I think that menu prices aren't enough to go on. There are other less-obvious ways that costs get passed to consumers. Restaurants are reluctant to be the first mover in raising prices because...
Prices did go up, with some variation between chains and menu items, but the average increase of around 3.7 percent (“about 15 cents on a $4 hamburger,” as the Reich and Sosinskiy put it) was marginal.
I think that menu prices aren't enough to go on. There are other less-obvious ways that costs get passed to consumers.
Restaurants are reluctant to be the first mover in raising prices because fast and casual dining are hyper competitive; consumers are extremely price-sensitive. Customers immediately notice when their go-to $3.00 taco becomes $3.25.
Restaurants in California often lean on hidden fees to increase prices without changing them on the menu.
Many people here in California claim they've experienced restaurant shrinkflation. I'm not sure if there any studies. I feel that my experiences support that feeling: I recently paid $5 for curly fries at a totally unfancy, hole-in-the-wall burger joint: I got like... 10 curly fries in a small bag that had fit in my palm.
On the labor side of things, I see that many fast food and to-go restaurants in SF have switched to self-service kiosks or some automation: Super Duper, The Melt, every boba place I've been to, etc. And it's hitting nicer, not-fast-food places too: I notice a beer garden in Oakland—Drake's Dealership—has a self-ordering system where you scan a QR code at your table to order; you then close your own tab on your phone. There's a similar system at the nice cozy wine bar I like going to in my neighborhood. I noticed these places aren't hiring less staff per se, but they're shifting their staff allocation toward operations away from service.
As for automation, that is going to come anyways. You would have to pay very underpaid wages to be able to compete with just having a kiosk that you only have to pay maintenance every now and then...
As for automation, that is going to come anyways. You would have to pay very underpaid wages to be able to compete with just having a kiosk that you only have to pay maintenance every now and then (and an up front fee) rather than continuous wages every hour you are operating.
Things like shrinkflation and automation - anything to pad profits - would happen anyway. It's not like these restaurants were operating on so little profit that they had to do those things just...
Things like shrinkflation and automation - anything to pad profits - would happen anyway. It's not like these restaurants were operating on so little profit that they had to do those things just to stay open.
Not sure what makes you say that. Restaurants notoriously operate on razor thin margins in most cases. They mostly rely on high margin items like beverage sales to stay afloat, because food sales...
Exemplary
Not sure what makes you say that. Restaurants notoriously operate on razor thin margins in most cases. They mostly rely on high margin items like beverage sales to stay afloat, because food sales barely turn a profit in most places. Their biggest expense is also labor. The only reason they'd do heavy automation and shrinkflation is if their competitors are also doing it, because generally customers don't like those things, and it would hurt them on the competitive marketplace.
There are many industries where margins are huge and the owners can skim huge amounts of profit off the top, and any cost increase can easily be absorbed by them. Restaurants are generally not one of those industries.
The hard, black and white truth is that paying another person to order, cook, and serve your food, then clean up after you is an expensive luxury, that in the last few decades, the average person has taken for granted as just a normal every day way to live, and that can only exist with extremely cheap labor.
Personally I'd rather restaurants continue to raise their prices to whatever it costs to pay their staff a fair wage. That means a lot of restaurants go out of business because people can't afford to eat out as often, but I also don't necessarily think that's the worst thing in the world in the long run.
I think this is a very important and often overlooked aspect of this whole thing. When I was growing up, dining out was a luxury. We were on the lower end of a middle-class family and eating out...
The hard, black and white truth is that paying another person to order, cook, and serve your food, then clean up after you is an expensive luxury, that in the last few decades, the average person has taken for granted as just a normal every day way to live, and that can only exist with extremely cheap labor.
I think this is a very important and often overlooked aspect of this whole thing. When I was growing up, dining out was a luxury. We were on the lower end of a middle-class family and eating out was a treat, something we only did about once a month. Nowadays, you have people who never cook and rely on takeout for all of their meals, but expect it to somehow be cheap despite the fact that they're paying for someone to do all the work for them. It's actually pretty incredible that it's as cheap as it is (in some cases, anyway).
I read online about people who never cook for themselves, but I have never met one in real life. I grew up same as you, with eating out being a luxury. When I was young, it was possible maybe once...
I read online about people who never cook for themselves, but I have never met one in real life. I grew up same as you, with eating out being a luxury. When I was young, it was possible maybe once or twice a week. When I was older, and when I was on my own, it was attainable almost never. My family is above the median income in my city according to the census bureau. This begs the question: why the change in affordability in dining? Restaurants in 2004 could set their prices such that an above median family could afford it a few times each week. Apparently restaurants in 2024 have to price their menu such that the same family can only eat out once or twice a month. What changed?
One of the biggest markup restaurants in the US have is on wine. It is pretty standard to have at least a 100% markup above the exact same bottle in a wine shop. Usually 200 to 300% is more common. I have also seen bottles above 400% markup. I’ve now been living in France for a few months. That same markup does not exist here. Of course there is a small markup on wine, but nothing close to even 100%. And I can assure you that the food is not outrageously marked up instead. If all these restaurants can survive and thrive here in France without outrageous prices, why can’t they do the same in the USA?
I am sure there is some nuance I don’t understand, but it feels like restaurants and business owners are lying through their teeth to try and squeeze more blood from the stone.
France and the US are extremely different places economically. Free healthcare and other social programs make it so that you don't need to make nearly as much to have a livable life as you do in...
France and the US are extremely different places economically. Free healthcare and other social programs make it so that you don't need to make nearly as much to have a livable life as you do in the US.
The restaurant industry is one of the most competitive there is, with tons of small businesses. The people who own restaurants are not generally living large and enjoying massive profits from their businesses. They're usually scraping by and under the constant threat of bankruptcy, because as a luxury good, the service they provide is the first to go in hard economic times. Their customers also tend to be more price sensitive than almost any other commonly engaged with industry. If a steak costs 35 dollars instead of 30, you can just not eat that steak and cook one at home instead. If you need gas however, it doesn't matter if that gas is $2.50 a gallon or $4.00 a gallon, you're getting gas.
I promise you, if a restaurant was just raising it's prices out of line with it's competitors out of pure greed, that restaurant would very quickly cease to exist.
I don't think they're necessarily lying, considering how often restaurants fail here in the US. Something like 60% of independently-run restaurants fail within the first three years and 80% within...
I don't think they're necessarily lying, considering how often restaurants fail here in the US. Something like 60% of independently-run restaurants fail within the first three years and 80% within the first 5 years. So it's not just talk, it's actual business failure. I don't know a lot about the P&L of restaurants in Europe, but I'm familiar with it in the US. I imagine it has something to do with some combination of these:
Actual raw food costs are more expensive in the US. We have a very long supply chain for food, and a lot of regulation
Food portions are quite a bit larger in the US compared to Europe
I imagine that commercial rent is more expensive in the US compared to Europe
Labor is one of the most expensive costs for restaurants in the US. Only wait staff are tipped, so the rest of the staff is subject to local minimum wage, which can be pretty high
Restaurants have a lot of health and safety regulations that they need to abide by. It's quite strict and expensive to remain within compliance
Because of the high failure rate of restaurants, it's considered a high-risk investment, and is therefore expensive to obtain the loans necessary for the capital expenditure of opening a restaurant
Alcohol is indeed a huge markup here in the US compared to other countries, but there are also all sorts of taxes and fees involved with selling alcohol in the US. But yes, alcohol is certainly more profitable than food in the US
I think attributing food costs to regulation in the US is not good for this comparison -- EU food regulations are generally much stricter than in the US. Food costs vary quite a lot within the EU,...
I think attributing food costs to regulation in the US is not good for this comparison -- EU food regulations are generally much stricter than in the US. Food costs vary quite a lot within the EU, of course, but if you're blaming raw food costs on regulation in the US than one would expect raw food to be more expensive in EU countries.
I also don't think it's reasonable to say commercial rent is more expensive in the US compared to Europe without backing it up statistically. In both places, this is highly regional and even dependent on location within something like a city. It would be exceptionally easy to cherry-pick examples to make the point in either direction, so I think actual stats are necessary there.
Labor costs and health and safety regulations are also things in Europe, and minimum wages are generally quite a bit higher in European countries that have them compared to the US (though California is probably an exception there, based on this article, the rest of the US is not California). I don't think it makes sense to attribute a difference in the viability of running a restaurant in the US vs France to these things when they are factors in both places, unless you have evidence showing that these costs are significantly higher in the US as a whole.
I'm also not super familiar with the French restaurant industry, so I don't know what's at play there that makes it different from the US (where, indeed, the failure rate is very high for independent restaurants and the market can be pretty brutal in places). So I can't shed light on that. But I don't think these factors are likely to play the major difference if there is one.
I'm not that old and eating out was a luxury when I was a kid too. I'm not exactly sure what changed that, though. It seems to me that there was a point in which fast food workers must have been...
I'm not that old and eating out was a luxury when I was a kid too. I'm not exactly sure what changed that, though. It seems to me that there was a point in which fast food workers must have been paid so poorly that the cost of food at fast food restaurants was incredibly low, which would be one explaination as to why foodservice operations remain with razor-thin margins. But it doesn't really explain why it kept going down to begin with. Perhaps fast food grew very quickly and the extreme competition caused a price war? Or maybe it has something to do with how most of the labor in these kinds of restaurants got moved into central kitchens where machines do them?
Or alternatively they'll shift to different layouts that provide other efficiencies. A lunch counter is a way more efficient use of space than a bunch of two tops filled with individuals eating...
Or alternatively they'll shift to different layouts that provide other efficiencies. A lunch counter is a way more efficient use of space than a bunch of two tops filled with individuals eating lunch, and at the same time the service turnaround can be a lot higher with the diners all in view at all times. I don't have any problems with automation, but it also feels like an expensive way to keep doing what we have been doing, rather than changing our built environment.
I've often thought that in cities, something like an adult meal plan would be super useful. Something like a place that you pay a monthly subscription to and you can go to a cafeteria, or network...
I've often thought that in cities, something like an adult meal plan would be super useful.
Something like a place that you pay a monthly subscription to and you can go to a cafeteria, or network of cafeterias to eat healthy, but unfancy food that's easy and cheap to prepare in bulk, just like you do in college.
When I was deployed in the military, one of the nicest parts is that I never had to worry about meals. I just showed up to the mess tent, they gave me food, I ate, and I went back to doing my job.
I think that would fill a huge niche for the "never cooks meals at home" crowd, and could potentially be affordable due to economies of scale.
Personally I really want cafeterias to come back into style. Grab a tray, pull out some plates of food that are already made, take it to the checkout stand and then go sit and eat. Put your dirty...
Personally I really want cafeterias to come back into style. Grab a tray, pull out some plates of food that are already made, take it to the checkout stand and then go sit and eat. Put your dirty dishes on a rack and have them get reused.
I basically want everything to be like the Ikea cafe; unpretentious, fast, with a focus on healthy options and pretty reasonable quality expectations.
Whole Foods has a 'chef case' that I like. It's different from the hot bar. It offers lots of healthy, tasty foods that are freshly prepared everyday: honey glazed carrots, spinach spanakopita,...
Whole Foods has a 'chef case' that I like. It's different from the hot bar. It offers lots of healthy, tasty foods that are freshly prepared everyday: honey glazed carrots, spinach spanakopita, cranberry kale salad, grilled salmon, grilled asparagus, and so on. You can get a 'chef's plate' of 1 entree and 2 sides that's easily a meal and a half for $10–12 (in San Francisco).
I think they are able to get the prices that cheap (by SF standards) through economy of scale: there are ~16 rotating options (spanning every diet) that are prepared in large batches early in the day. It's on the buyer to reheat it in the microwave, but it matches 80–90% of the quality as something freshly prepared.
(For reference, I'd peg a frozen microwavable meal at about 20%, and a pre-packaged never-frozen prepared meal at about 60–70%.)
I do like the concept and thought about maybe someday opening something like that. But I figured that grocery stores already have that niche locked down.
There have been a couple of startups that tried things like that, with 20-25% discounts on stated prices for having pre-paid and a network of restaurants. But it never quite caught on. Getting...
There have been a couple of startups that tried things like that, with 20-25% discounts on stated prices for having pre-paid and a network of restaurants. But it never quite caught on. Getting restaurants to sign up for it was a slow process because it was a novel idea, payment processing never quite gelled to be as easy as just using a card... it just didn't quite work, perhaps because the person running it was on a shoestring budget. But if Doordash started offering a subscription service I wouldn't be surprised if people went for it.
Automation, at least, would be captured by the employment statistics that this study looked at. I don't think shrinkflation would, as it's quite difficult to directly measure, but I think the...
Automation, at least, would be captured by the employment statistics that this study looked at. I don't think shrinkflation would, as it's quite difficult to directly measure, but I think the burden is on those who oppose wage increases to prove the connection there, if any.
EDIT: this was supposed to be a reply to the top-level comment but oh well.
Shrinkflation, sure - that's easy to do and it doesn't cost the restaurant much of anything to put fewer fries in a bag or cook a smaller loaf of bread. But automation requires an investment to...
Shrinkflation, sure - that's easy to do and it doesn't cost the restaurant much of anything to put fewer fries in a bag or cook a smaller loaf of bread. But automation requires an investment to design, implement and run. A business needs to make a decision as to the ROI of that investment. The higher the labor cost that they're replacing, the better the ROI on the automation investment and the more likely they are to eliminate those jobs. Replacing a $7.25/hr worker with a $5k (+ongoing maintenance) kiosk might be a more difficult business decision than replacing a $20/hr worker with one.
According to a working paper by Michael Reich and Denis Sosinskiy of the Institute for Research on Labor and Employment at the University of California, Berkeley, raising the minimum wage for fast-food workers to $20 led to an average pay increase of 18 percent per worker but did not reduce fast-food employment. Prices did go up, with some variation between chains and menu items, but the average increase of around 3.7 percent (“about 15 cents on a $4 hamburger,” as the Reich and Sosinskiy put it) was marginal. The researchers estimate consumers absorbed almost two-thirds of the increased costs.
Reich and Sosinskiy’s study should take some of the wind out of the fast-food industry’s argument of choice whenever any jurisdiction anywhere proposes a minimum wage increase. Virtually whenever legislators make a serious proposal, industry backers — like the auxiliaries for any low-wage industry in the United States — consistently invoke the threat of lost jobs, concealing their own distaste for paying people more behind concern for the working class.
I think that menu prices aren't enough to go on. There are other less-obvious ways that costs get passed to consumers.
On the labor side of things, I see that many fast food and to-go restaurants in SF have switched to self-service kiosks or some automation: Super Duper, The Melt, every boba place I've been to, etc. And it's hitting nicer, not-fast-food places too: I notice a beer garden in Oakland—Drake's Dealership—has a self-ordering system where you scan a QR code at your table to order; you then close your own tab on your phone. There's a similar system at the nice cozy wine bar I like going to in my neighborhood. I noticed these places aren't hiring less staff per se, but they're shifting their staff allocation toward operations away from service.
As for automation, that is going to come anyways. You would have to pay very underpaid wages to be able to compete with just having a kiosk that you only have to pay maintenance every now and then (and an up front fee) rather than continuous wages every hour you are operating.
Things like shrinkflation and automation - anything to pad profits - would happen anyway. It's not like these restaurants were operating on so little profit that they had to do those things just to stay open.
Not sure what makes you say that. Restaurants notoriously operate on razor thin margins in most cases. They mostly rely on high margin items like beverage sales to stay afloat, because food sales barely turn a profit in most places. Their biggest expense is also labor. The only reason they'd do heavy automation and shrinkflation is if their competitors are also doing it, because generally customers don't like those things, and it would hurt them on the competitive marketplace.
There are many industries where margins are huge and the owners can skim huge amounts of profit off the top, and any cost increase can easily be absorbed by them. Restaurants are generally not one of those industries.
The hard, black and white truth is that paying another person to order, cook, and serve your food, then clean up after you is an expensive luxury, that in the last few decades, the average person has taken for granted as just a normal every day way to live, and that can only exist with extremely cheap labor.
Personally I'd rather restaurants continue to raise their prices to whatever it costs to pay their staff a fair wage. That means a lot of restaurants go out of business because people can't afford to eat out as often, but I also don't necessarily think that's the worst thing in the world in the long run.
I think this is a very important and often overlooked aspect of this whole thing. When I was growing up, dining out was a luxury. We were on the lower end of a middle-class family and eating out was a treat, something we only did about once a month. Nowadays, you have people who never cook and rely on takeout for all of their meals, but expect it to somehow be cheap despite the fact that they're paying for someone to do all the work for them. It's actually pretty incredible that it's as cheap as it is (in some cases, anyway).
I read online about people who never cook for themselves, but I have never met one in real life. I grew up same as you, with eating out being a luxury. When I was young, it was possible maybe once or twice a week. When I was older, and when I was on my own, it was attainable almost never. My family is above the median income in my city according to the census bureau. This begs the question: why the change in affordability in dining? Restaurants in 2004 could set their prices such that an above median family could afford it a few times each week. Apparently restaurants in 2024 have to price their menu such that the same family can only eat out once or twice a month. What changed?
One of the biggest markup restaurants in the US have is on wine. It is pretty standard to have at least a 100% markup above the exact same bottle in a wine shop. Usually 200 to 300% is more common. I have also seen bottles above 400% markup. I’ve now been living in France for a few months. That same markup does not exist here. Of course there is a small markup on wine, but nothing close to even 100%. And I can assure you that the food is not outrageously marked up instead. If all these restaurants can survive and thrive here in France without outrageous prices, why can’t they do the same in the USA?
I am sure there is some nuance I don’t understand, but it feels like restaurants and business owners are lying through their teeth to try and squeeze more blood from the stone.
France and the US are extremely different places economically. Free healthcare and other social programs make it so that you don't need to make nearly as much to have a livable life as you do in the US.
The restaurant industry is one of the most competitive there is, with tons of small businesses. The people who own restaurants are not generally living large and enjoying massive profits from their businesses. They're usually scraping by and under the constant threat of bankruptcy, because as a luxury good, the service they provide is the first to go in hard economic times. Their customers also tend to be more price sensitive than almost any other commonly engaged with industry. If a steak costs 35 dollars instead of 30, you can just not eat that steak and cook one at home instead. If you need gas however, it doesn't matter if that gas is $2.50 a gallon or $4.00 a gallon, you're getting gas.
I promise you, if a restaurant was just raising it's prices out of line with it's competitors out of pure greed, that restaurant would very quickly cease to exist.
I don't think they're necessarily lying, considering how often restaurants fail here in the US. Something like 60% of independently-run restaurants fail within the first three years and 80% within the first 5 years. So it's not just talk, it's actual business failure. I don't know a lot about the P&L of restaurants in Europe, but I'm familiar with it in the US. I imagine it has something to do with some combination of these:
I think attributing food costs to regulation in the US is not good for this comparison -- EU food regulations are generally much stricter than in the US. Food costs vary quite a lot within the EU, of course, but if you're blaming raw food costs on regulation in the US than one would expect raw food to be more expensive in EU countries.
I also don't think it's reasonable to say commercial rent is more expensive in the US compared to Europe without backing it up statistically. In both places, this is highly regional and even dependent on location within something like a city. It would be exceptionally easy to cherry-pick examples to make the point in either direction, so I think actual stats are necessary there.
Labor costs and health and safety regulations are also things in Europe, and minimum wages are generally quite a bit higher in European countries that have them compared to the US (though California is probably an exception there, based on this article, the rest of the US is not California). I don't think it makes sense to attribute a difference in the viability of running a restaurant in the US vs France to these things when they are factors in both places, unless you have evidence showing that these costs are significantly higher in the US as a whole.
I'm also not super familiar with the French restaurant industry, so I don't know what's at play there that makes it different from the US (where, indeed, the failure rate is very high for independent restaurants and the market can be pretty brutal in places). So I can't shed light on that. But I don't think these factors are likely to play the major difference if there is one.
I'm not that old and eating out was a luxury when I was a kid too. I'm not exactly sure what changed that, though. It seems to me that there was a point in which fast food workers must have been paid so poorly that the cost of food at fast food restaurants was incredibly low, which would be one explaination as to why foodservice operations remain with razor-thin margins. But it doesn't really explain why it kept going down to begin with. Perhaps fast food grew very quickly and the extreme competition caused a price war? Or maybe it has something to do with how most of the labor in these kinds of restaurants got moved into central kitchens where machines do them?
Or alternatively they'll shift to different layouts that provide other efficiencies. A lunch counter is a way more efficient use of space than a bunch of two tops filled with individuals eating lunch, and at the same time the service turnaround can be a lot higher with the diners all in view at all times. I don't have any problems with automation, but it also feels like an expensive way to keep doing what we have been doing, rather than changing our built environment.
I've often thought that in cities, something like an adult meal plan would be super useful.
Something like a place that you pay a monthly subscription to and you can go to a cafeteria, or network of cafeterias to eat healthy, but unfancy food that's easy and cheap to prepare in bulk, just like you do in college.
When I was deployed in the military, one of the nicest parts is that I never had to worry about meals. I just showed up to the mess tent, they gave me food, I ate, and I went back to doing my job.
I think that would fill a huge niche for the "never cooks meals at home" crowd, and could potentially be affordable due to economies of scale.
Personally I really want cafeterias to come back into style. Grab a tray, pull out some plates of food that are already made, take it to the checkout stand and then go sit and eat. Put your dirty dishes on a rack and have them get reused.
I basically want everything to be like the Ikea cafe; unpretentious, fast, with a focus on healthy options and pretty reasonable quality expectations.
Whole Foods has a 'chef case' that I like. It's different from the hot bar. It offers lots of healthy, tasty foods that are freshly prepared everyday: honey glazed carrots, spinach spanakopita, cranberry kale salad, grilled salmon, grilled asparagus, and so on. You can get a 'chef's plate' of 1 entree and 2 sides that's easily a meal and a half for $10–12 (in San Francisco).
I think they are able to get the prices that cheap (by SF standards) through economy of scale: there are ~16 rotating options (spanning every diet) that are prepared in large batches early in the day. It's on the buyer to reheat it in the microwave, but it matches 80–90% of the quality as something freshly prepared.
(For reference, I'd peg a frozen microwavable meal at about 20%, and a pre-packaged never-frozen prepared meal at about 60–70%.)
I do like the concept and thought about maybe someday opening something like that. But I figured that grocery stores already have that niche locked down.
There have been a couple of startups that tried things like that, with 20-25% discounts on stated prices for having pre-paid and a network of restaurants. But it never quite caught on. Getting restaurants to sign up for it was a slow process because it was a novel idea, payment processing never quite gelled to be as easy as just using a card... it just didn't quite work, perhaps because the person running it was on a shoestring budget. But if Doordash started offering a subscription service I wouldn't be surprised if people went for it.
Automation, at least, would be captured by the employment statistics that this study looked at. I don't think shrinkflation would, as it's quite difficult to directly measure, but I think the burden is on those who oppose wage increases to prove the connection there, if any.
EDIT: this was supposed to be a reply to the top-level comment but oh well.
I misread the original comment. I thought the whole thing was referring to chain restaurants, but that was only part of what they were referring to.
Shrinkflation, sure - that's easy to do and it doesn't cost the restaurant much of anything to put fewer fries in a bag or cook a smaller loaf of bread. But automation requires an investment to design, implement and run. A business needs to make a decision as to the ROI of that investment. The higher the labor cost that they're replacing, the better the ROI on the automation investment and the more likely they are to eliminate those jobs. Replacing a $7.25/hr worker with a $5k (+ongoing maintenance) kiosk might be a more difficult business decision than replacing a $20/hr worker with one.