Demystifying Dinner: How The Restaurant Industry Makes Money (Off Us)

NYMag has put together an interesting compendium of questions and answers about how the restaurant industry makes money, sort of a FAQ for people who dine out. Here are some of the highlights:

+ If you can, splurge for wine by the bottle; it’s a much better value.

The standard formula for bottle markups is three times wholesale cost, says Estela co-owner and beverage director Thomas Carter, who prefers to mark up wines that cost him under $100 between 2.5 and 2.75 times, and those above $100 even less. When it comes to glasses, though, “loss” is always built into the price — either from overpouring or the potential for spoilage. “You’ll have better value by the bottle,” says Carter, who arrives at his glass price by the formula of 3.5 times wholesale, divided by five.

Also getting a bottle feels so festive! I never feel like I can afford it, though.

+ “’The first and last item in a category [on the menu] sell the best’”

+ What’s up with oysters? It’s like “The Walrus and the Carpenter” everywhere you look these days.

Oysters, often sold at happy hour for $1, fall under the heading of very affordable luxury, and restaurants use them as loss leaders to get diners in the door. “We make no money on them,” says MacGregor, “but people buy beer, they buy wine, they buy assorted appetizers.” And, as Esca’s Dave Pasternack points out, oysters don’t require much fuss. “They keep well, turn out consistently, and require little labor,” he says.

Reading through this reminded me of a great piece from a few years ago called “Six Rules for Dining Out: How a Frugal Economist Finds the Perfect Lunch.”

I’ve been an economist for some 30 years, and a foodie for nearly as long. In this time, I’ve learned that by applying some basic economics to my food choices, I can make nearly every meal count. I’ve also realized that a lot of the best food is cheap.

The economist-foodie in question goes on to recommend ordering against your inclination in fancy restaurants: “If it sounds bad, it probably tastes especially good … Order the ugly and order the unknown. You’ll probably get a better and more interesting meal.”

Also, check out the clientele:

I also start to worry if many women in a restaurant are beautiful in a trendy or stylish way. The point is not that beautiful women have bad taste in food. Instead, the problem is that they will attract a lot of men to the restaurant, whether or not the place serves excellent food. And that allows the restaurant to cut back on the quality of the food.

Try ethnic food at strip malls outside the city (“Low-rent restaurants can experiment at relatively low risk”) and in the suburbs. For the same reason, in NYC, stick to restaurants on crosstown streets, where rent is cheaper than on bustling avenues.

Because “competition works,” go for Thai in an area with lots of Thai choices rather than the one Indian place in town.

And ask people. Ask ask ask. Only, “if you ask people for a food tip, and their eyes don’t light up with excitement, ignore them.”

Then, when you get to the right restaurant, celebrate with a bottle of wine.

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