The restaurant business is notoriously tough, and owners have a myriad of costs ranging from health permits to commercial rent.
On average, 30% of a restaurants revenues go to labor costs, 30% goes to general overhead, and 30-33% is spent on ingredients. Making a decent profit in the restaurant industry is a high hurdle. As a consumer, when eating out you’re paying for a lot more than just the food; it’s the excellent waitstaff, unique ambiance, convenient location, in addition to the delicious dish that makes for a memorable experience. In order to cover all of these costs and still make a slim profit (generally 3-5%), restaurants need to mark up ingredients on average 300%.
But some items offer dramatically different margins than others.
We decided to analyze data from Priceonomics customer Plate IQ, a company that processes invoices for thousands of restaurants, and has unique access to the actual costs of the raw ingredients that go into our favorite foods. We decided to use our data to look at five common food items: the hamburger, the burrito, the pizza, the omelette, and the Cobb salad. For each item, we focused exclusively on West Coast prices, and analyzed two variations.
Here’s what we found: The markup you pay for a given item ranges anywhere from 155% to 636% — and generally, the higher-end meal you purchase, the better the deal you’re getting.