4340

reminder, one out of eight

4341

Beyond that, in the case of Applebees, we aren’t even talking about restaurant owners, we’re talking about the top executives of Dine Brands Global, a corporation with a market cap of $1.3B and revenues of nearly $1B. This isn’t a struggling restaurant, it’s a corporation with 3,600 restaurants, nearly all of them actually franchised. It makes money by extracting fees from actual restaurants.

4342

Imagine a world where people don’t have to work for assholes.

4343

I would assume you mean “every SUCCESSFUL restaurant owner . . .” I’ve looked into it and I just can’t figure out how any restaurant makes money that’s fancier than a Taco Bell. Not criticizing or arguing with what you said, the guys and gals who have it figured out make bank, but damned it seems like a brutal business at the spreadsheet level.

4344

Most places where I have any insight into the numbers make the vast majority of the profits on drinks, not the food. Wine by the glass is a particularly effective place to have crazy markups.

4345

Very true, Louisville is a crazy boozy town. We’re also a crazy restaurant town per capita, and they come and go like fruit flies. I’d much rather invest in a dive bar without food than a restaurant with booze.

4346

Yeah, the bottle price is crazy marked up, and then the price per glass is crazy marked up over that.

4347

yeah, I guess there is that. To be fair, I have known several that failed. I was just tired, possibly slightly inebriated, and seeing that old saw about ‘thin margins’ just got my dander up. I could possibly clarify (but probably just rant) more, but I think I’ll leave it there for now.

4348

By all means, rant away. I know successful restaurant owners that are bastards and earnest restaurant owners that are barely paying the bills, and see a dozen failures for each every year. I didn’t take from what you said that there was any doubt that the ones who figure out the formula and make bank aren’t jackasses.

4349

Here’s the thing, as I see it. Restaurants are like any other business. You should have a pretty good plan, what your inputs and outputs will be, and good management. Also, to clarify part of my earlier rant, I have little tolerance for ‘business owners’ who don’t actually work in their business, but complain about thin margins. You emploly a GM (or chef, for example), pay them a salary, that’s part of your expenses. If you did that job yourself, well, you’d be making that much more from the business. What, you can’t/won’t/realize you’d be terrible at it? Well, don’t complain, then, or don’t start the business in the first place.

Ditto for rent- find the ‘perfect place’, but the rent is more than your business plan allows for? Maybe it isn’t perfect. Dont try to rewrite the plan to make that work. Or another huge pet peeve of mine- loans, etc. to build out the place. That all costs money to pay back, and again, eats into the margins. Perhaps Seattle is an outlier here, but I’ve seen so many multi-100k buildouts (over half a million is not uncommon). Then it’s ‘we can’t afford to pay the cooks well, our margins are so thin!’. It’s just such a generic excuse for poor planning and management. I mean, I’m probably biased coming from the back of the house, but it the industry, as a whole, makes decisions to prioritize just about every other aspect of the business except, you know, the reason why people go there (ie, the food).

I admit, I’m probably very out of step with what a ‘real’ businessperson thinks. That said, I started my business 4 years ago, living according to these ideals. I got through the pandemic, stronger than ever. I actually have two (very) part-time employees now- hired because there’s more work than I can do myself. I did take a small (14k) loan out to help expand (into a food truck) this last November, and thats made money tight, but it’ll be paid off by the end of May. I was looking for a real brick-and-mortar space (I do takeout from my commissary kitchen, which really leaned into that after the pandemic got going), but purposefully passed over a few spots as they would have been too expensive for the lease, or cost too much to build out, or both, necessitating large increases in my prices to cover them (even with projected revenue increases), something I am unwilling to do currently.

Dammit, there I go.

4350

I getcha, I getcha. You’ve professionally reinforced what I amateurly thought, that the margins are thin as hell and it’s a super-tough business that trying to do it responsibly/logically seems like fighting upstream from the big money guys that can speculate, drive down the local business profit, and then fail out into other areas without having their hair mussed. Like I said, I could never make the money work on paper not knowing more than 201 about it, more power to you if you’ve survived and even slightly thrived through COVID.

4351

Old saw it may be, but it’s a statistical reality. The restaurant industry has really low profit margins (in the mid-single digits).

The Complete Guide to Restaurant Profit Margins - Lightspeed

https://pos.toasttab.com/blog/on-the-line/average-restaurant-profit-margin#:~:text=The%20range%20for%20restaurant%20profit,falls%20between%203%20–%205%20percent.

Obviously there are successful owner/operators in the industry, but as Houngan said, you’re probably focusing on the successful ones. Which, by the way, probably own several restaurants and leverage their expertise, economies of scale, etc. I don’t think many folks will tell you opening a restaurant is the easy path to riches.

As I’m sure you’re aware, labor is a major component of operating expenses for restaurants. Between those two things, is it surprising that controlling labor costs is a big part of managing a restaurant business?

4352

I’ll just shoulder back in to say that Don knew all that and your post could be read as assuming otherwise. It’s a tough goddamned business and anyone who can make a go of it knows it down to the peat moss, and anyone who has brushed up against it like myself as a server/bartender/theoretical investor knows it too. Not saying you were being aggressive or unfeeling, but it’s a goddamned nightmare of a job that could be interpreted harshly,

4353

What I’m pushing back at is people being shocked that Applebees is looking to save on labor costs as the applicant pool increases. It was a dumbass PR move to let that out, but I’m not surprised they’re looking at the applicant data and turning that into lower starting wages.

The answer to that, from a social engineering perspective, isn’t to rely on the charity of business owners or some pinky promise to just raise wages, but never lower them. It’s universal healthcare, education, etc.

4354

The answer IMO includes some regulation on how the benefits of productivity gains and growth and success are divvied up between ownership / management / labor.

4355

Just as an aside, we are all here at QT3 living vicariously and very proudly through Don"s successful donut business!

Keep up the great work!

4356

I honestly don’t know how you do that in many/most businesses that are private, while also taking into account different sectors with their different margins. Do even the most socialist of the European countries do that?

Seems much easier and effective to tax and increase social welfare programs.

4357

Do any of them need to? I think the UK is the only European country that has decided to follow the US down the gilded age income inequality path.

Otherwise, why can’t you regulate it? Certainly you can measure it, and you can regulate anything you can measure.

E.g., one simple method would be to limit CEO / executive pay as a multiple of employee pay.

People with good educations and excellent health get fucked on pay all the time. The answer to income inequality is higher wages for workers paid for by lower incomes for owners / managers, not blaming the problem on the poor education of the workers and throwing money at ‘training’ that doesn’t solve the problem.

4358

I’ll assume this means that you’re unaware of any that do anything like that. It would likely take a substantial amount of bureaucrats to sustain something like that, in addition to somebody to decide what is a “fair” allocation on relatively granular level, company-by-company or at least sector-by-sector.

In general, I find most of recommendations to require a huge amount of micro-management to implement and to decide what’s fair and equitable. For example, how do you set an equitable employee-CEO ratio when that can vary greatly with the structure of the company (e.g., is it a high revenue per employee business or vice versa)? Moreover, companies will probably restructure to avoid high employee to CEO ratios and such. Like your other plan, I’m assuming you’re unaware of any major country that implements anything like this.

It’s far, far more practical to tax and redistribute, if we can come to societal agreement that the current system is too inequitable, at a macro level.

4359

Or, put another way: nothing can be done.