We often assume we understand restaurant economics because we know what a chicken breast costs at the supermarket. “I could make this dish at home for $5,” the refrain goes. Could we? Here, Eater takes a look at all the costs of a popular restaurant dish to see what’s in it and the benefits that come with it.
Restaurant owners typically spend a lot of time figuring out how to make ends meet: how much to charge for a dish, how to choose ingredients, how to pay staff. For years, that’s what owners Beverly Kim and Johnny Clark have done to offer the Bacon, Potato, and Scallion Stuffed Bing Loaf at their Parachute restaurant in Chicago. Fried and baked, crispy on the outside, soft on the inside, bing bread was popular – and brought in just 63 cents per loaf sold, a profit of 4.2% (all the way down from the net 10% of the restaurant). It was also incredibly complicated to make (the restaurant published the 21-page method in a unique recipe book co-authored by Kevin Pang). But, as they reopen Parachute after a renovation and two years of take-out service, Kim and Clark are removing their signature dish from the menu, not just because of the low margin — they also want to do good for their employees.
Owners believe the time is right for a major overhaul of staffing practices. They are getting rid of the sub-minimum wage, the (legal) economic framework that sustains tipping and cements fundamental problems in the hospitality industry like the front-to-back-of-the-house wage disparity and systemic biases against servers by customers. “We inherited a broken model,” Kim says. “But we have to pay attention to the new view of how work works. Until the consumer can understand the true cost of food and service, there is this disconnect between what people are willing to pay for food and what we have to charge in order to have decent wages and the benefits that create a sustainable environment for people.
If Kim and Clark want to pay their employees fairly, it doesn’t make financial sense to keep the bread bing. To understand why, it’s best to look at bread bing in two ways: first, based on pre-pandemic costs that generated a profit of 4.2%. Second, comparing that to the extra amount the restaurant would have to charge to maintain that same slim margin, while taking into account both current food cost inflation and Parachute’s plan to raise minimum wage server wages. from $9 to the minimum wage of $9. $25 which they usually earn with tips.
Pre-pandemic menu price: $15
Labor: $4.65 (31%)
Fixed: $4.05 (27%)
Food: $5.67 (37%)
Total cost: $14.37
Profit: $0.63 (4.2%)
Since Parachute opened in 2014, bing bread had been an instant staple and default starter for sharing tables, but the food cost of $5.67 was still too high for a $15 item. . The dish required so much time and space to prepare: after a month of training on the recipe, a full-time employee had to arrive early each day to produce batches of 24 orders. Even with strong overall sales, fixed costs (27%) and labor costs (31%) within recommended margins, bing’s ingredients made up 37% of his menu price, resulting in a profit. down 4.2% from 63 cents.
For Kim, bing bread was not the heart of her Parachute menu, and she intended to rotate into different Asian bread recipes like roti or milk bread. But it was a fan favorite and eventually became too emotionally important for customers to take it down. (It’s a common pitfall of successful dishes; for example, Scaramouche, a Toronto restaurant, unsuccessfully tried to get rid of a coconut cream pie that’s been on the menu since 1980.)
This reluctant commitment to bread lasted through the early days of the pandemic. For the past two years, bing bread has been available for take-out and delivery, alongside meal kits, on-the-go cocktails, fried chicken, interstate shipping via Goldbelly, spin-off Korean pizza, and of every other kingpin owners could think of. They raised the price of bing to $20, but despite the $5 jump, Kim and Clark did not see their profits increase dramatically. Labor costs also jumped to 53% of sales. The cost of food has also increased. Like many businesses, Parachute was barely breaking even.
Reopening menu price: off the menu
Note: Estimates based on Parachute’s projected goal of achieving sales where labor is equal to 40% and 27% for fixed.
If Parachute charges $22.80 ($19 + 20% service charge)
Labor: $9.12 (40%)
Fixed: $6.15 (27%)
Food: $6.50 (28.5%)
Total cost: $21.77
Profit: $1.03 (4.5%)
If Parachute charges $28 ($23.40 + 20% service charge)
Labor: $11.20 (40%)
Fixed: $7.56 (27%)
Food: $6.50 (23%)
Total cost: $25.26
Profit: 2.74 (9.7%)
Kim and Clark opened a second restaurant, Wherewithall, for service in 2021, allowing them to renovate the century-old building that housed Parachute. While the space was massively laid out in a way that most diners wouldn’t notice (ripping up the floors revealed rotting joists and 25 types of flooring), the restorers decided to make more visible changes. to prizes, increasing everyone’s salaries to reduce the need for tricks. A note on the menu indicates additional service charges, and the point is elaborated upon at checkout: “A transitional service charge of 20% has been added to all checks to move away from below minimum wage and to allow us to pay a higher hourly wage to our entire team as well as health care benefits. We call it transitional because it will take time for the restaurant industry to adjust to the true cost of food and wages.
“Textbooks would say labor is 30% of sales,” Kim says. “But this is based on working at below minimum wage. I think by paying fair labor costs the ratio is more likely our ratio which makes sense as hotel restaurants operate the same as they have labor costs works higher than independent restaurants.
Chicago’s minimum wage is $15, but for tipped workers it’s $9. A living wage in the city (for someone without children) is over $18. Kim and Clark increased house pay from $9/hour plus tips to $25/hour, while increasing staff from $14-$15/hour to $17-$18 plus benefits . (At Wherewithall, this system produced roughly the same amount for both groups when factoring in longer hours and regular overtime for the cooks.)
The changes increase the restaurant’s labor costs by 29%. Neither group made a fortune. But that means raising the standard of living for cooks, while ensuring servers still earn a living on slow nights, instead of relying on tips and the whims of customers. “Some weeks it’s so slow because of COVID,” Kim explains, “we lose money and go negative paying servers $25 an hour. But it’s about building a culture that values and validates people as professionals. And I think we’ve done that. We only lost one server last year. At the same time, a 20% service charge is effectively treated as income (and taxed as such, as opposed to tips, which are traditionally split between staff and not counted as income or wages).
The first option for restaurateurs in this position is to find a way to make the dish cheaper to produce. If they can’t afford people less, they look to downsize the method or the ingredients, hoping that customers won’t notice the difference in quality. They switch from one brand of flour to another, then bacon and butter – until the final dish no longer resembles the cherished original. Kim and Clark were unwilling to do this.
The next option is to raise prices. With food costs up 15%, on top of additional labor costs, the restaurant would have to charge $19 for bing bread, plus 20% service charge, bringing the price to 22, $80, in order to generate the same 4.5% profit they earned before the pandemic. And to be on par with the restaurant’s overall 10% margin, the dish would need to be priced at $23.40 ($28 total with service charge). “It’s hard to charge only what you need to charge when every restaurant bases its prices on below-minimum wages,” Kim says.
But raising prices is not on the table for all restaurants. At New York’s Babbo, $28 would be down for a pasta dish, which can go up to $39 (not including the $85 black truffle tajarin). But thanks to entrenched racial biases in menu prices, Kim is reluctant to charge more than $15 for this Asian-American Korean bread, regardless of the cost of ingredients and labor. (In an even starker example, a place like Eleven Madison Park may even raise prices and reap praise when it dumps tips — then reverse course, bring the tips back, and keep the prices inflated.) This discrimination by the price is “the bamboo ceiling,” she says. “Attitudes toward pricing do not reflect the true value of cooking, but American perceptions of the value of the social and economic status of cooking.”
The only option left is to remove bread bing altogether, which is where Kim and Clark landed. Although this may irritate some customers, the decision was ultimately to retain staff. With no way to mechanize the process and the hard-to-train human element, a sous chef (plus a dishwasher) had to come in the mornings when the kitchen was empty. Working alone, this cook was never really part of the crew, so there was a high burnout rate in the position. Kim and Clark often found that this was the last station a cook had in the kitchen.
The realities of the restaurant industry do not allow Parachute to produce bing bread in a way that serves everyone. Along with making great food, Kim says one of her goals is to leave the industry better than she found it. This work is not done. “We have to start somewhere to move towards a fairer system – towards better compensation for everyone,” Kim says. “If I have to make choices, like take out the bread bing, to do that, then that’s what I have to do.”
Corey Mintz, a food journalist who focuses on working in restaurants, is the author of the recently published book The Next Supper: The End of Restaurants as We Known Them, and What Comes Next (Public Affairs 2021).