We often assume we understand restaurant economics because we know what a chicken breast costs at the supermarket. “I could make this dish at home for $5,” the refrain goes. Could we? Here, Eater takes a look at all the costs of a popular restaurant dish to see what’s in it and the benefits that come with it.
For Patricia Howard and Ed Szymanski (2021 Eater New Guard), closing their Manhattan restaurant for the weekend makes perfect sense. During the week, Szymanski regularly enjoys the look of disbelief on diners’ faces when he tells them, while Howard spends Saturdays answering texts, explaining that there are no tables to be had on the weekends. Customers can’t believe that a busy hotspot like Dame can stay in business without being open on Saturday nights.
It is certainly unusual. Working in a restaurant usually means being on duty every Friday and Saturday night. Working while the 9 to 5 world is playing rules out being available for birthday parties or dinner parties with friends who don’t work in the industry. By doing the unthinkable – only opening Monday through Friday – Howard and Szymanski were able to offer employees something like a normal life. Employees work four days a week, and even the owners only work five – and for a restaurant less than a year old, that seems quite drastic.
But beyond being radical, it is also more profitable for Lady to operate on Monday rather than Saturday.
Mondays in the restaurant business are generally considered quiet, while busier nights like Saturdays generate more revenue. With just 22 seats and a solid reputation (built on a series of pop-ups and collaborations, with proceeds going to charity), Dame is popular enough to be sold out every night. There are currently hundreds on the waiting list, so filling the dining room on a Monday isn’t the challenge. Also, before eliminating weekend service, Howard and Szymanski noticed a smaller average check size on Saturdays. Weekends attract non-regular customers; the scavenger hunt diner who wants to hit all the buzzing spots to snap a shot for the gram, or the couple who’s sharing an entree because they’re rushing to a show or a bar afterwards. Although not the primary reason for the change, the belligerent “Why can’t I get a table?” dinners were also more frequent. One of the straws, before the owners decided to close on Saturday, was a customer who didn’t have a reservation, who aggressively asked for a table in the full house, while trying to get a cosmopolitan from another restaurant (he had to be physically removed).
“The weekend crowd isn’t as fun to work with as the weekday crowd,” says Szymanski. Dame’s Monday diners tend to be more industry veterans ordering the whole menu and full bottles of wine. So with every seat occupied, opening on Monday is more cost-effective than Saturday, while giving staff and owners weekends off.
Yet this is a restaurant with only 22 seats, five nights of service and expensive seafood to buy. Here’s how the numbers work when it comes to the restaurant’s signature fish and chips.
Menu price: $29
Total restaurant cost: $23.93
Food costs: $12.34
Cure (salt, sugar, lemon zest): $0.05
Dough (vodka, beer, rice flour, all-purpose flour, baking powder): $0.20
Fryer oil: $1.50
Idaho russet potato: $1.75
Maldon Salt: $0.01
Tartar sauce: $0.50
Lemon wedge: $0.33
Every day, the kitchen receives whole hake (about $75 for a 10-pound fish), breaks it down, then salts the fillets in a mixture of salt, sugar and lemon zest. This draws in moisture and seasons the fish. It is then divided into pieces between six and seven ounces. Fish can be cheap, if you’re a pub, ordering pre-portioned frozen fillets. However, when a restaurant prioritizes sustainability and freshness, fish is expensive. It’s no surprise, then, that a six-and-a-half-ounce piece of Cape Cod hake fetches between $7 and $9.
The batter – a mixture of vodka, beer, baking powder, rice flour and all-purpose flour – is made to order during service. After dipping (no flour dredging here), it is fried until golden. Meanwhile, hand-cut Russet potatoes (the price of which has fluctuated wildly and lands between $1.50 and over $2 per serving), are boiled in seasoned water, cooled, then blanched in oil for 12 to 20 minutes, and finally added to the fryer. with the fish.
Although no chef is alarmed by the price of good fish, it is certainly surprising that oil for the fryer accounts for almost 13% of the cost of the dish. That’s because cooking oil saw some of the biggest price increases in the past year. According to the Bureau of Labor and Statistics, between December 2020 and December 2021, the cost of cooking oil increased by 34%. Currently, it takes $150 worth of canola oil to fill Dame’s fryer. Oil darkens as it is used, affecting the color and taste of anything cooked in it. And nothing turns frying oil cloudy faster than breaded foods. At Dame, oil is changed every 100 orders, resulting in $1.50 worth of oil per order.
Once cooked, the fish is sprinkled with Maldon salt and a little malt vinegar before being served with a cup of tartar sauce and a wedge of lemon. In total, the dish costs 43% of the food, which is much higher than the restaurant’s average food cost of 26-30%.
Labor costs: $7.97
Dame’s staff trains to learn every part of the restaurant, so someone can cook one day and serve the next. Everyone at Dame starts at $15/hr, plus an equal share of the tip pool (owners excluded) which is a net income of between $30 and $40 per hour. Even with these high hourly rates, labor costs land at 27.5% – just short of the 30% sweet spot that many restaurant operations seek.
“Our cooks have never made so much money in their lives,” says Howard. “And most of them only work three to four days a week.” The arrangement goes against the standard front-to-back-of-the-house economic divide (not too long ago, Szymanski was a line cook on less than minimum wage, on which nobody can live in New York) and the culture created by the sinkhole. “We don’t have the storefront disparity that we’ve both experienced at other restaurants,” Howard says. “That’s where having a small restaurant helps. There is nowhere for more people to go. So we have to make it work with just a few of us on the floor.
Fixed fee: $3.62
Commercial rent in Manhattan tends to range from $100 to $200 per foot. But it easily goes beyond that for particularly sought-after spots or corners. The Dame’s MacDougal Street location costs $9,000 per month. At 460 square feet, it’s $240 per foot. What makes Dame’s fixed costs so abnormally low as a percentage of sales is that sales are so high. The restaurant does three full shifts per night. In the summer, outdoor dining adds an additional 32 seats. This doubles the capacity during warm months, with no added rent or utilities. In summer, this means that fixed costs average around 10% of sales, which reinforces the more difficult winter months, where fixed costs average around 15%.
“We are very lucky that our concept has proven to be so popular,” says Szymanski. “But we also made a conscious decision to open a small restaurant, taking into account these economic considerations – in our experience, restaurants that are not financially successful often operate below capacity, leading to inefficiencies. We thought that if we were always at 100% capacity, we could operate at maximum efficiency, and the best way to approach 100% capacity is to open a small restaurant. Obviously that limits our potential. revenue, but it makes our margins better than they would be for a larger restaurant.
Third-party delivery and pick-up costs
“The main reason we don’t offer delivery is that we’re too small,” says Howard. “We can barely keep track of the number of covers we cook each evening. We do not have additional bandwidth to offer delivery in the current kitchen.
Szymanski is less kind, calling the third-party delivery industry “manipulative scumbags.”
profit or loss
Given the well-paid employees, high cooking standards, and use of expensive seafood that pushes the dish well above the restaurant’s food cost target of 26-30%, it’s amazing that fish and chips yield a profit of 17% (Dame does even better on calamari and oyster dishes). Part of the credit simply goes to billing what is necessary for a healthy business. But Szymanski and Howard also have very low fixed costs and manageable labor costs (given the tedious nature of cooking) that unfortunately don’t scale beyond Dame’s small footprint.
“We’re planning to open a bigger restaurant, and we won’t have such good margins because our labor model works for a very small place,” says Howard. “We know most restaurants can’t make those same numbers.”
Margins, Szymanski adds, aren’t everything. “A 5% margin on $10 million in revenue per year is more net profit than a 20% margin on $2 million in revenue per year.” His math checks out. But while Szymanski and Howard know it makes financial sense to open a bigger restaurant where they can earn higher incomes (even with lower margins), he also says they are risk averse – running the smaller restaurant first was important for them to get their footing. “Running a $10 million a year restaurant sounds like a logistical nightmare. Quality of life is far more important than profit.
Corey Mintz, a food journalist who focuses on working in restaurants, is the author of the upcoming book The Next Supper: The End of Restaurants as We Known Them, and What Comes Next (Public Affairs 2021)