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It’s all about the margins..

September 12, 2009
Chateau Mouton

Chateau Mouton

I might have mentioned this before but restaurants operate on very thin margins when it comes to food.  Most casual dining restaurants are good to make 10% on food sales.  By comparison, Microsoft has operating margins in the 30+% range and Goldman Sachs is anywhere from 30-40% depending on the markets.  Most businesses maintain 20-30% operating margins.  So, how the crap do restaurants stay afloat?  Booze.  Wine, especially, is marked up somewhere in the neighborhood of 300-400%.  So, let’s say, for example, a restaurant can purchase a bottle of pinot grigio for $11 (a fairly common price for wholesale), the restaurant will turn around and charge somewhere in the neighborhood of $11-12 per glass for that wine.  Wine bottles average about 4 glasses per bottle.  Meaning, in one glass you can pay for a bottle of wine.  So, if you ever wonder why restaurants have corking fees or push alcohol when you begin the meal, there is your reason.  It keeps them in business.  So drink up! 

The Mouton sold for $1000/bottle at Gramercy Tavern.  My guess is that the restaurant purchased this bottle for $250-300. 

Food inventory:

Imagine having to predict dining patterns, 6 or 7 days in advance, where any number of variables (weather, social events, competition, etc…) can alter previous data points.  Each week the chefs have to purchase inventory for the week (some perishables will be purchased the day before) and, given those thin margins, it’s important that food inventory does not go to waste.  It’s a weekly, sometimes daily, exercise that determines whether the restaurant is profitable for the day.  Too much tuna for the day’s entrée and you might wind up throwing out several pounds of very expensive supply.  Last night at Za Za, we had an unexpected influx of diners and, more importantly, they flocked to the shrimp pasta entrée.  By 8:30, we had run out the shrimp and that is an opportunity cost of unknown quantity.  It happens in every restaurant but you try to avoid disappointing customers as it leaves a poor impression if you find yourself running out of favored dishes.  Despite the shrimp issue, the night turned out great as all the pizza was sold, pasta was cleaned out and most importantly, every customer was fed.  My only regret is not having enough leftovers to sample. 

I plan to learn some baking recipes and salad vinaigrettes on Sunday so I’ll make sure to share what I learn. 

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