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Comment by beat | Hacker News Reader

There's a formula for restaurant finance - 30% ingredients, 30% labor, 30% rent and other overhead, and (hopefully) 10% profit. This is broadly true across the industry, at all price points. Much of the higher cost of "nice" restaurants is higher quality ingredients (this is especially true of pricey sushi-dominated Japanese, which pays a premium for the best fish). An additional cost is prestigious locations.

Because of this formula, expensive restaurants are not necessarily more valuable or profitable - merely more prestigious. I was talking to a friend of mine the other day about his father's restaurant businesses. He owned two restaurants - a prestigious steakhouse on a valuable lakefront, and a cheap fast food chain location. He made far more money slinging cheap burgers than he ever made on fancy steaks. Cheap ingredients, cheap labor, cheap location, very high volume!

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Anecdotally, I've heard from a number of people that catering is one of the larger profit centers for restaurants that do it, with the dine-in service acting almost like a marketing tool, or sometimes even a loss leader.

Absolutely. The restaurant I used to work at did catering as well, and we made far more profit from catering than from regular service. I don't think that total income was more for catering though.

With catering, you only have to pay for the staff you need, when you need them. You also often don't have to pay for the venue, or only have to pay for renting furniture etc.

Part of the profitability also comes from the fact that you're already paying for the kitchen, and often the venue (if it's hosted at the restaurant after hours), so you're essentially removed 30% of the cost.

This is dependent on the level of fine dining and the locale. A high-end restaurant in an affluent, high density area like LA or NYC can support very high prices while still keeping packed day in day out. And that leads to a lot of money coming in (five figures a day easily). Which is why, incidentally, there tend to be more such restaurants in such places.

Years ago a VC who passed on my startup drove my co-founders and myself past a restaurant in the western Philly suburbs. He pointed to it and declared that he and his father had almost bought it. "Why didn't you," I asked. He laughed derisively. "Because we realized you could only fill the tables, and once you did that was it: you'd never make any more money."

In Sydney, I've noticed the better places to eat are increasingly becoming the cheaper restaurants.

Minneapolis has an amazing food scene, driven by localvore ingredients (we're farm country) and hipster-casual "fine dining". It's a hard town for traditional fine-dining restaurants. The really good eating is split between the hipster places and southeast Asian ethnic restaurants. For $50/person, you can get a shockingly good meal here, and you can wear jeans and a t-shirt eating it.

For $50 I'd hope so! That's an expensive meal sans alcohol. I've had great meals at every price point, but above $25/person I'm expecting a good meal, above $50/person a great meal, and above $75-100 an exempelary meal.

Yeah, when I think of great cheap local food, I'm thinking of e.g. this awesome Cajun place where you can get a big plate of amazing chicken etouffee, garlic bread, and a beer for around $10. I might go as far as "cheap for what you get" for a truly great $20/person place. $50/person may be delicious, but it's not "cheap" by any reasonable definition.

Depends what you want out of food. I personally go to high end restaurants because I want to see what chefs are capable of doing with all the new techniques they invent, or come up with new combinations, or use familiar things in new ways. This sort of cooking is not easy or cheap work. So when restaurants are able to be inventive well under the $100 mark, then yes, it's cheap - unless you think labor should be free.

I hope your comment was dictated and you meant $15 / person? $50 is ludicrously expensive.

Especially for Minneapolis...

In general, Europe is (much) more expensive than the US food-wise and I still can eat a four-course meal at a one Michelin star restaurant for less than $50 (without drinks) 10 mins by foot from my house (Netherlands - you won't get to wear t-shirt and jeans though). I'd certainly hope that $50 would get me exceptional food.

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