Originally Posted by
SlevinKelevra
Standard restaurant model: total labor costs (MW workers, subMW workers, Managers, etc) = 25-30% of total costs, and operate at ~5% margin
So , let's use some easy #s,
Total Costs = 1,000,000
Revenues= 1,052,600
Margin = 52,600
LaborCost_LOW=250,000
LaborCost_HIGH=300,000
Assume MW = 1/2 of total LaborCosts
In LaborCost_LOW that would be 125,000
In LaborCost_HIGH that would be 150,000
Let's assume that you now need to double this (to make the math easier....)
NEW:
LaborCost_LOW: 375,000
LaborCost_HIGH: 450,000
TotalCost_LOW: 1,125,000
TotalCost_HIGH: 1,150,000
To maintain a ~5% margin, ceteris paribus
Revenue_LOW = 1,184,000
Revenue_HIGH = 1,211,000
So Revenue needs to increase by ~
Either 132,000 or ~158,000
Since this place is running on ~1.05M in revenue, let's assume a ticket averages $10
They are moving then 105,000 tickets a year.
To recoup 132,000 or ~158,000 they would have to increase ticket price by
1.25$ or $1.50 (~12-15%) --- in other words, the typical amount of inflation that
restaurants face in a 5-6 year window anyways.
Now before you go bat guano crazy, consider in the last decade, ice cream has gone up in price (at least here) by about $1 (~20%) while decreasing the volume by ~25% in the container. Hence a net change per unit volume of ~47%----- Consumers weather gradual price increases far more robustly than you give them credit for if the good/service is worth "it" or is unique.