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Comment by dehrmann | Hacker News Reader

> So, why are the margins so bad anyway? Well, it starts with the fact that the industry as a whole shot itself in the foot when it started competing on price.

Started? You're always competing on price until you hit a certain status. Restaurants are low-margin if they offer a commoditized product.

They're also up against time. People lose interest in restaurants, and if they can't maintain enough business a few years after opening, they're not going to make it.

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And yet this is not (so) true in Europe, where (1) people eat out less but (2) people pay more for restaurant food.

What's the difference? Is it really just too many food vendors thinking that the $1 happy meal is their competition? Or what?

EDIT: a better formulation, from a reply I wrote below: I'll restate it somewhat differently: eating out in Europe more accurately reflects the full cost of everyone involved making close to a living wage.

1 and 2 can both be true and margins can still be low because of higher rent and/or labor costs.

> Is it really just too many food vendors thinking that the $1 happy meal is their competition?

Maybe if you're a Burger King, but most restaurants aren't really competing with fast food. It's more like the Italian place is competing with the Sushi place in the same price bracket (I'm guessing, but 3x-5x more than fast food).

It used to be 3-5x more than fast food.

A burger with a meal + a drink @ Wendys is like $8+. The price of fast food has risen quite a bit over the years.

I can get a burger and fries that's 10x better at Friendly's, Ruby Tuesday's or a half a dozen other franchises for about $10-12 and the only sacrifice I have to make is that I'll have to drink water instead of soda.

I don't buy this. At a fast food chain, drinks are $1 with free refills. A burger is $3 for the fancy ones, $1 for the dollar menu ones. The windows also have all sorts of 4 for $4 or $5 value meal deals. So $5 without any coupons at Wendy's. Two people can eat for $6 if you use a coupon.

Ruby Tuesday burgers are $9.50 with fries. Add a soda, tip, tax, and it's $16. The multiple is still 3-4x.

It also depends on where you live. Some places the price disparity might be higher than others.

Also if you're talking about dollar menu stuff or the stuff close to it, its about 1/3 the size of the burgers included in fast food meals. The burgers in the meals are comparable in size to what you would get at a sit down restaurant.

Is restaurant food really more expensive in Europe? I only ate in San Francisco, so my perception is probably warped, but there at least eating out is significantly more expensive than in Germany. The prices on the menu are maybe comparable, but they don't include tax and tip.

I've eaten in both SF and Europe a lot. Is it more expensive than SF? Not notably, but I'm comparing against SF.

Using SF prices to represent the US would be like using Swiss prices to represent Europe.

I'm not sure about Europe but I suspect one of the issues is similar to Japan. The food isn't necessarily that much more expensive, especially if you're eating food similar to a native, but the serving size is much much smaller. In the US most people will leave a restaurant upset if they aren't completely and totally stuffed with leftovers for the next day and this is combined with people here easily able to eat more on average already. When I first lived abroad I was spending alot of money in my first couple months trying to eat like an American, until I embraced eating more local food and accepting the smaller serving size. Then I loss tons and tons of weight without even going to the gym.

2 is not true for Southern Europe.

True. I'll restate it somewhat differently: eating out in Europe more accurately reflects the full cost of everyone involved making close to a living wage.

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