Profit margins in restaurants are notoriously slim, and the high-end joints, funded chiefly by private equity, are the exception. In these establishments, breaking even is the (elusive) goal. Basically, they are private clubs for the investors where they are treated to the hospitality associated with exclusivity.
For those who are upset about income disparities: Dining out at pricey joints while hammering away about the 1% is reminiscent of Alexander Cockburn, the wonderful Leftist writer, having a column in The Wall Street Journal. You entertain those who you seek to oppose through your contradictions.
More on profit margins.
One reason why you see more burger joints across the U.S. is that ground beef is among the few cheap proteins that satisfy with fat, and have even more appeal with salt and by being fried, to create more profit for a restaurant. Private equity knows this: McDonald’s is pretty much blue chip stock and shows up in many of our portfolios. And Shake Shack is an asset of the Leonard Green Equity Fund.
There’s big money in burgers.
Even more money in three other menu items: Noodles, pizza, bread.
A pizza that costs the customer $14 has a food cost of about 90 cents. Bread sold at bakeries for $4-6, depending on size and grains used, has comparable margins.
Best of all are noodles: For $18, you get a bowl of ramen noodles at places like Santouka. Served in a salty, oily broth made from water and pork bones, the cost is about 60 cents per serving.
Meanwhile, establishments, with PR budgets that can employ dozens, convince food writers to celebrate both the high end and low end joints.
And private equity enjoys every bite.
The context for the food and descriptions of it are established by money, which is covert, and what is served and written about shows up within that hidden context.
More to the point would be food served that benefits those who produce it, the customers served, and their communities. You see this approach in countries that do not have bottom line or profit margins dictate these matters.
In these countries, restaurants are seen as cultural experiences, fundamental to employees, customers, and communities, and to some degree they are subsidized by those with authority.
Prices are lower, time spent dining is longer, wages are sometimes higher.
But until contexts can be added to the rubric of private equity, you will see more high-end joints, burger joints, and noodle and bread and pizza erode communities by vacuuming away money. Most of these places are not owned by people who live where they work, and the money ends up in private equity.
You deserve a break today.