I actually just got done reading an interesting reply on Quora which gave me the idea of this article. Technically a reading factor of restaurants profits by cuisine is nearly impossible, most of the cost in running a restaurant is labor, fixed costs and a few variable expenses. The food cost along with utensils is the highest variable.
The question was “How do Chinese restaurants with so little business stay in business”, there were plenty of replies but one actually evaluated the food cost of the business. Comparing a noodle dish that would sell for an average price of $8 - $9, where the cost to make would be under $2. Our math from the research we did throughout the years is a bit higher, we factor in the plastic containers, brown bags on top of plastic bags, utensils, fortune cookies, noodles, etc. Mark-up can only be as high as the person buying is willing to pay. It nearly always stays in the 30 - 40 of food cost.
Restaurants are classified as a “Service Industry” part of the food industry. In the real world the revenue made from a restaurant is all in the service that is provided. A Restaurant is a business just like any other where the owner buys a product in bulk, breaks it down and sells it in smaller quantities. The restaurant adds an extra layer of service by preparing multiple items and packaging it for direct sale.
Since the heart of a restaurant is service, most of the revenue comes from the amount of service provided. The cuisine that takes the longest to prep uses more service, therefore naturally more profitable on a cuisine basis. But there are other costs involved as the need for other costs rise when more service is needed. Take a look at that Chinese Restaurant mentioned in Quora topic. That dish may sell for $8 - $9 and the cost to make it is around $2 - $3, the service to create that dish means chopping up the onions, cutting the fresh vegetables, cooking the shrimp, cooking the noodles, putting it altogether, adding all the ingredients to make it taste good and look good. The prep is much higher than taking frozen chicken tenders, sticking them into the fryer for 4 minutes and putting them into a container.
Most profitable cuisines are the ones where the highest amount of service is required, and the least profitable cuisines are the ones as close to little service as possible. Each one is a different business model in itself. There are shops that just sell chicken wings and chicken fingers that make much more profit than the full service custom prepped restaurants and vice versa. Food cost is only a small deciding factor in the overall operation. The best or most successful type of business offer a little of both, a few custom prepared special dishes and a lot of pre-prepped. This type of “Cuisine” or business allows to retain the customers looking for specialty dishes of the certain cuisine while being able to serve things people look for on a daily basis.
Examples of food cost by cuisine
Pizza: Flour, sauce, cheese isn’t that expensive. But try creating a pizza at home and it will take you hours. Prepping the flour, letting the yeast settle in and rise all takes time
Greek restaurant: You can spend nearly half a day making and prepping a Moussaka, Spinach Pie or other Greek specialties. These dishes will always have a high mark-up.
Burger restaurant: Depends on if it’s a custom burger shop grinding their own meat in house or a pre-prepped burger.
Turkish Restaurant serving gyros: Pre made gyros vs made in-house, made in house gyros will always have a higher markup than pre-made, but time spent on making the gyros should always be considered as the overall business.
Italian restaurant making it’s own pasta will have a higher mark-up than one that doesn’t.
If we look at some franchise, most are automated systems which need very little work and service in house. These restaurants usually have the least amount of profitability per item but their focus is bulk. A Subway sandwich for $6 may have food costs of $2.50, the custom sandwich shop next door can go for $8 and have the same food cost, because more prep is involved.
When purchasing an existing restaurant or creating a new one from scratch, decide on your main goal, do you want to take on more or less service and whatever the case may be, CurrentLVL will be here to create a complete web solution for your restaurant. Whether it is full service prepped fresh from your farm on the roof or ready to go wraps just heated and served. Our solution is to help attract customers at all levels to your food establishment.
*CurrentLVL is a complete Web Solution