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Richard Rider

What’s on your restaurant plate is often a rather minor cost factor in your bill

Rising inflation causes more and more people to expose their profound economic illiteracy. Recently I’ve been fascinated to read the Internet comments of otherwise intelligent people who think that the main cost of a sit-down restaurant meal is the food ingredients. Too many commenters think that the primary factor driving eatery prices up is the greed of the restaurant owners.

Anyone who RUNS a restaurant will tell you that in most cases, the cost of what’s on your plate is just a minor and sometimes even a tiny part of the restaurant’s overhead. Especially so for breakfast — which was the meal being discussed on the thread that I was reading.
Here are just SOME of the many restaurant costs being ignored by those commenting “economists,” claiming that some/most restaurants are ripping us off:
* Labor
* Rent/lease/mortgage payments
* Cost of capital (loans or forgone earnings on one’s capital)
* Cost of the owner’s time (he usually forgoes a salary he could earn elsewhere)
* Taxes and government fees
* Insurance — especially workers’ comp in CA
* Utilities
* Advertising * Discount coupons
* Theft
* Franchise fees (for the chains)
* Lawsuits (CA has the worst business lawsuit climate in the nation)
* Competition — fortunately for consumers, every business is seeking to “steal” other businesses’ patrons with lower prices, better products and/or better service. That open market competition keeps prices in check.
* Alternatives — such as eating at home. My wife and I seldom dine out any more, largely because the cost differential is so high (even before the pandemic). Here’s my SAN DIEGO U-T article on this:
Many such ill-informed people go into the restaurant business, figuring to make a killing. The reality is that the restaurant failure rate is at 60% in the first year. And 80% of restaurants don’t make it past 4 years.

Of course, these gourmet pundits
are free to roll the dice with their own time and money. These critics should open a restaurant — thus taking a VERY expensive course in real world economics!
For me, what’s frightening is that no matter how ignorant a person is, their vote counts just as much as the wisest people on the planet. In large part, I credit this stunning lack of knowledge to our education system that pushes a collectivist, anti-business agenda. I’ve been appalled at what passes for “economics” in high school classes (I’ve spoken in hundreds of high school classes over 30 years).

BTW, one of the interesting (if unstated) “economic theories” is that California eatery owners are more greedy than restaurant owners in other states — states where restaurant prices are significantly lower. That’s how these financial “experts” implicitly explain the higher CA prices.

Indeed, for these folks, this bogus (but again, unstated) rationalization is too often the same for ALL the higher prices in California — CA business owners must be more greedy than CEO’s in the other states. To say that this is an absurd hypothesis is an understatement. Yet “greedy businessmen” is a common refrain heard from the public. And everyone’s vote counts the same.

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