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Policies, Percentages and Profits in Restaurant Mark-Ups

  • Spence Cooper
  • August 29, 2012

Britain’s Bee Wilson who writes “The Kitchen Thinker” food column for The Telegraph’s Stella magazine, recently discussed the policies, percentages and profits involved in restaurant mark-ups.

She notes that it’s not unusual for a bottle of wine served in a restaurant to be sold for 300 percent more than you’d pay in retail store — a price markup most diners might expect.

But Ms. Wilson claims that patrons would be surprised to learn that the mark-up on the food may be even greater than on wine.

When enjoying a starter of artichoke hearts with ground lamb and goat’s curd priced at £8.50 (around $10), Ms. Wilson suggests diners have no idea what relation this bears to the price of the ingredients.

She believes the standard policy is that ingredients in each dish should comprise about 25 to 35 percent of the final price.

The secret of restaurant economics, says Wilson, is that the mark-up on food is often greater than that on wine.

She emphasizes that the markup is not “a swindle” because the remaining 65 to 75 percent of what diners are charged has to cover everything from kitchen equipment to lighting to the chefs’ wages.

“After all that is accounted for, it’s a miracle if any profit remains.”

Policies, Percentages and Profits in Restaurant Mark-UpsMs. Wilson noted that the manager of a successful chain of restaurants recently discussed how difficult it was to maintain his food bill cost ratio at 25 percent of the total without pricing himself out of the market due to the rising cost of entree ingredients.

What this restaurateur does when the percentages creep up, says Ms. Wilson, is rethink ingredients.

“He has quietly removed the squid from a mixed seafood dish and no one seems to have noticed.” she said.

According to this restaurateur, contrary to what diners may think, the most expensive items on the menu may actually yield the least profit in percentage terms because the raw ingredients cost so much.

“A piece of fillet steak can easily cost as much as 40 per cent of the £25 menu price. By contrast, a bowl of soup for £4.95 may only be 70p or so to make, offering far heftier margins.”

Tea and coffee generate hearty profits because a double espresso instead of a single, for example, cost around the same to make, but you can charge much more for the double.

Ms. Wilson pointed out that Andrew Parkinson, an experienced head chef, revealed in his 2001 book, “Cutting It Fine,” that he once worked in a restaurant where the gross profit got so bad that they ended up using grey mullet on the menu as “Italian sea bass”(a fantasy fish).

“It made 95 percent profit on each fillet we sold,” Parkinson said.

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