept of restaurants in trafficked places) than to re-adjust the expectations of the fucking landlords, which has never been dealt with before...
The hyperfocus on "disruption" you sometimes see in here is really... something.
> Yes. Let's just kill all community space. Great idea. I too enjoy being a pod person.
The problem is that a heck of a lot of people are ok with that. I'm one of them. When I went to university, the delivery apps arrived in the middle of my time there. I think I went to a restaurant a 5-6 times in the remaining two years after UberEats and SkipTheDishes arrived.
I lived in the centre of downtown my final year and I didn't go to a restaurant downtown once.
I'm an extreme case of wanting to be at my computer to be sure, but it only takes a small percent opting out to make slim margins go to zero.
A lot of the demand for community type space was under a certain logistical duress. I either had to go to a restaurant, choose from a limited selection of delivered foods, or order takeout (and I may as well just eat it there if I have to make the journey anyway). That no longer exists and instead of paying for the overhead of the restaurant, my money goes to UberEats.
I also want to be on my computer, but I have never ordered food delivery and don't plan to change that. I'm lucky to have a wealth of restaurants nearby and I like it that way, so it's eat out or take-away when I don't feel like cooking. The price premium alone for delivered food makes the whole concept unappealing to me in inner city.
Wait, so now the plan is (a) reduce rent overhead (b) pay someone to deliver all the food? You're betting that the increase in costs implied by (b) exceeds the possible drop caused by (a) ? Good luck!
That's one way to look at it. I, on the other hand, right now order only from the restaurants that are close to home, and I know exactly where they are. In the hopes that at least some of my favourites survive.
Exactly. The French Laundry can charge $325+ for dinner because it is arguably one of the 15 best restaurants in the country. It is incredibly differentiated.
I don't think we disagree here. I was pointing out that those rare times restaurants are differentiated, they can demand a premium, but only because they're differentiated. Restaurants aren't inherently low-margin, but most are, and it's because they're not differentiated.
I know I'm being pedantic, but the best restaurants in the biggest food cities have pricing power because they effectively become Veblen goods. Benu, Coi, Quince, and so on can pretty much charge what they want to. They will continue to be booked out a month in advance, and the exclusivity itself becomes a draw. The line a restaurant needs to cross to achieve that differentiation is apparently a second Michelin star.
Those are not examples of true Veblen goods but rather goods which use price as a signal of quality. True Veblen goods are things like staple foods for the very poor where the increase in price eats so much of their income that they can only buy more staple foods.
>...A higher price may make a product desirable as a status symbol in the practices of conspicuous consumption and conspicuous leisure. A product may be a Veblen good because it is a positional good, something few others can own.
>...The classic example given by Marshall is of inferior quality staple foods, whose demand is driven by poverty that makes their purchasers unable to afford superior foodstuffs. As the price of the cheap staple rises, they can no longer afford to supplement their diet with better foods, and must consume more of the staple food.
What I don't understand is that restaurants seem very well differentiated to me. I have a significant preference for the food of some restaurants over others, and I'm not remotely a foodie.
The medium post seems to be arguing for charging $12 for the example Doner instead of $11. It could just be that I'm relatively price-insensitive, but if I'm choosing between meals at two different restaurants where one costs $11 and the other $12, the decision is being made by which meal I'd prefer eating, not by the $1 difference.
If we're talking a 2x in price, then sure, that can sway my decision. But the article is not talking about such big differences.
People love food, but eating out at restaurants to the extent that happens in the modern world is a historical aberration. It’s not just other restos you’re competing with but a home-cooked meal too.
I get the sense from the tone taken here that this owner is going to be in trouble down the line. It’s good to be passionate but their objectivity is clouded. The restaurant with the really expensive donair is indeed likely to find itself in trouble ...
Home-cooked meals are actually the aberration. Back in the old days (before the 1950s), the poor didn't have kitchens, hence the proliferation of street foods such as pizza and their ancient Roman antecedents.
Although it should be noted that modern American regulations make it very challenging to run the kind of low-cost "random guy with a cart" stands that historically provided street food.
Very true, and I also read that income taxes were one reason for people doing things themselves, because income taxes discourage 'outsourcing' household tasks. The example used in that article (which I can't find right now) was that people paint their own houses more in places with higher income taxes.
Depends how far you want to go back and where they live. Most people throughout history have had the ability to make bread and soup on a fire or something similar to that.
We are talking about Roman era urban setting. A kitchen was a luxury for most common folks in urban eras. Most poor people would go to a local shop, and eat cooked millet/grains or rarely meat (usually chicken, as beef was a luxury), and lots of local fruit/veggies.
In the country-side, yes, there were kitchens/places to cook home, or often outside the main home. (barn style of a place, dedicated to cooking).
On a more philosophical level, are restaurants an essential good for society, or more of a luxury along the lines of upscale purses, limited-run sneakers, Rolex watches and Teslas?
I'm not going to argue that they shouldn't exist, but just like with fine mechanical watches, I don't imagine society will collapse without them as we switch to centralized food preparation with economies of scale and more home cooking.
I would consider some amount of restaurants (of one variety or another) to be of some cultural importance. They don't need to be as prevalent as today, perhaps. But it would be a very different place to be without them entirely, and I think it would feel... a bit colder; more barren.
Luxury? To some degree, perhaps. Hardly to the same degree as Rolex watches, however.
And yet looking at the picture attached I wondered "That layout looks like something cliche out of Ontario". Was not surprised to find out it's in Ottawa.
Not that changing decor in the current climate will do much, but for heaven's sake, why do so many of these places recycle the same stripped down, soulless interiors in that province?
To the article's point, doing any back of the napkin (sorry) math on average rental pricing per sqft, number of employees and so on, would give you a ballpark number that is borderline insane, and would make you wonder how majority of these restaurants can afford to stay open (hint: they can't).
My theory, which is not a theory so much as it is fact, is that there is a lot of dirty money laundering happening through these small "boutique restaurants". I don't see this discussed anywhere.
> there is a lot of dirty money laundering happening through these small "boutique restaurants".
I don't believe that -- why bother with a boutique restaurant when you can just run a crappy kiosk / convenience shop instead -- but forced closures cause an interesting predicament to anyone with a business like this: if their illegal income is continuing, how can they continue to report it when the front-business is supposed to be closed?
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]
Though tax is on charged separately in Canada, so probably closer to 8 EUR. I’ll admit, in Canada, assuming you’re in a busy part of town, I’ve gotten used to the idea that a fulfilling meal out costs $15-25. The only way I’ve been able to reduce prices further than that is to use a service like MealPal or stack discounts from credit cards and app cash back to get another 10-12% off or so. Not to say there aren’t cheaper places to eat at, but I’d have to drive a bit of a distance to get there. Land/rent really is too damn high everywhere “walkable”... The cheapest places in town are always the ones that have been there “forever” or have the smallest, sketchiest locations, but still have lineups around the block, or they’re simply fast food with coupons.
But isn't it cash-only at even most established joints in Germany much less mom and pop immigrant-run hole-in-the-walls? My friend tells me even vape shops that sell hundreds of dollars of gear are cash only.
We have plenty of those in our ethnic neighborhoods. Heck even some very successful joints like Rosamunde Sausage Grill in the Mission District (S.F.) were cash-only until a couple of years ago, when I last went there.
Most other places accept cards & thus have to factor that into the price of the offerings.
Cash-only means no card reader rental, which saves a couple hundred per month and at least 5% of every transaction, and possibly no internet bill, either...
But you can't go cash-only because so few people carry cash, that our would drive out your sales.
Banks charge for handling large volumes of cash though - can be as high as 2% I think; and as others have said 5% is way way more than you'd be paying to accept card payments. If anything the economic incentives are towards going completely cashless these days.
And I'm pretty sure no receipt and under-reported taxes. But what am I saying, that's only something that happens in PIGS, nobody evades taxes in Germany...
I would argue Berlin has some of the cheapest food in Europe. Though to be honest the food quality of the 2.5 EUR Döners is usually questionable and I'm not sure how they can turn any profit or actually live from it.
While on a work trip to Berlin, I walked into a random lebanese place in Neukolln to get a quick bite. Looked at the price of a shawarma - 2 euros - and thought, damn, this is going to be awful. But I was in a hurry and got one (actually two, in case they were tiny) anyway.
Not only were they not tiny, to this day the best shawarma I've had.
Commercial rents are still insanely low in Berlin. Low fixed costs and high turnover make a low-margin business viable, hence the proliferation of food trucks in Tier 1 US cities.
$15 CA is €9.50...The meal you describe would still cost more than that, maybe $20 CA & that would be the cheaper end of the spectrum (€7 Mittagsmenü, €3 wine, €1.5 espresso + 10% tip, then convert € to $CA).
If you're in central business locations in Mitte or Charlottenburg it would be more than that. That said you have very cheap options for Turkish, Arab or Vietnamese food in other districts like Neukölln. One of the best benefits I had when self-employed was the cheap & decent "ethnic" food options I had near the coworking space I chose in Neukölln vs having to go to the office in an expensive part of Mitte.
Right, I was thinking USD so ~13€. For that you have a nice main, wine, and coffee in half the ethnic places of Berlin. Not in Mitte as you said though.
As a side note, I don't know anyone actually tipping 10%. At this price range usually it's rounded to next full euro.
I try to tip at least 10-15% and in cash as the waiters for sure earn less than I do & honestly the extra Euro or 2 make 0 difference to a well compensated software developer.
This is just a ridiculous exaggeration. There are at a minimum (the number of reported and taxed restaurant workers) 302,000 in NYC. There have been 13,500 deaths in NYC. That is less than .5 percent of the number of restaurant workers in the city.
> Drinks for instance cost us more than at the grocery store — but we can’t exactly go get 20 cases of pop per day, so we don’t have much choice.
I didn't understand this. It may not be feasible to buy 100 cases of pop at a regular grocery store, but isn't Costco/Sam's Club set up for that?
I do think it comes down ultimately to real estate prices. Major metros in North America have gradually become unaffordable for the middle-class over the past 20 years. It's not surprising that it's the same story for small businesses such as restaurants. Businesses have to pay workers more (because housing is expensive) and they have to pay their landlord more (because commercial rents are high). All that profit margin is ending up in landlords' pockets.
For older, less popular restaurants, maybe, but a salad at Sweetgreen is, what, $10-$15? And that's fast casual. Clearly overhead is being passed on to customers.
My favorite is the landlords that refuse to lower their rents to attract tenants. They got a loan to buy the property, and the loan is backed by the revenue potential of the property. If rents decrease, the revenue potential also decreases and the lenders require the property owners to make up the difference. It produces a huge incentive for a property to go unrented at a high price rather than rented at a low price.
I’m familiar with the argument but I think people overstate the importance of unrented high price to refinancing. Banks (and CMBS investors) don’t simply look at market rent levels in isolation. They also look at percent vacant and length of tenancy. Except over the very short term, no one is being deceived.
I can't say that it's specifically the case, but in Montreal, there's been an ever increasing number of vacant commercial spaces - seemingly because they know that "eventually" some BigCo will come along and be willing to pay the extremely high rent. As anecdata, there's a corner space on the ground floor of Duluth and St. Laurent that's been vacant for well over a year - maybe even two. It's pricing out smaller businesses, and even though the space is available and empty, it's just unaffordable and priced far above the true market value.
We don't want more A&W's and Starbucks, but that's what eventually happens here. The only places that survive are bars.
Refinancing isn't the answer, because the borrowers will need to make up the difference between the old value and new value in cash. That's what makes this such a strong incentive, where it's worth it to leave a property unrented for a long time. If there's no refinancing, there's no reevaluation and no big lump of cash to be produced - everything just continues on as it did before.
Large landlords who own an entire street/area in upmarket or aspiring parts of a city also worry about low end tenants dragging the rest down. Completely rationally they'd rather have 60% occupancy at 2x the average rent than 95% at 1x and they know that high end retailers will pay a lot less (if anything) for a site next to a McDonald's (for example) than for a site next to another high end retailer.
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.
>...The goal is to maximize income, and the maximum you can get sustainably is 100% of your lesee's profits.
If you hypothetically take 100% of the profits of the renter, they won't be in business long term. There likely will be a gap between when they stop paying rent and you are able to evict them. There will also likely be a gap between that point and when you get a new renter, particularly when your rent is so high.
I agree that the goal is to maximize income, but trying to take 100% of the profits of the renter is not a way to maximize long term income.
I'm not sure why you couldn't buy 20 cases of pop per day at a big grocery store. There's more than 20 cases of each flavor at my local grocery store and there's lots of other grocery stores nearby that have the same selection.
> One: the shop often wouldn't let you buy up their whole supply
Any half-sane shop would love the giant piles of money you're spending and negotiate a way to get you a nice big supply with an even easier pickup process than filling a cart.
> Two: there are likely other restaurants in the area, so that's 20N boxes a day
Even better. Imagine a shop saying they don't* want to ramp up to selling ten times as much product out of aisle seven with no extra work beyond staying in stock.
> Three: lots of countries have resale laws that prevent this
If you buy a shelf-stable food, you can't resell it? Why would a law like this ever exist?
> Four: that's a lot of time to spend every day when you can get a single delivery every week / two weeks instead
This is a better reason, but you'd think the huge volume of the sale would get you at least a mild price improvement.
> Five: the delivery often includes the collection of the used bottles (when using glass) and that otherwise can cost a lot
If it costs money to set things out for recycling, the local government is doing a bad job.
Other than borrowing what costs do landlords have to bear? Certainly in the UK they seem to do nothing other than cream off any profitability you have generated at the next rent review.
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 programs by the City Council. For example, if the spouse of a tenant damages the apartment, the landlord has to pay for the damage, not the tenant.
>> [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 "there are lots of costs", which is true and people don't appreciate that a landlord can have a hard time.
But it doesn't work as an argument about how much costs have risen or fallen.
Most of the costs you listed have either stayed the same or gone down in recent years, so it doesn't appear to support your side of that argument.
Mortgage costs in particular have gone down a lot in recent years. Mortgages are great if you can get them, because they are so cheap now.
6 has gone up but that one is cheating. It's like saying landlord's income is lower than the amount it "should" have gone up, which does not work as an argument that landlords actually have to pay out more. If 6 has gone up due to longer voids, those voids (until recently) are usually due to raising the rent, their own decision, so again do not constitute landlords paying out more.
9 is an interesting mixed bag, as depreciation is only relevant as a true outgoing cost if you're going to sell the property someday, in which case you should only be counting the interest component of the mortgage, which has gone down, as well as the change in property price, which has probably gone up by more than depreciation (until recently).
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.
> Dismissing depreciation is a serious mistake.
...
> The generally accepted rule is buildings have a 30 year life.
I think you are saying "there are substantial costs" again.
It only works as an argument about rising costs if backed up by "and the real costs to the landlord caused by depreciation have actually risen".
Do you have anything to back that up?
I think most people take the view that landlords have generally benefitted, until recently, from steadily rising property prices, and this nearly always greatly outweighs depreciation over 30 years. I.e. the cost of property doubles more often than every 30 years, so you can use the bonanza to buy replacement buildings which offsets the cost of old buildings being taken down.
And that doesn't even consider cost of the land, which does not suffer depreciation even if a building has to be replaced, and is often the majority of the cost of purchase.
> There's nothing about property management that suggests it is immune from these forces.
But there is a very significant obstacle to these forces acting fluidly according to the ebb and flow of commercial forces! I would happily be a landlord (until recently and maybe even then) on the basis of commercial thinking, but the avenue is not open to me because I don't have access to capital. Capital is around, but it will tend to be allocated first to an entity with an existing portfolio.
Also, in the town where I live, even if I had a few million, I would struggle to become a landlord of commercial property larger than a tiny corner shop, because very few units are for sale. When one comes up, which is not often, there's a secret bidding war because pent up demand exists as does the money behind it, and buyers simply cannot find something. This is despite a very large number of empty units, with owners who seem to be happy keeping them empty (I know several companies that have tried renting be turned away on various grounds, sometimes "we are not interested in renting it at all, we have plans for it in 10 years", others "we want personal rent guarantees from all the directors as well as a large deposit".) Heck, even renting is subject to bidding wars and personal interviews to decide which company should be allowed to rent among several candidates (I've been involved in this twice as a business tenant, and several times for residential, so I'm not speculating.)
I've actually been in the commercial property management business for a while. I can assure you that the notion that you can charge whatever rent you like is false. That it's a magical money machine is false. That you don't have large and ever-growing expenses is false. That landlords don't go bust is false. That you make money with an unrented property is false. That there is some secret cabal of landlords is false.
I lost money every year in it, and finally gave it up before it crushed me.
Sure, I stink as a businessman. But that's also my point. It ain't an easy business to make money in.
I suppose that would be true if you weren't paying maintenance, taxes, insurance, legal bills, accounting costs, compliance with regulation costs, repairs, upgrades and assume that none of those go up over time.
I'd expect most of those to rise only insofar as the inflation rate. The cost of housing in major North American metros has outpaced inflation in the past 20 years.
This doesn't make sense in the first place. Don't suppliers charge lower rates to restaurants exactly because they'd otherwise just go to the supermarket?
That part seemed strange to me. According to people I know that have worked in food/beverage industry, the most expensive part of a cup of Coke at a movie theater or fast food restaurant is the actual cup itself. The liquid inside the cup costs pennies.
As with my examples above (linen and dishwashing) ice machines are also notoriously difficult/expensive. They most certainly have to be cleaned & serviced regularly. When the Board of Health comes in, the ice machine is one the first places they look as it’s basically a invitation to a mold party without diligent cleaning.
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 washers, pay rent on space to keep them, know how to service them, pay staff to operate them, etc...
If you’re a large chain, perhaps you could bring those operations in house. If you’re tiny, you could do it yourself. But if you’re seeing over 100 guests a day, there’s no reason not to use service companies for these two examples.
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.
You'll find a $16 doner in the comically overpriced food court in City Point, or a $15 currywurst at a place Chelsea Market.
This is, of course, a comically grim state of affairs compared to the 4 euro doner or currywurst you can get in Berlin. Though I will say NYC halal carts might be the best _common_ street food in the US, and that hasn't yet made it above the $6 sandwich/$7 plate mark... yet.
People are fine with making their own food. It has a big benefit in that you can make it exactly how you want. Restaurant food makes the most sense for things which are difficult to make or require expensive equipment or the most prep.
I don't feel its a matter of people passing or not. Its a matter of how often they pass. People, in aggregate, will just eat out less. Whether this means restaurants will, at the end of the month, make more or less money, I don't know (I suspect its less, because it seems most of the costs are pretty constant; the food itself is a minority of the pie).
If another restaurant can make a profit by increasing efficiency and keep prices low, they win over one that doesn't. And restaurants have no real business moat - recipes for most things are known, and it's mighty hard to invent something totally new.
Let's imagine that all restaurants raise their prices like the article claims. Suddenly, the margins at 19%. Let's also assume that consumers are willing to pay, but if they find something of similar quality but cheaper, the will move. Then one self-interested restaurant owner could simply lower their price by a bit, and they will make more money than their competition.
And so all restaurants have to do the same. So the margin of 5-9% is what you end up with.
TBH, as an investor, if you're given a 9% return on investment, i think they would be ok. It's not great, but it's not the worst. 19% margin is too high: most junk bonds are returning something like 8-10% (sure some are like 20%). Is running a restaurant riskier than junk bonds?
The main way businesses that use labor reduce cost and/or increase profit is to reduce the cost of labor. Efficiency wins are generally small compared to labor costs.
So the reality is that, as the article noted, restaurants have been in a battle for a decade or two focused on cost reduction, which means mostly labor cost reduction.
In short: the cost of eating out is relatively low because we pay most of the people involved as little as possible. That might be good for our eating out, but it's far from clear that it's good for the rest of our lives.
Personally I think it's mostly the last one: I know what sandwiches are "worth" and you are trying to fleece me, or your high price is because you are bad at running a business and it's not my problem. No one likes to be conned or make up for someone else's mistakes, that stings a lot more than just paying a few dollars more. I've noticed a vaguer version of that train of thought in my own head more than once.
The calculus is, what percentage of Americans can afford $15-$20 per sandwich on a regular basis? And how does that revenue compare to current revenues?
edit: Though, this throwing around of prices is perhaps not very effective. Reasonable prices for sandwiches in SFC, NYC, or Seattle will be much higher than a midwest capital, which will still be higher than some rural diner. The point stands, however, that there's a breaking point which has nothing to do with principles or indignation and everything to do with household economics.
My guess is that moving forward businesses will try to reduce labor and overhead through automation and centralization in places like cloud kitchens. Delivery costs to the consumer will eventually be sufficiently streamlined to be negligible, like they allegedly already are in East Asia.
A $20 kebab is not going to fly. The only other option is to optimize whatever costs can be optimized.
Unfortunately it's not looking good for people who are currently employed in the more manual roles. It was only a matter of time before that became the case in the food industry.
Delivery food tends to not taste as well as food that come straight out of the kitchen, and that dynamic is going to be hard to compete with without a much faster delivery pipeline (drone delivery)?
Agreed. I don't think it makes sense to order food from a place that's a 30 minute drive away, but unfortunately in bigger cities with traffic this is the norm as of today. By the time the food makes it to you, it's lukewarm and has lost some of its appeal. A first world problem, but also one of the simple joys of food.
Maybe with cloud kitchens we'll be able to improve kitchen proximity, and we'll improve the containers that the food is delivered in.
Not to mention that most of the containers used for delivery are not biodegradable and, I imagine, generate a ton of extra trash.
In my opinion. In here (NYC), food quality compared to big cities in Asia (at least that's what I know, both from 3rd world countries Asia and 1st world countries Asia) are way better than here in NYC.
It is crazy how bad food quality in NYC for its price. It is so bad that I almost feel like there is a conspiracy between restaurants in the city that goes on like this:
restaurantA: "Hey you know, we can make good food"
restaurantB: "Yes you are right, we can, but why should we? Why not just create mediocre food? If everyone of us are doing it, the customers don't have any other choice, yet we still charge them expensive price"
restaurantA: "You are right, why don't I think of that? that's genius"
I just don't understand why in Asia food quality compared to its price are just much much better. At least for Asian food. Maybe I am bias because I am Asian and used to Asian food. But yes Asian food here in NYC also not great for its price.
Brand value extraction might be the name of the game. It seems only when a restaurant is ascendant is the quality excellent. Once they have a good reputation, the quality slides.
The lion share of the price goes for the privilege of eating in a NY establishment. The rent is too damn high [0]. I bet you can find world class Asian food in NY, it's just that it's going to be a whole lot more expensive.
[0] 'The Rent Is Too Damn High Party is a single issue political party, primarily active in the state of New York, that has nominated candidates for mayor of New York City in 2005 and 2009, and for governor and senator in 2010.', https://en.wikipedia.org/wiki/Rent_Is_Too_Damn_High_Party
I've heard of local stories where restaurants are pairing up to provide meals - i.e. dinners with a combination of a nearby desert place. This may be temporary but perhaps will be a model that continues in the future to support local businesses.
> 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 after opening, they're not going to make it.
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.
1 and 2 can both be true and margins can still be low because of higher rent and/or labor costs.
> Is it really just too many food vendors thinking that the $1 happy meal is their competition?
Maybe if you're a Burger King, but most restaurants aren't really competing with fast food. It's more like the Italian place is competing with the Sushi place in the same price bracket (I'm guessing, but 3x-5x more than fast food).
A burger with a meal + a drink @ Wendys is like $8+. The price of fast food has risen quite a bit over the years.
I can get a burger and fries that's 10x better at Friendly's, Ruby Tuesday's or a half a dozen other franchises for about $10-12 and the only sacrifice I have to make is that I'll have to drink water instead of soda.
I don't buy this. At a fast food chain, drinks are $1 with free refills. A burger is $3 for the fancy ones, $1 for the dollar menu ones. The windows also have all sorts of 4 for $4 or $5 value meal deals. So $5 without any coupons at Wendy's. Two people can eat for $6 if you use a coupon.
Ruby Tuesday burgers are $9.50 with fries. Add a soda, tip, tax, and it's $16. The multiple is still 3-4x.
It also depends on where you live. Some places the price disparity might be higher than others.
Also if you're talking about dollar menu stuff or the stuff close to it, its about 1/3 the size of the burgers included in fast food meals. The burgers in the meals are comparable in size to what you would get at a sit down restaurant.
Is restaurant food really more expensive in Europe? I only ate in San Francisco, so my perception is probably warped, but there at least eating out is significantly more expensive than in Germany. The prices on the menu are maybe comparable, but they don't include tax and tip.
I'm not sure about Europe but I suspect one of the issues is similar to Japan. The food isn't necessarily that much more expensive, especially if you're eating food similar to a native, but the serving size is much much smaller. In the US most people will leave a restaurant upset if they aren't completely and totally stuffed with leftovers for the next day and this is combined with people here easily able to eat more on average already. When I first lived abroad I was spending alot of money in my first couple months trying to eat like an American, until I embraced eating more local food and accepting the smaller serving size. Then I loss tons and tons of weight without even going to the gym.
True. 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.
I think this can all be collapsed into a very simple explanation. Almost everyone has a kitchen in their home and practices being an amateur chef every day.
What else does everyone practice almost every day at home that has higher margins?
Restaurants are competing with a baseline price of homemade meals. Most other businesses aren't competing like this.
Yeah. But that's not really the core concept. That's an add on. The core concept still competes with "anybody can make a version of that doner at home" so if you want everyone to rethink the value of the experience up to $15 a pita, it's just going to drive more people to eat out less.
I appreciate that there's more to a restaurant than the literal food on the plate. But I think it's what oversold that ambience drives such a premium.
Most neighborhood restaurants aren't really selling the experience. To be honest, I only go because taste is good, and I don't want to invite people over.
I think trying to collapse this into a simple explanation is a simple mistake when other countries around the world have the same 'competition' and not the same issues.
So when you start looking at issues with American restaurants vs other countries, a different picture starts to arise. One with a whole lot of rent-seeking behavior.
- 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 lifespans. And on the flip side, it allows you to charge significantly more for the fancier experience.
- I don’t think the “simple and cheap” restaurant actually works that well economically. My litmus test here is when an area gets gentrified, often these hole-in-the-wall places are first to go.
- Most restaurants are lifestyle businesses, so normal business logic breaks down a little. In many cases, the owners want the prestige of running a nice place.
They exist as described (family owned/operated restaurants; owner is the cook; relatively small building with small dining area). I personally know a family which owns/operates one in my hometown, and also know of a few here in Wisconsin's capital. They don't seem to be too hard to find if you look.
It's probably location dependent, so I don't know about major urban centers like SFC. But it's definitely not fair to say that NA doesn't have these; there's a lot to NA outside of major urban centers.
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..."
I once worked for a chain of nightclubs. We used a poor man's form of demographic analysis. We looked to see where the major franchise food operations were building and would shop for a property there. People eat and people drink...
Most cities are developing at least a couple bars clustered together, and they are pretty universally well attended by millenials. Previous generations might feel guilt or shame about spending a night at the bars. Modern parents are much more sensible and hire a sitter and rideshare to a brewery every now and then. Some bars and brewerys have a more substantial meal service as well, and it's not unheard of to bring your kid in tow during dinner hours.
To me, its a business that will only get more profitable as younger generations become much more sensible adults around social drinking. Outside of a pandemic, that is. Even my parents generation seems to be seeing a resurgence in going out to bars now that kids have grown up and moved away. My mom now frequents tequila bars with her friends. It doesn't even matter if it's a cold climate. Throw on the game, buy a few heat lamps, and have a special on pitchers.
Drinking culture is seeing a huge resurgence in the 4 U.S. metros I've lived in the last few years imo, although I don't have any particular data to point to off hand. Given the increasing secularization of american culture, and the acceptance of the fact that you can indeed have a bender with your friends on a weekend and still pass your medical school exams, I see no reason why bars aren't the best bet in
Yeah it’s funny that she ever mentions booze, where the markups are 200-500%. If you can use your tables and food to sell bottles of wine, you can really improve your bottom line.
Ah the benefits of selling an addictive substance in a market with a large base of addicts and a legal environment that largely shields you from liability for even the fairly direct consequences of your product (such as drunk driving after serving at places and times where the non-availability of alternatives guarentees that most of your patrons will be driving).
Most customers who have a glass of wine or beer with their dinner don't qualify as addicted. Also, the restaurants make the same (or even more profit) when selling alcohol-free beverages with their food.
Yeah, but I don't generally sit down and drink 3 cokes in one sitting. Alcohol is a great money maker because there's a large standard deviation to how many drinks a given person might order. It would be very rare for a customer to drink 3 cokes with dinner but not uncommon for someone to order 3 beers.
When I am out in larger groups, the number of drinks varies little with what was ordered, be it beer, alcohol-free beer or other beverages. This is one medium to large sized glass of beverage for a lunch and several in the evening. Coke might be an exception, but it is very rare, that someone orders coke in a restaurant. Usually you have fruit juices of many variations, often as a "Schorle", that is fruit juice mixed with sparkling water. Or just water. And the prices differ only little between a glass of beer and of juice.
> Yeah, but I don't generally sit down and drink 3 cokes in one sitting
Do you generally sit down and drink 3 beers in one sitting?
> It would be very rare for a customer to drink 3 cokes with dinner but not uncommon for someone to order 3 beers.
At home, I drink much as I'm thirsty for, be it soda, beer, wine, tea, water... I certainly don't drink more just because it's alcoholic. I might drink less, or switch to something else, if I'm starting to feel drunk and it's not an occasion for such.
At a restaurant, I order less when alcohol is involved. I prefer to have my senses about me if I'll be driving home...
I wasn't arguing for anything-- it's just an observation.
A bar would be a very different and less profitable business if they had the normal spectrum of liability other businesses have when their actions result in predictable harm. Or even if just law enforcement weren't effectively prevented from staking out bars and stopping obviously drunk patrons as soon as they started to drive.
Similarly, I also believe they'd be much less profitable if not for the rather alarming amount of addiction and abuse.
I don't think prohibition is a good idea but the fact that I'm opposed to prohibition doesn't make me blind to the externalities that bars create which are a component of their profitability.
There are lots of less than perfect things in the world. We can make them better by willing to discuss them and not being to quick to assume that any criticism is a call for a prohibition. In this case, especially, there was a comparison with other businesses and more than anything I wanted to point out that it wasn't a fair comparison because of bars unusual amount of externalized costs.
I don't drink much these days but I think that's taking it a little far. You could make the same argument about fatty foods and many other things.
There are non-drink culinary uses for it too. The wholesale banning of alcohol misses the point a lot of the time. I had a friend who taught cake decorating and it's common to mix high concentration alcohol with coloured dust to paint on sugar flowers because it's a great solvent, evaporates quickly, and doesn't soak into the sugar. No one eats this part of the cake. But in some countries with Islamic students they were so unwilling to be anywhere near alcohol they used water. Perhaps I'm mistaken but I thought the original intent of those commands was regarding intoxication (which I don't fully disagree with) so this seems odd to me.
Correct, it's mainly to avoid intoxication and the ramifications that come out of it. However, I agree with what those students did. They have principles and they stuck to them. The alcohol could have mixed with the food for instance, even though it wasn't meant to be consumed directly. Secondly, someone could unknowingly consume it thinking it was edible.
As to your first point, highly processed foods are definitely something to watch out for. However, the effects of alcohol are immediate, and can be seen in a single sitting. Countless instances of rape, drunk driving, and homicides that come out of it. You won't see someone consume a couple of meals at a fast food place then lose his decision making ability for instance.
> German street food is not complete without a Pilsner
German here. For lunch, no one I know ever drinks alcoholic beverages (except maybe when going to a nice restaurant with the whole family on the weekend). And I don't think people are eating street food for dinner all that much, except maybe Döner. But even at Döner places, I don't think I've ever seen people drinking beer. They mostly don't drink anything, and some drink Ayran.
So I know (not personally) this guy named Ian McCollum. He's kind of well known on youtube, filming/writing/presenting on a topic that is personally very interesting to him.
He graduated from Purdue with a degree in mechanical engineer. But he didn't want to settle with a 9 to 5 job and a normal life, just to pay his bills. So instead he earned some extra small pile of money after college and set up a low cost life style in Arizona, with off grid house etc. And now he doesn't have to spend life in 9 to 5 job but instead travels around filming/interviewing/presenting on a passion project of his.
So how did he get that bit of enough extra money within 2 - 3 years (I think) after college to pay to get himself set up with that life style? He went to a bartender school and worked as a bartender. That earned him enough chunk of money that he could set up an off grid house in AZ and get on with his passion project.
If you listen to Ian McCollum presenting on his topic, you can tell he would've been a very good bartender. Calm, articulate, polite.
Knowing a few other mechanical engineers myself, finding a decent paying job as a mechanical engineer was nearly impossible. At least 10 - 15 years ago.
So the revelation from his story is that working as a bartender can bring in quite a bit of money due to high margin of alcohol and bigger tip.
Unless you're a really special restaurant with significant differentiation capabilities and people come to eat at your place irrationally, here's a tip:
Restaurants are never the ones making the money. They enable others to make money. Usually, landlords.
And generally, be cautious about going into a business where people want to do it because it's their passion. It means you're going to competing with people who are willing to work for nearly $0 because it's their passion.
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; too many other giants can squeeze you without a thought (eg the McDonalds $1 value menu the author also cites).
Nobody’s “in” to paying >$10 for döner kebap. You have to differentiate a lot more than that; unlike me (and edge case) most people will not pay $25 to scratch the itch of the intense periodic lust for dönerfleisch.
"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 unskilled labor - doing car repairs properly and efficiently requires a lot of practice and training.
Similarly, if I'm a bank there's only so much differentiation I can offer. Different financial services and interest rates or stuff like that, sure, but at the end of the day I just store people's money in accounts and provide loans. That's basically all I do, and any other bank can do it. A bigger bank has the ability to do it better (due to their resources and regulatory capture) no matter how much I differentiate myself, and since it comes down to policy in many cases another player can just come in and copy all of my policies. None of this means that working in banking is "unskilled labor".
The tendency to call people like chefs or line cooks "unskilled labor" is disgusting. Being a line cook or a chef in a high-pressure restaurant environment is REALLY HARD and takes tons of practice and training.
> The tendency to call people like chefs or line cooks "unskilled labor" is disgusting.
I don't think this is disgusting. I don't believe it's meant to imply what I believe you think it implies. It sounds to me as if, in your life, this term "unskilled labor" may be used as a slur --- is this the case? It is not the canonical intent behind "skilled/unskilled labor" terminology.
"Unskilled labor" means you don't spend years on preliminary education before you can even enter the job market. It means you can hire a person with no prior training or pertinent education and expect them to be able to succeed given a reasonable training program and work ethic. Compare this to "skilled labor" where entry into the field is gated upon higher education (or perhaps apprenticeship).
I'm not disparaging line cooks. As you say, it's very high-pressure, and experience and drive are critical to competency in such an environment.
PS. I do also agree that "differentiation" and "skilled/unskilled labor" are orthogonal concepts.
Regardless of their skill, they're competing with the general, unskilled population, who are overwhelmingly capable of, if disinclined towards, cooking their own food or eating packaged food.
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.
The iron law of wages was based, among other things, on Malthus' demographic theory. Modern economists are highly critical of it. Supply and demand are sufficient to explain the wages of cooks and dishwashers: anyone can be trained in a couple weeks to be a minimally competent cook or dishwasher. The labor supply is roughly equal to the number of people who need any kind of work.
That's a good observation about landlords. Often if you find a local "ethnic" restaurant that's been there forever and is run by a family (typically Chinese/Indian/Thai/etc) they own the building or at least the space for their restaurant. That means they can stay in business basically infinitely (well, until now) without worrying about rent increases. But this is a different model than most trendy restaurants where the owners are not interesting in buying a property outright - those are seen as an investment not as a steady income for a family.
I don't think the passion argument is that valuable. For a LOT of people programming is their passion. Yet they command some of the highest salaries. The labor market doesn't care about passion. It will settle where it needs to based on demand and supply.
I think he's saying the passion factor will increase the supply. I think the same thing happens some with programming, it's just a lot fewer people have the passion (and ability?) than for cooking food.
The same thing happens with teachers, nurses, firemen, police... I think the reason they generally don't make more money is many people have a passion for doing those jobs (ask ten kids what they want to be when they grow up), but they aren't super difficult, so there's a large supply.
>The same thing happens with teachers, nurses, firemen, police
Maybe there's something different going on there since government salaries don't respond normally to market supply and demand. Perhaps a better way to track the true value of those jobs is by looking at private sector counterparts, such as security contractors or teachers at private schools.
Also, as far as I know (that would depends on the country, but I believe it is generally true), those professions (except for teachers) can't go on strike too much, they have to keep a minimum service running, which vastly limits their negotiating power.
Teachers, nurses, firemen, and police officers would like to have a word with you.
Programming may be mathematically complex and difficult to learn, but it does not corner the market on difficulty.
Try adapting a teaching curriculum for online learning for fourth graders, working 16 shifts in an ICU during a pandemic while trying to keep people safe, planning and organizing a response to statewide wildfires, or de-escalating complex interpersonal issues dealing with crime, safety, and mental illness on the daily.
The devil is in how well you do your job. Handling those things well is difficult; handling them well enough the government won't fire you (for which the bar seems to be fairly low) is not.
We've been flooded with reports of how we are not adapting to the change to online learning well.
Working in the ICU during a pandemic is not a complex task; the procedures for doing so are fairly simple steps posted on charts everywhere. There are degrees of complexity to being a nurse depending on the level of certification you have. Physician's assistants have abilities fairly close to a doctor.
Planning and organizing responses to state wildfires is far outside the scope of a firefighter. There are a very small number of people that plan and organize, and a large number of people who implement.
I do not think de-escalating is well-embraced form of policing in the US. If it is, we are doing a terrible job. Police in the US kill drastically more people than other countries. It's not uncommon for European countries to go a full year without police killing a single citizen. There are, of course, more complexities to it than that, but it would be hard to reconcile a doctrine of de-escalation with the absurd number of police shootings we have.
Doing those things well is hard. The fact of the matter is that there is a distinct lack of expectation that those things will be executed well. No one is going to be punished for online schooling failing, botched responses to wildfires, or for shooting a homeless person. In the face of that, they're certainly not herculean feats of strength.
Is it a work for $0 market due to passion though? I love programming. I am either programming, writing, or sleeping.
I wouldn't live in a box with roommates to be one though. I think many of us would find regular engineering or analytics jobs instead. Slightly less interesting, but we could still program within those jobs.
People who love food are basically willing to live in poverty to do it.
Yeah... and here's a thing. I can write programs all day long at home. I could spend the rest of my life on personal projects if I so chose, and had the financial security to do so. If I somehow ran out of ideas, I could write software for friends and family. If I wanted to scale up from there, I could work on open source projects. Some types of projects would be closed to me (big research, projects requiring specialized hardware, etc), but there's a lot a person can do on their own as a hobby.
Compare this to food. Beyond a very small scale (cooking for the immediate family, occasionally cooking for family events) there's a very fast, hard limit on what you can do as a hobbyist.
May I introduce you to the video games industry? While there are good paying jobs out there, I'd risk saying the vast majority of people working in games are hugely underpaid. At my first job I was literally told "yeah the pay is crap, but you get to work on big titles so it's fine". And it's not just demand and supply - we're having a very hard time recruiting for senior positions as there just aren't any candidates around, but the pay is still very poor compared to other industries.
If you are not able to recruit then that pretty much proves you are underpaying, right? If you pay market price for devs you would not have trouble recruiting, well, devs.
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"
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 to persuade. It's a strategic decision for the company leaders, whether they think it's worth spending more to attract hires of the type who get better offers elsewhere.
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.
Individual HR people may not all be critical thinkers, but HR people do salary research and keep up with trends in hiring. They have their own professional communities where they discuss this stuff. Even if they aren't all individually doing it, some within the HR communities look at such things and talk about it with others. They use this to advise each other and their execs if nothing else.
HR industry groups could, as a body, look into whether "the industry standard" is getting hiring results as well as employee churn, satisfaction, and company-reported satisfaction with their hiring outcomes and make that information available to HR people and then to whomever needs to take it into account in strategic decisions.
> there just aren't any [senior] candidates around
I think that statement is almost certainly false.
Offer better pay, conditions and interesting work that has career prospects for the people when they leave, and make it known you are doing this, and I think you will have plenty of interested, good candidates.
(Unless you make crappy games infested with 15s gameplay alternating with 30s brain-polluting ads, and that's for the people who paid for the "ad-free" feature. I jest not - I just turned down a recruiter for a games company looking for someone in a senior role, after I researched the company and the first few reviews I looked at showed the games fit the above description. I copied the reviews over to the recruiter and said this this is why I could not imagine myself working there in a salaried role.)
I work for one of the largest developers in the world - the career prospects and attractiveness of work are both not an issue. I'm surrounded by people who have worked here 15, 20, even 25 years, we pretty much never let people go unless they want to leave and try something else, and generally the company tries to bend over to accomodate any wishes towards your dream career path(I personally know several people who changed their speciality within company just because they wanted to, and the company did everything it could to accomodate such changes) - you can also move to any of our 40+ studios across the world if you so desire(there is a process, but no one is going to stop you from transferring if you want to do it). Pretty much everyone here has worked on at least one title that sold 10+ million copies - it's a pretty good place to work all things considered.
No, the main and only problem is pay, and it all stems from the fact that there are hundreds of applicants willing to apply for junior positions, some of which I am certain would literally chop their own leg off for the opportunity to work in video games - if it was legal they would literally agree to work for free. So they all start on some extremely low salary(especially considering that actually, our standard for hiring programmers seems extremely high and I have no doubts that those people could find much better paid jobs elsewhere), but obviously that leads to problems further down the line.
But, just because we have thousands of applicants for junior positions, that doesn't mean we have as many for say Senior roles - those see barely anyone applying, and yes, I'm 100% convinced it's purely because of pay. And the pay is what it is, because HR considers it unacceptable to pay new hires more than what we pay people who have advanced through the ranks naturally(which obviously cannot be a lot, seeing as your starting salary as a junior was so low, even if you somehow through some miracle managed 10% increase every year that's still not a lot by the time you get promoted to senior).
It boils down to supply and demand, though, right?
I think the large number of people who love programming makes getting an "elite" programming job difficult.
But, I think the vast majority of people think they'd hate or couldn't do programming, and so never consider it as a job despite how much demand there is for it. And that keeps our entry level wages safe.
There is an entire world of people who are willing to work for less and developing can be done remotely.
Even ignoring that. Everything gets commoditized over time. How much does your typical PHP/Wordpress developer make now? Companies like make it easy for someone who doesn’t know anything about programming to make a decent website. There are companies now that make it easy to make a cut and paste iOS app.
Quit whining about how your restaurant is going to die, you knew about the crap margins going into the restaurant business in the first place. Everyone is fucked. This is life.
I'll make another observation about the landscape of restaurants.
You may notice that in Europe, Asia, the demographics of restaurants are noticeably different from the US. There are far more hole-in-the-wall mom-and-pop restaurants in those places compared to the US, running a small and seemingly profit-thin but subsistence restaurant for the neighborhood. Think of a suburban neighborhood in Madrid or Rome, where a small restaurant is just as common as a tabacchi / corner convenience store.
I believe (have not seen a careful study yet) that the rent-seeking / zoning policies of our cities in the US increase greatly the cost of running restaurants. And incentivize / prohibit anything but large commercial / chain places from surviving as a rule. It makes it very hard for small experiments or small-time mom-and-pop shops to survive and stay in a community for decades at the low profits those places are willing to accept. There may also be something about the small square footage of typical shops in such cities being unfavorable towards chain restaurants which seem to require a certain size (like hotel properties).
The landscape of our policies for cities, neighborhoods, plus the way they interact with our corporations, directly translates into the kinds of restaurants that we get as a result.
This will no doubt be an unpopular opinion, but I’m not a fan of food trucks as an everyday dining experience. Not super impressed with the average food quality, and the “stand around waiting for 20 minutes” experience is also not ideal. Crowded food truck clusters are super annoying to me.
For the odd meal at a festival or park or whatnot - sure. But every day? not so much.
Yeah, I was pretty excited about things like "Food Truck Tuesday" in our neighborhood, but it didn't take long to realize 90%+ of them are pretty bad, slow, and unhealthy.
As an everyday experience I would agree, but food truck pods are great for groups of people since everyone can pick what they want.
Food trucks were really meant to make use of an empty lot while the owner waited for development opportunities but they took on a life of their own. Here in Portland people are very attached to them, sometimes for better, sometimes for worse.
"Crowded food truck clusters are super annoying to me." This tells me that there is indeed a market for food trucks. If this annoys you, then nothing is stopping you from shopping somewhere else. :) The alternative would be to get real estate close to these clusters and open up a "real" and high quality restaurant. Though my guess is, in these clusters, people are busy, they're not looking to sit down, and just want a snack while on the move to some other point of interest. I see these kinds of trucks in tourist-heavy areas, or in shopping areas, so that should give you a clue. The patrons are only looking for a quick snack, and not a Michelin star experience.
Oh my, looks like I hit a nerve... Punishing people for using good arguments when talking about freedom and free trade is the way to go, guys! :) That was sarcasm btw. You guys remind me of Chinese authoritarians sometimes, with this so-called "karma" social credit score. I guess it only counts when you have the same opinion as all the other sheep in here.
Where I live in Seattle, there is a lot of new dense neighborhoods going up. And many of these large apartments have ground-level retail, which is supposed to be that urban planning magic sauce for walkable neighborhoods.
The problem is, most of these retail spaces are actually vacant, despite massive job and housing growth. But why? Because the retail spaces are simply too large. These spaces are big enough to seat 100-200 people, but most restaurants, even popular ones, will not seat that many people most of the time, so they end up paying rent on real estate that is not being fully utilized the vast majority of the time, and then they go belly up because they can't afford the rent.
One recent trend that has kind of taken us back to the roots of small restaurant square footage is the food hall, where many small setups share one large communal seating area. Another is the food truck, with no seating, minimal rent costs, and the entire operation fits in a parking space. There is a great irony when I've been to a food truck serving food out of the parking lot of an under-occupied strip mall, because the strip mall spaces are simply too large.
It also doesn't help that mom-and-pops are not exactly the most attractive tenants for commercial lending; better to ink a long-term contract with a sure bet like a bank branch or a national chain.
Every large space can be trimmed down to a small space. If there are too many vacant shops in an area, and there would be a market for smaller shops, I would assume that tenants add walls and rent out the smaller space. Even if that walled-off space is unused, tenants would make more money than not renting out at all.
In reality, democracy can be commandeered by well-organized groups of people that vote as a bloc. At the local level, this means that well-connected homeowner associations wield the power to ban density and commercial activity near where they live.
The oft-cited counterexample to US restrictive zoning, Japan's permissive zoning, works because in Japan zoning type is decided at the national level and there are only 12 types of zoning that define maximum nuisance (so a blacklist). US zoning gets extremely nitty-gritty and is functionally a whitelist.
I think you may have boiled the problem down to its essence. Search for Japanese vs. US zoning laws to see the two extremes. European countries tend to be somewhere in the middle. Same pattern can be observed with restaurant sizes and their variety.
Yep, it's this. Zoning laws in US urban centers are an absolute nightmare to navigate. If you have the time (and the gall) consider looking up the zoning laws that exist across what a normal person would consider "Los Angeles".
I want small restaurants as much as I want shoe makers instead of automated Nike factories.
The way forward is not by enabling people who can serve 500 people/day to exist when we can have a robot serving 5,000.
We want automation, we want people doing what they choose to do because we've automated away things they had to do, such as work for a living.
The way to get there is more automation.
Restaurant cooks/servers are the equivalent of hand washing clothes. We have washing machines - technology has enabled humanity to do a great deal more with their life, let's move in that direction please.
The other piece of the puzzle is this - technology alone is not enough - technology alone is why we have nuclear weapons and idiots with nuclear codes. The time will come soon, when we have to have a frank conversation about the number of idiots inhabiting this Earth and that it's not climate change, it's idiots, that will be the end of all of us if this keeps up.
True, and even if the meal is not "Tate modern", even a workday lunch can make me feel that someone actually cared and reinvigorate my soul in the middle of work. Most of the time I will choose to pay a premium in time or money instead of cheapest/convenient-est.
Work is what gives life meaning for many people. You can't just say we'll automate most productive tasks then expect everyone to be mozart or do yoga all day or something. That's not a future I want.
There’s plenty to do even if you’re not a talented musician: volunteering for a good cause, inventing, crafting...
I strongly suspect that if the most tedious jobs were automated away, so long as people had their needs met, they’d find something much more meaningful than the work they were doing before. I know I sure would!
“So long as they have their needs met” is a big assumption, though, and one that wouldn’t hold up in our current society.
The robot restaurant is something completely different then restaurant for date or familly dinner.
The robot restaurant is for lunch during work - you care about price and speed and nutrition. That is it. Self service checkout is fine. SittIng close to other people does not matter.
For date, meetups with friends, celebration or filly dinner I want calmer, more intimate place.
Lunch during work is a great chance to add some joy to the middle of your day. You spend so much time at work, why not leaven it with something delightful?
(I understand the expense arguments, but I think it's a false economy, without specific goals, and isn't worth much regard on software engineering salaries.)
Wow that sounds like 10's of thousands of opportunities to meet, network, whatever, squandered. I always choose a quiet conversational place for lunch, and always with somebody. If not somebody on my project right now, then a contact I haven't visited with in a while.
There is powerful stuff in sharing lunch. Especially if you pay.
The same things that are preventing small restaurants also stand in the way of that sort of thing. If you could install a machine like a kiosk where people walk up to it, press buttons and insert money and out comes a hot sandwich made to order, people would be renting space to install them all over the place.
But the machine doesn't take up that much space. If the zoning requires you to rent 200 times that much space, the economics go away. So you still have to solve the original problem.
We have this today - McDonald’s, Chipotle, Jimmy John’s, Dominos, etc. Sure there are some humans, but there is also an optimized supply chain and in the case of McDonald’s, a fair bit of automation.
> Restaurant cooks/servers are the equivalent of hand washing clothes
Both are a skilled trade. Can you not tell the difference between the best meal you’ve ever eaten at a restaurant and a cup of fried cheese balls from Sonic? If not, then your post is entirely logical.
> technology has enabled humanity to do a great deal more with their life
More than cook good food for people? Are you surprised that there are people who dream from a young age of cooking, or cutting hair, or working on a construction site? That people have different skills, aptitudes and interests?
I’d rather see people flourish while doing what they love to do - especially if that thing is as central to the human experience as preparing a good meal.
Actually, some of the best food I've had has been frozen but cooked correctly, ie. using convection. For example, Healthy Choice used to have a Marsala Pasta steamer in a balsamic wine reduction. If microwaved properly it was tastier than 90% of the expensive pasta meals I've had at 4 and 5 star Italian restaurants. And I live in NYC so I know good food.
That said, it's very possible healthy choice employs very skilled chefs to either do small batch production or has figured out a way to do large batches without sacrificing quality.
Their microwave steamer container technology also factors in, since most microwave meals taste bad due to excess moisture.
I don't think automation and quality have to be mutually exclusive. The same goes for spirits. Some small batch Icelandic vodka I had was absolutely horrible compared to the mass produced Grey Goose, despite costing more.
I see the benefits of covid. Culling the inefficiencies in our markets. Shale fracking, unnecessary luxury services like mid-tier restaurants, etc..
* Restaurant cooks/servers are the equivalent of hand washing clothes. We have washing machines - technology has enabled humanity to do a great deal more with their life, let's move in that direction please.*
Maybe you might as well drink Soylent. Washing clothes or dishes is a chore. Cooking food is a social event and lots of people like cooking and creating food.
If anything automation of mundane tasks will lead to more food being cooked by humans. I’ll also eat my hat if you can get a robot to cook an 8 course degustation.
Right now restaurant work is too complicated for robots to do it as accurately and quickly as humans. There are hundreds of micro-skills that a prep and line cook needs to perform very well in a restaurant and most of those are specific to the individual restaurant. Mcdonalds will be the first to be automated since they serve the same stuff at every location in America, but expect regular restaurants to be the last places to be automated.
As a counterpoint, SF has some of the strictest zoning in the country. It has very few chains, from my experience. Most places where I know the owners, they are just normal people scratching out their existence.
Unfortunately, I observe that SF typically does it backwards. They (the peculiar political process there) identifies the business or person they like, and puts up rules to protect that specific thing. Rather than create the broader incentives and guidelines that lead to that business being made possible. It produces a lot of bad side effects.
Look. I know it sounds good to say, hey, there may be a catastrophic event every 100 years, let's factor that into our costs as a collective industry so that we don't all die when it happens.
But realistically, you're going to get laughed out of the park. Cheating on longer term costs to gain competitive advantage in the short term is rampant and part of how capitalism works.
An example of this kind of thinking - "if I cut my price by 5% by not paying for 100 year catastrophe insurance, then I will have an edge over my competitors who are paying that 5% for 100 year catastrophe insurance."
This is actually how all industries are run in the modern era. To compensate, western companies generally have strong finance functions to find other ways to survive.
Public companies raise capital by selling shares. You can also take a loan, reduce opex, or rely on your savings. Relying on your savings is relying on your past. Everything else is, at least in part, drawing from your future.
It's the private SMEs that have the most risk in this model because they lack similar access to capital as publicly traded companies. If SMEs do not have substantial marginal profit, they are playing a very risky game.
I think at least the more casual/lower-end restaurants are fucked because a lot of people probably learned how to cook in the last few weeks and realized that it isn't hard to make food that is pretty good, and it's a lot cheaper and easier to do when doing it regularly.
I'm sure the "fine dining" restaurant business will pick back up again, but I think the medium tier restaurants will be hurting for a while. I'm certainly going to be buying a lot less Thai, Mexican, Chinese, etc. food and making it myself instead. It's almost as good if not better and I tweak dishes to make them how I prefer.
After cooking almost every meal for the last month (in comparison to before when my office would cater every lunch and I'd usually do take out for dinner), I've come to appreciate that yes: ingredients are expensive and cooking is laborious. At the lower-end of the industry (<=$10 per meal), prices are low. Perhaps lower than what I could make it myself just due to ingredients/spoilage costs.
At the lower-end of the medium-part of the industry ($10-$30/meal), I think the prices are a ripoff. For instance, I've been making a lot of ramen (akin to what you find in dedicated ramen shops a la spicy miso tonkatsu ramen with a soft boiled egg) lately. I spend probably ~$6~8 for the ingredients for a bowl (not incl. ingredients that I buy but end up spoiling before I can use them) that I previously wouldn't have blinked twice to spend ~$20 on at a ramen shop (incl. tax/tip). Yes it takes me a solid 15-25 minutes to make it myself, but my subway ride to/from the restaurant takes about that same amount of time.
At the higher-end of the medium-part of the industry ($30-50/meal), things become more debatable since flavors _should_ skyrocket.
I have no qualms about paying for the ingredients for food. But I don't really care if the restaurant is a proverbial hole in the wall where you order and pick up your food at the counter. I'd prefer a store where the food is comparable to another store but at half the price and 0% of the frills of table service.
497 comments
[ 2.9 ms ] story [ 295 ms ] threadI wouldn't care for a fancy takeaway döner, I think other meals benefit far more from better ingredients etc. Evidently, others do appreciate it.
Also, as someone who lives ~4 blocks from the restaurant in question (Wolf Down in Ottawa) I can confirm that the Doner is completely unparalleled. You can tell that they use top quality ingredients and all of the portions are super generous.
tl;dr, while $11 may be expensive for a different doner in a different city, its pretty reasonable for Wolf Down in Ottawa.
Financial engineering/optimization. I'm not well versed in it myself, but from my understanding:
Commercial landlords can harvest a paper loss from a vacant unit. If you were renting a unit out at $100 per square foot per month, being able to take a $100 sq/ft/month write off from a vacancy may be more advantageous than dropping your rate to $50 sq/ft/month and getting it occupied. Particularly useful if you have a large enough portfolio to withstand the loss in cash flow.
Leasing a unit out at a lower rate can also have other implications on financing (and I believe valuations) for commercial real estate, by essentially re-establishing the cash flow potential of the unit less than what it was (and still is on paper, until you re-lease it at a lower rate).
You may have a valid point on financing.
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 landlord is now bringing in $500 per month, or $6000 per year. Is it your expectation that the landlord can somehow deduct the other $6k in rent not paid and pay $0 per year in taxes??? No, the landlord would now pay $600 a year in taxes on that $6k in rental income. Naturally the landlord doesn’t pay taxes on money they didn’t receive, but it’s always better to have 90% of the rent after tax, than 0% of it. It is always always more profitable to receive rent than not.
Now, as others have mentioned, it may be worthwhile to lose a few months of rent in return for signing a higher-dollar lease over a 10 year term.
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 make any money.
On paper this sounds bad. But because the expectation that property grows in value, they gain capital growth. This isn't taxed until sale time, but capital gains tax is very favourably taxed in most juristictions. Not to mention depreciation over time (a paper loss tbh) can deduct taxation.
After a few more years, they sell the property, using the old (high) rental income value as the valuation figure, pocketing the capital growth while paying little in taxes from the rental (which goes into the cost of debt).
This is why rents would remain high - you need high rents to value the property as high value.
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.
For a 30% increase, locked in for at least 10 years (assuming the restaurant survives), landlords are willing to let a property sit vacant for a while.
The thing that puzzles me is how willing landlords are to let properties stay vacant. I live in NYC and all of the newer high rise apartment buildings in my neighborhood have retail spaces at the ground floor and usually a few floors above the ground floor also for retail/commercial use. As far as I can tell, almost every building has utterly failed to get any tenants in the ~5 years since the buildings have been built.
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/sites.
The restaurant I came out of retirement on in 2018 has been vacant since Summer of 2018, just to give context that building was $13k/month before operational costs, which were immense due to it be an incredibly old building. I personally had to patch up the pipesdue to massive leaks as our dishwasher wasn't getting enough pressure and my station was getting all the run off I had run to FOH get some wine cork to plug the holes and used a bunch of duct tape until the plumber could get there for the next week of service.
I think I overheard the Sous and Execs saying where I last worked that rent was 20k/month for the flagship, which on a busy night we could clear in a single days (day/night) service.
The further this has gone on, Colorado only just lifted its stay at home order today, the more I think I've hung up my whites and knives professionally for good this time.
By contrast, this is what is happening in Hong Kong, as they have captured the loyalty of their patrons and are months ahead of most country in terms of Covid19 recovery [1]:
1: https://www.reuters.com/article/us-hongkong-protests-mayday/...
It's pretty much the exact same situation in Toronto.
Trying $40k/mo in Midtown in rent alone. It's stupid.
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.
Does that apply to all properties, including commercial buildings? I only said that because a close friend of Tebo's wife (that's his actual name, and he named his business after himself from striking it big in collectors Coins) was a trainer at the gym I went to and we'd often talk about how all the property surrounding the area was owned by him and a lot are vacant, he said that was her rationale. He could be wrong or made it up, I suppose.
He literately is a Feudal Lord in Boulder and has obscene amounts of holdings, its actually alarming how much clout the guy has a result of it and the effect it has on the local population.
I learnt about two ways, but I am sure there are many more. First you can manage the losses of selected businesses of yours such that you break the tax progression and second if you own the property you rent to yourself (this means to your company) such that the deduction of rent leads to a higher reduction of taxes than the increase by the rent income.
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.
The value of a commercial property is (generally, if it has development potential that may be the main factor in valuation) usually multiple of the rental income that it can generate. If landlords accept lower rents then that lowers the value of their property.
How? Is rent lower for chain restaurants? Do they charge more than non-chain for the same food? And they still have the franchise fees on top of the same costs as the non-chain restaurants. How are chain restaurants surviving and others not?
I'd expect what nradov describes: That the space stays empty.
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 since the parent corporation owns all the land).
I don't have any specific insight into the EU, but in the other global markets I'm familiar with (mostly China, Hong Kong, Singapore, and Japan) locations are either owned by McDonald's directly or franchised by large corporations that have significant bargaining power with (and sometimes are) landlords.
The China/HK franchise, for example, is operated by CITIC (a Chinese SOE) and Carlyle.
"The company owns about 45% of the land and 70% of the buildings at their 36,000+ locations (the rest is leased)."[1]
This article is from 2015, but I don't have any info that disputes it.
[1]https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...
Sometimes they increase margin on price. But more often, they do it on labor and cost of goods. McDonalds takes no-skill workers, applies its systems, and spits out 5 billion cheeseburgers at five nines consistency. And then it buys in quantities that move world markets, unlike your locavore restaurant.
Five Guys will have lower margins, but still be 4-10x the margin of a one-off restaurant. Same for Cheesecake Factories, and all the Darden-owned restaurants.
There is a retail development near me that sat largely empty for years. They kept it up and clean, but word was the prices were sky high. It still has a huge number of vacancies ... we're talking 5+ years after it was built.
Meanwhile other retail places had shops closing, word was the rent kept climbing.
I almost want to suggest that the local city come up with a concept that somehow would encourage actual occupancy. Granted that could be complex but it seems a real waste to have these spaces empty / taking up space with high rents where maybe some business could try to run if rents were lower...
It is a weird dynamic. It's like every spot is just waiting for a Chipotle or Noodles & Company or some small fitness fad / chain and if not that ... nothing.
In summary, lowering rents to market price lowers the value of the building and makes the project insolvent.
If a project isn't objectively solvent and banks are still lending on it, then the problem is higher up the food chain - a lending "market" based on moral hazard which encourages poor decisions that blow up later.
This is one of those situations where the people on the ground - shopkeepers, small restaurant entrepreneurs, and their customers - are being punished for policy errors in the financial and real estate industries.
If you read the link, the point is the project is able to pretend it is still solvent when it isn't anymore.
From what I understand, the owners of the buildings are holding out for the high cost renters... like a bank.
A city government could provide incentives to ensure these places don’t sit vacant, and that formerly thriving areas stay interesting and have shopping for most people, not just those with massive wallets or looking for a bank.
Land value tax. Shift away from taxing the value of buildings and towards taxing the value of the land they're built on; that way you encourage appropriate and efficient development / land use.
Good thing central banks around the world have been cutting rates. /s
If a restaurant has x% less business, they can buy x% less 'proteins' and x% fewer servers.
But they are screwed on the fixed costs, which is mostly rent.
The thing is, these are not normal conditions. Real-estate owners everywhere are as worried as anyone about their business.
If restaurants and other such businesses start collapsing - they will take a whole chunk of businesses with them - and maybe even risk the viability of some banks.
If one major bank has been doing stupid things, like Bear Sterns, and collapses, it could take the whole system down.
(Don't want to chastise but HNers could develop a stronger appreciation for how all of this stuff is connected and there are some really scary outcomes from this economic meltdown)
So - there might be a kind of reckoning.
Restauranteurs could legit approach landlords and say: "If my rents stay the same, we go bankrupt, you won't see a dime, and you will not rent this place for a year, and when you do, it will be for 20% less"
That's a credible premise.
In other words - the property is really worth a lot less.
So it's hopefully an opportunity for some hard bargaining.
[1] https://www.youtube.com/watch?v=3Fx5Q8xGU8k
If restaurants had 20% margins they would still be facing collapse.
Rent is a huge portion of costs vis-a-vis most other businesses that can be run 'anywhere' whereas restaurants need prime locations.
Restaurants must relocate to cheaper areas like warehouses and shift to a delivery-first distribution model, which Uber, Lyft, and Google Express could help dispatch. It sucks from a customer-interaction perspective, but it's necessary. Other businesses like Pret in London were already using a hybrid centralized preparation with small, hyperlocal retail sales model.
If you want to make money, you can't think and do what everyone else is doing in all respects.
Under which logic? The Baron Von Muchausen argument of demoralization?
It could also be that the expo/chefs valued speed over anything else, I've never been or eaten at a Howards Johnoson's, but I can easily see it being an issue if you're trying to make an effort while being behind on a ton of tickets and management prioritizes volume over quality and it they're seen as the bottle neck.
I admit speed is not my strong point, but my presentation and knife skills are strong so I make up for it that way and I'm organized and clean--its what got me to work under a 3 star Michelin chef (total nightmare, he finally got fired a months after I left) despite focusing mainly on Farm to table concepts for most of my career.
But I've been judged negatively in other kitchens for playing to my strengths and believing/saying that speed comes with time--in the last place I proved that is the case and trained 4 people due to that philosophy/results.
But patience isn't exactly easily found in kitchens or tolerated amongst a bunch of fast talking, high-strung adrenaline/stress junkies which is what most chefs are, myself included.
Yes. Let's just kill all community space. Great idea. I too enjoy being a pod person.
It might be helpful to differentiate "community space" from "restaurant". Or perhaps to differentiate "restaurant that is primarily selling convenience", which is the kind the article seems to be describing, from "restaurant that is primarily selling a dining experience in a community space". I would expect margins on the latter type of restaurant to be significantly higher.
But only restaurants that can be this are famous ones which have a lot of celebrity pull. So the remaining ones that don't have such pull will need to adapt, or die.
It's not that all restaurants will die - just the ones who aren't celebrity/famous and can sell an experience.
Wanting to be a dining experience, and having "be a dining experience" be your primary business model, are two different things.
I'm sure the author of the article would like his restaurant to be a "dining experience", but that's not his primary business model. His primary business model is selling convenience. His customers buy his food because it's more convenient than preparing it themselves, not because they need to have the "experience" of dining in his restaurant. His restaurant could just as easily be a truck parked at the curb--as many sellers of food actually do in large cities--and his customers probably wouldn't care as long as the food was the same and was available as quickly.
Sure, if you ask the customers, they'll say they prefer the restaurant space to a truck at the curb, but unless they're willing to pay more for the former than they would for the latter, there's no business value in the former. And the fact that customers aren't willing to pay enough to support a restaurant space, but what they're willing to pay probably would be enough to support a truck at the curb, is precisely why the author is struggling to find ways to cut costs--because he mistakenly thinks the space itself is part of his business model, when it actually isn't. He'd like it to be, but it isn't, because his customers aren't willing to pay extra to support it.
The hyperfocus on "disruption" you sometimes see in here is really... something.
The problem is that a heck of a lot of people are ok with that. I'm one of them. When I went to university, the delivery apps arrived in the middle of my time there. I think I went to a restaurant a 5-6 times in the remaining two years after UberEats and SkipTheDishes arrived.
I lived in the centre of downtown my final year and I didn't go to a restaurant downtown once.
I'm an extreme case of wanting to be at my computer to be sure, but it only takes a small percent opting out to make slim margins go to zero.
A lot of the demand for community type space was under a certain logistical duress. I either had to go to a restaurant, choose from a limited selection of delivered foods, or order takeout (and I may as well just eat it there if I have to make the journey anyway). That no longer exists and instead of paying for the overhead of the restaurant, my money goes to UberEats.
Exactly. The French Laundry can charge $325+ for dinner because it is arguably one of the 15 best restaurants in the country. It is incredibly differentiated.
A Veblen good:
>...A higher price may make a product desirable as a status symbol in the practices of conspicuous consumption and conspicuous leisure. A product may be a Veblen good because it is a positional good, something few others can own.
https://en.wikipedia.org/wiki/Veblen_good
A Giffen good:
>...The classic example given by Marshall is of inferior quality staple foods, whose demand is driven by poverty that makes their purchasers unable to afford superior foodstuffs. As the price of the cheap staple rises, they can no longer afford to supplement their diet with better foods, and must consume more of the staple food.
https://en.wikipedia.org/wiki/Giffen_good
The medium post seems to be arguing for charging $12 for the example Doner instead of $11. It could just be that I'm relatively price-insensitive, but if I'm choosing between meals at two different restaurants where one costs $11 and the other $12, the decision is being made by which meal I'd prefer eating, not by the $1 difference.
If we're talking a 2x in price, then sure, that can sway my decision. But the article is not talking about such big differences.
I get the sense from the tone taken here that this owner is going to be in trouble down the line. It’s good to be passionate but their objectivity is clouded. The restaurant with the really expensive donair is indeed likely to find itself in trouble ...
https://www.reference.com/world-view/did-romans-cook-prepare...
In the country-side, yes, there were kitchens/places to cook home, or often outside the main home. (barn style of a place, dedicated to cooking).
On a more philosophical level, are restaurants an essential good for society, or more of a luxury along the lines of upscale purses, limited-run sneakers, Rolex watches and Teslas?
I'm not going to argue that they shouldn't exist, but just like with fine mechanical watches, I don't imagine society will collapse without them as we switch to centralized food preparation with economies of scale and more home cooking.
Luxury? To some degree, perhaps. Hardly to the same degree as Rolex watches, however.
And yet looking at the picture attached I wondered "That layout looks like something cliche out of Ontario". Was not surprised to find out it's in Ottawa.
Not that changing decor in the current climate will do much, but for heaven's sake, why do so many of these places recycle the same stripped down, soulless interiors in that province?
To the article's point, doing any back of the napkin (sorry) math on average rental pricing per sqft, number of employees and so on, would give you a ballpark number that is borderline insane, and would make you wonder how majority of these restaurants can afford to stay open (hint: they can't).
My theory, which is not a theory so much as it is fact, is that there is a lot of dirty money laundering happening through these small "boutique restaurants". I don't see this discussed anywhere.
I don't believe that -- why bother with a boutique restaurant when you can just run a crappy kiosk / convenience shop instead -- but forced closures cause an interesting predicament to anyone with a business like this: if their illegal income is continuing, how can they continue to report it when the front-business is supposed to be closed?
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/en/cat/eating-257/kebab-shops-230...
[2] https://www.lieferando.de/en/meraba
We have plenty of those in our ethnic neighborhoods. Heck even some very successful joints like Rosamunde Sausage Grill in the Mission District (S.F.) were cash-only until a couple of years ago, when I last went there.
Most other places accept cards & thus have to factor that into the price of the offerings.
Most Döner and other Street Foods in Austria are cash only, but that's not the reason a typically priced Döner costs ~5€
But you can't go cash-only because so few people carry cash, that our would drive out your sales.
In EU 0.3% or 0.2% depending on card type: https://www.reuters.com/article/us-eu-payments-cards-idUSKBN...
If you're in central business locations in Mitte or Charlottenburg it would be more than that. That said you have very cheap options for Turkish, Arab or Vietnamese food in other districts like Neukölln. One of the best benefits I had when self-employed was the cheap & decent "ethnic" food options I had near the coworking space I chose in Neukölln vs having to go to the office in an expensive part of Mitte.
As a side note, I don't know anyone actually tipping 10%. At this price range usually it's rounded to next full euro.
Prices really do vary wildly across Europe.
I didn't understand this. It may not be feasible to buy 100 cases of pop at a regular grocery store, but isn't Costco/Sam's Club set up for that?
I do think it comes down ultimately to real estate prices. Major metros in North America have gradually become unaffordable for the middle-class over the past 20 years. It's not surprising that it's the same story for small businesses such as restaurants. Businesses have to pay workers more (because housing is expensive) and they have to pay their landlord more (because commercial rents are high). All that profit margin is ending up in landlords' pockets.
For older, less popular restaurants, maybe, but a salad at Sweetgreen is, what, $10-$15? And that's fast casual. Clearly overhead is being passed on to customers.
The landlords that win seem to be the landlords who play the political subsidy and tax games, not just good developers.
[0]
We don't want more A&W's and Starbucks, but that's what eventually happens here. The only places that survive are bars.
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.
If you hypothetically take 100% of the profits of the renter, they won't be in business long term. There likely will be a gap between when they stop paying rent and you are able to evict them. There will also likely be a gap between that point and when you get a new renter, particularly when your rent is so high.
I agree that the goal is to maximize income, but trying to take 100% of the profits of the renter is not a way to maximize long term income.
only if there's a monopoly on real estate. I find that unlikely.
Also, you're right. Costco exists too.
One: the shop often wouldn't let you buy up their whole supply
Two: there are likely other restaurants in the area, so that's 20*N boxes a day
Three: lots of countries have resale laws that prevent this
Four: that's a lot of time to spend every day when you can get a single delivery every week / two weeks instead
Five: the delivery often includes the collection of the used bottles (when using glass) and that otherwise can cost a lot
Any half-sane shop would love the giant piles of money you're spending and negotiate a way to get you a nice big supply with an even easier pickup process than filling a cart.
> Two: there are likely other restaurants in the area, so that's 20N boxes a day
Even better. Imagine a shop saying they don't* want to ramp up to selling ten times as much product out of aisle seven with no extra work beyond staying in stock.
> Three: lots of countries have resale laws that prevent this
If you buy a shelf-stable food, you can't resell it? Why would a law like this ever exist?
> Four: that's a lot of time to spend every day when you can get a single delivery every week / two weeks instead
This is a better reason, but you'd think the huge volume of the sale would get you at least a mild price improvement.
> Five: the delivery often includes the collection of the used bottles (when using glass) and that otherwise can cost a lot
If it costs money to set things out for recycling, the local government is doing a bad job.
The landlord's costs go up, too.
This is what killed retail in the UK. Amazon certainly made a difference, but given a choice, some people actually enjoy mall shopping and eating.
But between huge hikes in business rates (commercial operating taxes) and rent increases, retail simply isn't as profitable as it was in the 90s.
The rent increases are pure greed and predatory extraction. There certainly hasn't been any correspondingly huge explosion of costs for landlords.
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 programs by the City Council. For example, if the spouse of a tenant damages the apartment, the landlord has to pay for the damage, not the tenant.
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 "there are lots of costs", which is true and people don't appreciate that a landlord can have a hard time.
But it doesn't work as an argument about how much costs have risen or fallen.
Most of the costs you listed have either stayed the same or gone down in recent years, so it doesn't appear to support your side of that argument.
Mortgage costs in particular have gone down a lot in recent years. Mortgages are great if you can get them, because they are so cheap now.
6 has gone up but that one is cheating. It's like saying landlord's income is lower than the amount it "should" have gone up, which does not work as an argument that landlords actually have to pay out more. If 6 has gone up due to longer voids, those voids (until recently) are usually due to raising the rent, their own decision, so again do not constitute landlords paying out more.
9 is an interesting mixed bag, as depreciation is only relevant as a true outgoing cost if you're going to sell the property someday, in which case you should only be counting the interest component of the mortgage, which has gone down, as well as the change in property price, which has probably gone up by more than depreciation (until recently).
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.
I think you are saying "there are substantial costs" again.
It only works as an argument about rising costs if backed up by "and the real costs to the landlord caused by depreciation have actually risen".
Do you have anything to back that up?
I think most people take the view that landlords have generally benefitted, until recently, from steadily rising property prices, and this nearly always greatly outweighs depreciation over 30 years. I.e. the cost of property doubles more often than every 30 years, so you can use the bonanza to buy replacement buildings which offsets the cost of old buildings being taken down.
And that doesn't even consider cost of the land, which does not suffer depreciation even if a building has to be replaced, and is often the majority of the cost of purchase.
> There's nothing about property management that suggests it is immune from these forces.
But there is a very significant obstacle to these forces acting fluidly according to the ebb and flow of commercial forces! I would happily be a landlord (until recently and maybe even then) on the basis of commercial thinking, but the avenue is not open to me because I don't have access to capital. Capital is around, but it will tend to be allocated first to an entity with an existing portfolio.
Also, in the town where I live, even if I had a few million, I would struggle to become a landlord of commercial property larger than a tiny corner shop, because very few units are for sale. When one comes up, which is not often, there's a secret bidding war because pent up demand exists as does the money behind it, and buyers simply cannot find something. This is despite a very large number of empty units, with owners who seem to be happy keeping them empty (I know several companies that have tried renting be turned away on various grounds, sometimes "we are not interested in renting it at all, we have plans for it in 10 years", others "we want personal rent guarantees from all the directors as well as a large deposit".) Heck, even renting is subject to bidding wars and personal interviews to decide which company should be allowed to rent among several candidates (I've been involved in this twice as a business tenant, and several times for residential, so I'm not speculating.)
I lost money every year in it, and finally gave it up before it crushed me.
Sure, I stink as a businessman. But that's also my point. It ain't an easy business to make money in.
Not if you've owned the place for a long time and seen rent and value appreciation.
Also maybe because you don't want to use tap water...
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...).
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...
If you’re a large chain, perhaps you could bring those operations in house. If you’re tiny, you could do it yourself. But if you’re seeing over 100 guests a day, there’s no reason not to use service companies for these two examples.
> 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
If restaurants in general raise their prices, what’s to stop landlords from doing the same and raise rents to match?
This is, of course, a comically grim state of affairs compared to the 4 euro doner or currywurst you can get in Berlin. Though I will say NYC halal carts might be the best _common_ street food in the US, and that hasn't yet made it above the $6 sandwich/$7 plate mark... yet.
Isn't it more likely to be true that they will pass because they've become accustomed to crazy low prizes for prepared foods?
If another restaurant can make a profit by increasing efficiency and keep prices low, they win over one that doesn't. And restaurants have no real business moat - recipes for most things are known, and it's mighty hard to invent something totally new.
Let's imagine that all restaurants raise their prices like the article claims. Suddenly, the margins at 19%. Let's also assume that consumers are willing to pay, but if they find something of similar quality but cheaper, the will move. Then one self-interested restaurant owner could simply lower their price by a bit, and they will make more money than their competition.
And so all restaurants have to do the same. So the margin of 5-9% is what you end up with.
TBH, as an investor, if you're given a 9% return on investment, i think they would be ok. It's not great, but it's not the worst. 19% margin is too high: most junk bonds are returning something like 8-10% (sure some are like 20%). Is running a restaurant riskier than junk bonds?
So the reality is that, as the article noted, restaurants have been in a battle for a decade or two focused on cost reduction, which means mostly labor cost reduction.
In short: the cost of eating out is relatively low because we pay most of the people involved as little as possible. That might be good for our eating out, but it's far from clear that it's good for the rest of our lives.
edit: Though, this throwing around of prices is perhaps not very effective. Reasonable prices for sandwiches in SFC, NYC, or Seattle will be much higher than a midwest capital, which will still be higher than some rural diner. The point stands, however, that there's a breaking point which has nothing to do with principles or indignation and everything to do with household economics.
A $20 kebab is not going to fly. The only other option is to optimize whatever costs can be optimized.
Unfortunately it's not looking good for people who are currently employed in the more manual roles. It was only a matter of time before that became the case in the food industry.
Maybe with cloud kitchens we'll be able to improve kitchen proximity, and we'll improve the containers that the food is delivered in.
Not to mention that most of the containers used for delivery are not biodegradable and, I imagine, generate a ton of extra trash.
A lot of vacant real estate, cheap after-market equipment, desperate workforce, so you can get the best cooks and waiters for peanuts...
It is crazy how bad food quality in NYC for its price. It is so bad that I almost feel like there is a conspiracy between restaurants in the city that goes on like this:
restaurantA: "Hey you know, we can make good food" restaurantB: "Yes you are right, we can, but why should we? Why not just create mediocre food? If everyone of us are doing it, the customers don't have any other choice, yet we still charge them expensive price" restaurantA: "You are right, why don't I think of that? that's genius"
I just don't understand why in Asia food quality compared to its price are just much much better. At least for Asian food. Maybe I am bias because I am Asian and used to Asian food. But yes Asian food here in NYC also not great for its price.
[0] 'The Rent Is Too Damn High Party is a single issue political party, primarily active in the state of New York, that has nominated candidates for mayor of New York City in 2005 and 2009, and for governor and senator in 2010.', https://en.wikipedia.org/wiki/Rent_Is_Too_Damn_High_Party
https://www.youtube.com/watch?v=zrv78nG9R04
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 after opening, they're not going to make it.
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.
> Is it really just too many food vendors thinking that the $1 happy meal is their competition?
Maybe if you're a Burger King, but most restaurants aren't really competing with fast food. It's more like the Italian place is competing with the Sushi place in the same price bracket (I'm guessing, but 3x-5x more than fast food).
A burger with a meal + a drink @ Wendys is like $8+. The price of fast food has risen quite a bit over the years.
I can get a burger and fries that's 10x better at Friendly's, Ruby Tuesday's or a half a dozen other franchises for about $10-12 and the only sacrifice I have to make is that I'll have to drink water instead of soda.
Ruby Tuesday burgers are $9.50 with fries. Add a soda, tip, tax, and it's $16. The multiple is still 3-4x.
Also if you're talking about dollar menu stuff or the stuff close to it, its about 1/3 the size of the burgers included in fast food meals. The burgers in the meals are comparable in size to what you would get at a sit down restaurant.
What else does everyone practice almost every day at home that has higher margins?
Restaurants are competing with a baseline price of homemade meals. Most other businesses aren't competing like this.
I appreciate that there's more to a restaurant than the literal food on the plate. But I think it's what oversold that ambience drives such a premium.
So when you start looking at issues with American restaurants vs other countries, a different picture starts to arise. One with a whole lot of rent-seeking behavior.
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.
- 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 lifespans. And on the flip side, it allows you to charge significantly more for the fancier experience.
- I don’t think the “simple and cheap” restaurant actually works that well economically. My litmus test here is when an area gets gentrified, often these hole-in-the-wall places are first to go.
- Most restaurants are lifestyle businesses, so normal business logic breaks down a little. In many cases, the owners want the prestige of running a nice place.
Would be nice if there were more smaller businesses. And less barriers to entry.
It's probably location dependent, so I don't know about major urban centers like SFC. But it's definitely not fair to say that NA doesn't have these; there's a lot to NA outside of major urban centers.
The lack of frills (e.g. signage, interior design, tables, dishes, etc.) are not what make the prices low (relative to developed countries).
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..."
Ideal would be somewhere like NYC that's mostly walkable. Can't just open up a bar at the end of the universe. Unless talking cow being served.
https://www.youtube.com/watch?v=jILgxeNBK_8
To me, its a business that will only get more profitable as younger generations become much more sensible adults around social drinking. Outside of a pandemic, that is. Even my parents generation seems to be seeing a resurgence in going out to bars now that kids have grown up and moved away. My mom now frequents tequila bars with her friends. It doesn't even matter if it's a cold climate. Throw on the game, buy a few heat lamps, and have a special on pitchers.
Drinking culture is seeing a huge resurgence in the 4 U.S. metros I've lived in the last few years imo, although I don't have any particular data to point to off hand. Given the increasing secularization of american culture, and the acceptance of the fact that you can indeed have a bender with your friends on a weekend and still pass your medical school exams, I see no reason why bars aren't the best bet in
Do you generally sit down and drink 3 beers in one sitting?
> It would be very rare for a customer to drink 3 cokes with dinner but not uncommon for someone to order 3 beers.
At home, I drink much as I'm thirsty for, be it soda, beer, wine, tea, water... I certainly don't drink more just because it's alcoholic. I might drink less, or switch to something else, if I'm starting to feel drunk and it's not an occasion for such.
At a restaurant, I order less when alcohol is involved. I prefer to have my senses about me if I'll be driving home...
A bar would be a very different and less profitable business if they had the normal spectrum of liability other businesses have when their actions result in predictable harm. Or even if just law enforcement weren't effectively prevented from staking out bars and stopping obviously drunk patrons as soon as they started to drive.
Similarly, I also believe they'd be much less profitable if not for the rather alarming amount of addiction and abuse.
I don't think prohibition is a good idea but the fact that I'm opposed to prohibition doesn't make me blind to the externalities that bars create which are a component of their profitability.
There are lots of less than perfect things in the world. We can make them better by willing to discuss them and not being to quick to assume that any criticism is a call for a prohibition. In this case, especially, there was a comparison with other businesses and more than anything I wanted to point out that it wasn't a fair comparison because of bars unusual amount of externalized costs.
There are non-drink culinary uses for it too. The wholesale banning of alcohol misses the point a lot of the time. I had a friend who taught cake decorating and it's common to mix high concentration alcohol with coloured dust to paint on sugar flowers because it's a great solvent, evaporates quickly, and doesn't soak into the sugar. No one eats this part of the cake. But in some countries with Islamic students they were so unwilling to be anywhere near alcohol they used water. Perhaps I'm mistaken but I thought the original intent of those commands was regarding intoxication (which I don't fully disagree with) so this seems odd to me.
As to your first point, highly processed foods are definitely something to watch out for. However, the effects of alcohol are immediate, and can be seen in a single sitting. Countless instances of rape, drunk driving, and homicides that come out of it. You won't see someone consume a couple of meals at a fast food place then lose his decision making ability for instance.
German here. For lunch, no one I know ever drinks alcoholic beverages (except maybe when going to a nice restaurant with the whole family on the weekend). And I don't think people are eating street food for dinner all that much, except maybe Döner. But even at Döner places, I don't think I've ever seen people drinking beer. They mostly don't drink anything, and some drink Ayran.
He graduated from Purdue with a degree in mechanical engineer. But he didn't want to settle with a 9 to 5 job and a normal life, just to pay his bills. So instead he earned some extra small pile of money after college and set up a low cost life style in Arizona, with off grid house etc. And now he doesn't have to spend life in 9 to 5 job but instead travels around filming/interviewing/presenting on a passion project of his.
So how did he get that bit of enough extra money within 2 - 3 years (I think) after college to pay to get himself set up with that life style? He went to a bartender school and worked as a bartender. That earned him enough chunk of money that he could set up an off grid house in AZ and get on with his passion project.
If you listen to Ian McCollum presenting on his topic, you can tell he would've been a very good bartender. Calm, articulate, polite.
I'm sure he was a very good bartender.
So the revelation from his story is that working as a bartender can bring in quite a bit of money due to high margin of alcohol and bigger tip.
Restaurants are never the ones making the money. They enable others to make money. Usually, landlords.
And generally, be cautious about going into a business where people want to do it because it's their passion. It means you're going to competing with people who are willing to work for nearly $0 because it's their passion.
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; too many other giants can squeeze you without a thought (eg the McDonalds $1 value menu the author also cites).
Nobody’s “in” to paying >$10 for döner kebap. You have to differentiate a lot more than that; unlike me (and edge case) most people will not pay $25 to scratch the itch of the intense periodic lust for dönerfleisch.
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 unskilled labor - doing car repairs properly and efficiently requires a lot of practice and training.
Similarly, if I'm a bank there's only so much differentiation I can offer. Different financial services and interest rates or stuff like that, sure, but at the end of the day I just store people's money in accounts and provide loans. That's basically all I do, and any other bank can do it. A bigger bank has the ability to do it better (due to their resources and regulatory capture) no matter how much I differentiate myself, and since it comes down to policy in many cases another player can just come in and copy all of my policies. None of this means that working in banking is "unskilled labor".
The tendency to call people like chefs or line cooks "unskilled labor" is disgusting. Being a line cook or a chef in a high-pressure restaurant environment is REALLY HARD and takes tons of practice and training.
I don't think this is disgusting. I don't believe it's meant to imply what I believe you think it implies. It sounds to me as if, in your life, this term "unskilled labor" may be used as a slur --- is this the case? It is not the canonical intent behind "skilled/unskilled labor" terminology.
"Unskilled labor" means you don't spend years on preliminary education before you can even enter the job market. It means you can hire a person with no prior training or pertinent education and expect them to be able to succeed given a reasonable training program and work ethic. Compare this to "skilled labor" where entry into the field is gated upon higher education (or perhaps apprenticeship).
I'm not disparaging line cooks. As you say, it's very high-pressure, and experience and drive are critical to competency in such an environment.
PS. I do also agree that "differentiation" and "skilled/unskilled labor" are orthogonal concepts.
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.
The same thing happens with teachers, nurses, firemen, police... I think the reason they generally don't make more money is many people have a passion for doing those jobs (ask ten kids what they want to be when they grow up), but they aren't super difficult, so there's a large supply.
Maybe there's something different going on there since government salaries don't respond normally to market supply and demand. Perhaps a better way to track the true value of those jobs is by looking at private sector counterparts, such as security contractors or teachers at private schools.
Teachers, nurses, firemen, and police officers would like to have a word with you.
Programming may be mathematically complex and difficult to learn, but it does not corner the market on difficulty.
Try adapting a teaching curriculum for online learning for fourth graders, working 16 shifts in an ICU during a pandemic while trying to keep people safe, planning and organizing a response to statewide wildfires, or de-escalating complex interpersonal issues dealing with crime, safety, and mental illness on the daily.
Do any of those sound easy to you?
We've been flooded with reports of how we are not adapting to the change to online learning well.
Working in the ICU during a pandemic is not a complex task; the procedures for doing so are fairly simple steps posted on charts everywhere. There are degrees of complexity to being a nurse depending on the level of certification you have. Physician's assistants have abilities fairly close to a doctor.
Planning and organizing responses to state wildfires is far outside the scope of a firefighter. There are a very small number of people that plan and organize, and a large number of people who implement.
I do not think de-escalating is well-embraced form of policing in the US. If it is, we are doing a terrible job. Police in the US kill drastically more people than other countries. It's not uncommon for European countries to go a full year without police killing a single citizen. There are, of course, more complexities to it than that, but it would be hard to reconcile a doctrine of de-escalation with the absurd number of police shootings we have.
Doing those things well is hard. The fact of the matter is that there is a distinct lack of expectation that those things will be executed well. No one is going to be punished for online schooling failing, botched responses to wildfires, or for shooting a homeless person. In the face of that, they're certainly not herculean feats of strength.
I wouldn't live in a box with roommates to be one though. I think many of us would find regular engineering or analytics jobs instead. Slightly less interesting, but we could still program within those jobs.
People who love food are basically willing to live in poverty to do it.
Compare this to food. Beyond a very small scale (cooking for the immediate family, occasionally cooking for family events) there's a very fast, hard limit on what you can do as a hobbyist.
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 to persuade. It's a strategic decision for the company leaders, whether they think it's worth spending more to attract hires of the type who get better offers elsewhere.
Individual HR people may not all be critical thinkers, but HR people do salary research and keep up with trends in hiring. They have their own professional communities where they discuss this stuff. Even if they aren't all individually doing it, some within the HR communities look at such things and talk about it with others. They use this to advise each other and their execs if nothing else.
HR industry groups could, as a body, look into whether "the industry standard" is getting hiring results as well as employee churn, satisfaction, and company-reported satisfaction with their hiring outcomes and make that information available to HR people and then to whomever needs to take it into account in strategic decisions.
With a straight face they responded to my objection that i would get access to all their PC game catalog and a limited-discount for consoles.
I still laugh when i remember that conversation.
I think that statement is almost certainly false.
Offer better pay, conditions and interesting work that has career prospects for the people when they leave, and make it known you are doing this, and I think you will have plenty of interested, good candidates.
(Unless you make crappy games infested with 15s gameplay alternating with 30s brain-polluting ads, and that's for the people who paid for the "ad-free" feature. I jest not - I just turned down a recruiter for a games company looking for someone in a senior role, after I researched the company and the first few reviews I looked at showed the games fit the above description. I copied the reviews over to the recruiter and said this this is why I could not imagine myself working there in a salaried role.)
No, the main and only problem is pay, and it all stems from the fact that there are hundreds of applicants willing to apply for junior positions, some of which I am certain would literally chop their own leg off for the opportunity to work in video games - if it was legal they would literally agree to work for free. So they all start on some extremely low salary(especially considering that actually, our standard for hiring programmers seems extremely high and I have no doubts that those people could find much better paid jobs elsewhere), but obviously that leads to problems further down the line.
But, just because we have thousands of applicants for junior positions, that doesn't mean we have as many for say Senior roles - those see barely anyone applying, and yes, I'm 100% convinced it's purely because of pay. And the pay is what it is, because HR considers it unacceptable to pay new hires more than what we pay people who have advanced through the ranks naturally(which obviously cannot be a lot, seeing as your starting salary as a junior was so low, even if you somehow through some miracle managed 10% increase every year that's still not a lot by the time you get promoted to senior).
I think the large number of people who love programming makes getting an "elite" programming job difficult.
But, I think the vast majority of people think they'd hate or couldn't do programming, and so never consider it as a job despite how much demand there is for it. And that keeps our entry level wages safe.
Even ignoring that. Everything gets commoditized over time. How much does your typical PHP/Wordpress developer make now? Companies like make it easy for someone who doesn’t know anything about programming to make a decent website. There are companies now that make it easy to make a cut and paste iOS app.
So PHP/Wordpress developer is still a great job from that point of view.
But have you looked at what developers are charging on places like UpWork?
Even the simplest mobile app use to cost a lot. Now you have services like this.
https://buildfire.com/
You know it doesn't cost much to be a bit nice to other humans...
You may notice that in Europe, Asia, the demographics of restaurants are noticeably different from the US. There are far more hole-in-the-wall mom-and-pop restaurants in those places compared to the US, running a small and seemingly profit-thin but subsistence restaurant for the neighborhood. Think of a suburban neighborhood in Madrid or Rome, where a small restaurant is just as common as a tabacchi / corner convenience store.
I believe (have not seen a careful study yet) that the rent-seeking / zoning policies of our cities in the US increase greatly the cost of running restaurants. And incentivize / prohibit anything but large commercial / chain places from surviving as a rule. It makes it very hard for small experiments or small-time mom-and-pop shops to survive and stay in a community for decades at the low profits those places are willing to accept. There may also be something about the small square footage of typical shops in such cities being unfavorable towards chain restaurants which seem to require a certain size (like hotel properties).
The landscape of our policies for cities, neighborhoods, plus the way they interact with our corporations, directly translates into the kinds of restaurants that we get as a result.
For the odd meal at a festival or park or whatnot - sure. But every day? not so much.
Food trucks were really meant to make use of an empty lot while the owner waited for development opportunities but they took on a life of their own. Here in Portland people are very attached to them, sometimes for better, sometimes for worse.
The problem is, most of these retail spaces are actually vacant, despite massive job and housing growth. But why? Because the retail spaces are simply too large. These spaces are big enough to seat 100-200 people, but most restaurants, even popular ones, will not seat that many people most of the time, so they end up paying rent on real estate that is not being fully utilized the vast majority of the time, and then they go belly up because they can't afford the rent.
One recent trend that has kind of taken us back to the roots of small restaurant square footage is the food hall, where many small setups share one large communal seating area. Another is the food truck, with no seating, minimal rent costs, and the entire operation fits in a parking space. There is a great irony when I've been to a food truck serving food out of the parking lot of an under-occupied strip mall, because the strip mall spaces are simply too large.
It also doesn't help that mom-and-pops are not exactly the most attractive tenants for commercial lending; better to ink a long-term contract with a sure bet like a bank branch or a national chain.
Every large space can be trimmed down to a small space. If there are too many vacant shops in an area, and there would be a market for smaller shops, I would assume that tenants add walls and rent out the smaller space. Even if that walled-off space is unused, tenants would make more money than not renting out at all.
The oft-cited counterexample to US restrictive zoning, Japan's permissive zoning, works because in Japan zoning type is decided at the national level and there are only 12 types of zoning that define maximum nuisance (so a blacklist). US zoning gets extremely nitty-gritty and is functionally a whitelist.
You can't just throw up some false walls and call it a day. Even if you could, your landlord's lease terms probably don't let you sublease like that.
The way forward is not by enabling people who can serve 500 people/day to exist when we can have a robot serving 5,000.
We want automation, we want people doing what they choose to do because we've automated away things they had to do, such as work for a living.
The way to get there is more automation.
Restaurant cooks/servers are the equivalent of hand washing clothes. We have washing machines - technology has enabled humanity to do a great deal more with their life, let's move in that direction please.
The other piece of the puzzle is this - technology alone is not enough - technology alone is why we have nuclear weapons and idiots with nuclear codes. The time will come soon, when we have to have a frank conversation about the number of idiots inhabiting this Earth and that it's not climate change, it's idiots, that will be the end of all of us if this keeps up.
Anyhow :)
One of those things is doing 20 covers of handmade tagliatelle every night.
Automation alone certainly does not guarantee this.
I strongly suspect that if the most tedious jobs were automated away, so long as people had their needs met, they’d find something much more meaningful than the work they were doing before. I know I sure would!
“So long as they have their needs met” is a big assumption, though, and one that wouldn’t hold up in our current society.
The robot restaurant is for lunch during work - you care about price and speed and nutrition. That is it. Self service checkout is fine. SittIng close to other people does not matter.
For date, meetups with friends, celebration or filly dinner I want calmer, more intimate place.
(I understand the expense arguments, but I think it's a false economy, without specific goals, and isn't worth much regard on software engineering salaries.)
Date, familly dinner, celebration and similar all take time. You are comfortable being there for two hours. With lunch, you want be shorted then that.
There is powerful stuff in sharing lunch. Especially if you pay.
But the machine doesn't take up that much space. If the zoning requires you to rent 200 times that much space, the economics go away. So you still have to solve the original problem.
> Restaurant cooks/servers are the equivalent of hand washing clothes
Both are a skilled trade. Can you not tell the difference between the best meal you’ve ever eaten at a restaurant and a cup of fried cheese balls from Sonic? If not, then your post is entirely logical.
> technology has enabled humanity to do a great deal more with their life
More than cook good food for people? Are you surprised that there are people who dream from a young age of cooking, or cutting hair, or working on a construction site? That people have different skills, aptitudes and interests?
I’d rather see people flourish while doing what they love to do - especially if that thing is as central to the human experience as preparing a good meal.
That said, it's very possible healthy choice employs very skilled chefs to either do small batch production or has figured out a way to do large batches without sacrificing quality.
Their microwave steamer container technology also factors in, since most microwave meals taste bad due to excess moisture.
I don't think automation and quality have to be mutually exclusive. The same goes for spirits. Some small batch Icelandic vodka I had was absolutely horrible compared to the mass produced Grey Goose, despite costing more.
I see the benefits of covid. Culling the inefficiencies in our markets. Shale fracking, unnecessary luxury services like mid-tier restaurants, etc..
Maybe you might as well drink Soylent. Washing clothes or dishes is a chore. Cooking food is a social event and lots of people like cooking and creating food.
If anything automation of mundane tasks will lead to more food being cooked by humans. I’ll also eat my hat if you can get a robot to cook an 8 course degustation.
But realistically, you're going to get laughed out of the park. Cheating on longer term costs to gain competitive advantage in the short term is rampant and part of how capitalism works.
An example of this kind of thinking - "if I cut my price by 5% by not paying for 100 year catastrophe insurance, then I will have an edge over my competitors who are paying that 5% for 100 year catastrophe insurance."
This is actually how all industries are run in the modern era. To compensate, western companies generally have strong finance functions to find other ways to survive.
Public companies raise capital by selling shares. You can also take a loan, reduce opex, or rely on your savings. Relying on your savings is relying on your past. Everything else is, at least in part, drawing from your future.
It's the private SMEs that have the most risk in this model because they lack similar access to capital as publicly traded companies. If SMEs do not have substantial marginal profit, they are playing a very risky game.
I'm sure the "fine dining" restaurant business will pick back up again, but I think the medium tier restaurants will be hurting for a while. I'm certainly going to be buying a lot less Thai, Mexican, Chinese, etc. food and making it myself instead. It's almost as good if not better and I tweak dishes to make them how I prefer.
At the lower-end of the medium-part of the industry ($10-$30/meal), I think the prices are a ripoff. For instance, I've been making a lot of ramen (akin to what you find in dedicated ramen shops a la spicy miso tonkatsu ramen with a soft boiled egg) lately. I spend probably ~$6~8 for the ingredients for a bowl (not incl. ingredients that I buy but end up spoiling before I can use them) that I previously wouldn't have blinked twice to spend ~$20 on at a ramen shop (incl. tax/tip). Yes it takes me a solid 15-25 minutes to make it myself, but my subway ride to/from the restaurant takes about that same amount of time.
At the higher-end of the medium-part of the industry ($30-50/meal), things become more debatable since flavors _should_ skyrocket.
I have no qualms about paying for the ingredients for food. But I don't really care if the restaurant is a proverbial hole in the wall where you order and pick up your food at the counter. I'd prefer a store where the food is comparable to another store but at half the price and 0% of the frills of table service.