Nationally, Restaurants Are Hurting; In Some Rural Areas, Not So Much


Are you eating out less than you did a while back? Are you, when you do eat out, going to smaller eateries? If so, you are in sync with a growing number of Americans, according to millions of restaurant tabs analyzed by American Express and the latest retail sales report on restaurant sales. Both those reports were reported by (and here).

The thinking at both Amex and BI is that this shift reflects the reality that it’s getting cheaper to eat and home and more expensive to eat out.

Aside from shifts in ingredient costs, something else that’s pushing up the cost of eating out in some locations is one (or more) increases in meal tax. Example: We yesterday bought two chicken dinners to go at Kroger. One was $3.99, the other was $5.99. The Campbell County tax amounted to $1.18 – more than 10.25% of the cost of the food!

I’ve noticed, recently, on a couple of observational visits to a local Italian restaurant that, oddly, the place was staffed with double the number of servers the evening’s traffic justified. That’s probably part of the reason why that restaurant has maintained its prices while at least one other dropped its, in line with lower ingredient cost and lower staff costs, as fewer were being kept on or assigned shifts on evenings when traffic tends to be slow.

The slowdown in business in restaurants is definitely hitting large establishments hardest, to the extent that a number of them in high-priced New York City have closed. Rental costs have been rising rapidly there, and that is affecting the housing as well as the restaurant market: You’re liable to pay $25,000-$30,000 a month for a 5,000 sq. ft. (464.5 sq. m.) That doesn’t actually sound too bad, if your average meal ticket is $15, because at that price, figuring your rent at 25% of your overhead, you have to sell “only” 267 meals daily to hit your $120,000 monthly “nut” for rent and the other 75% of your overhead.

Around here (in a small town in central Virginia), you can rent 6000 sq ft. (557.4 sq m) for as little as (or even less than) $72,000 a year. That would put the monthly rental cost for your small restaurant at $6,000. As little as $200 a day walking in the door will cover that. But keep in mind, your total “nut” for the rent/lease plus the other 75% of your overhead will run to $24,000 a year. Break that down to your monthly/weekly/daily need, and you’ll still see a pretty reasonable number.

What kind of cuisine will you offer? What do you plan to call the place?

Oh, one more thing: The sit-down restaurants around here aren’t hurting as much those in some places, in part because there’s nothing to do around here, when you want to go out, except go to one of the local restaurants!


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