We often presume to understand restaurant economics because we know what a chicken breast costs at the supermarket. “I could make this dish at home for $5,” goes the refrain. Could we? Here, Eater looks at all the costs in a popular restaurant dish to see what goes into it, and how much profit comes out.
To Patricia Howard and Ed Szymanski (2021 Eater New Guard), closing their Manhattan restaurant for the weekend makes total sense. During the week, Szymanski regularly enjoys the incredulous look on diners’ faces when he tells them, while Howard spends Saturdays replying to texts, explaining that there are no tables to be had on the weekend. Customers just can’t seem to believe that a busy hotspot like Dame can stay in business quite well without being open on Saturday nights.
It’s certainly unusual. Working in a restaurant typically means being on duty every Friday and Saturday night. Laboring while the 9-to-5 world is playing excludes being available for birthday parties or dinners with friends who don’t work in the industry. By doing the unthinkable — only opening Monday to Friday — Howard and Szymanski have been able to offer employees something like a normal life. Employees work four days a week, and even the owners only work five — and for a restaurant under a year old, it seems utterly radical.
But beyond being radical, it’s also more profitable for Dame to operate on Monday rather than Saturday.
Mondays in the restaurant business are typically thought of as quiet, while busier nights like Saturday bring in more revenue. With only 22 seats and a strong reputation (built over a series of pop-ups and collaborations, with profits funneled to charities), Dame is popular enough to be booked solid every night. There are currently hundreds on the waitlist, so filling the dining room on a Monday isn’t the challenge. Also, before eliminating weekend service, Howard and Szymanski noticed a smaller average check size on Saturdays. Weekends attract the non-repeat customers; the scavenger hunt diner who wants to visit every buzzy spot to take a picture for the gram, or the couple splitting an entrée because they’re rushing to a show or bar after. While not the main reason for the change, belligerent “Why can’t I get a table?” diners were also more frequent. One of the last straws, before the owners decided to close on Saturdays, was a guest who had no reservation, who aggressively demanded a table in the packed room, while trying to bring in a cosmopolitan from another restaurant (he had to be physically removed).
“The weekend crowd is not as fun to work for as the weekday crowd,” says Szymanski. Monday diners at Dame tend to be more industry veterans who order the whole menu and full bottles of wine. So with every seat filled, opening on Monday is more profitable than Saturday, while also affording staff and owners weekends off.
Still, it’s a restaurant with only 22 seats, five nights of service, and expensive seafood to buy. Here’s how the numbers work when it comes to the restaurant’s signature fish and chips.
Menu price: $29
Total cost to restaurant: $23.93
Food costs: $12.34
Cure (salt, sugar, lemon zest): $0.05
Batter (vodka, beer, rice flour, all purpose flour, baking powder): $0.20
Fryer oil: $1.50
Idaho russet potato: $1.75
Maldon salt: $0.01
Tartar sauce: $0.50
Lemon wedge: $0.33
Every day, the kitchen receives whole hake (about $75 for a 10-pound fish), breaks it down, then cures the filets in a mix of salt, sugar and lemon zest. This draws out moisture and seasons the fish. It’s then portioned into pieces between six and seven ounces. Fish can be cheap, if you’re a pub, ordering frozen, pre-portioned filets. However, when a restaurant prioritizes sustainability and freshness, fish is expensive. So it’s no surprise that a six-and-a-half ounce piece of Cape Cod hake see-saws between $7 and $9.
Batter — a mix of vodka, beer, baking powder, rice flour, and all-purpose flour — is made to order during service. After a dip (no flour dredging here), it’s fried until golden. Meanwhile, hand-cut russet potatoes (whose price has been fluctuating wildly and landing anywhere between $1.50 to over $2 per serving), are boiled in seasoned water, cooled, then blanched in oil for 12 to 20 minutes, and finally added to the fryer with the fish.
While no chef would be alarmed by the price of good fish, it is certainly surprising that oil for the deep fryer comprises almost 13% of the dish’s cost. That’s because cooking oil has seen some of the sharpest price increases this last year. According to the Bureau of Labor and Statistics, between December 2020 and December 2021, the cost of cooking oil rose 34 percent. Currently, it takes $150 of canola oil to fill the deep fryer at Dame. Oil darkens as it’s used, which affects the color and taste of anything cooked in it. And nothing makes fryer oil turn cloudy faster than battered food. At Dame, the oil is changed after every 100 orders, resulting in that whopping $1.50 of oil per order.
Once cooked, the fish gets a sprinkle of Maldon salt and a spritz of malt vinegar before it’s plated with a cup of tartar sauce and lemon wedge. All told, the dish runs at a 43 percent food cost, which is much higher than the restaurant’s average 26-30 percent food cost.
Labor costs: $7.97
The Dame staff cross-trains to learn every part of the restaurant, so someone might cook one day and serve the next. Everyone at Dame starts at $15/hr, plus an equal share of the tip pool (owners excluded) that works out to take-home earnings between $30 to $40 an hour. Even with those high hourly rates, labor costs land at 27.5 percent — right near the 30 percent sweet spot many restaurant operations strive for.
“Our cooks have never made so much money in their lives,” says Howard. “And most of them are only working three to four days a week.” The arrangement counters the standard economic divide between front and back of house (it wasn’t long ago that Szymanski was a line cook making sub-minimum wage, on which no one can live in New York) and the culture that chasm creates. “We don’t have the front-of-house disparity that we’ve both experienced at other restaurants,” says Howard. “This is where having a small restaurant helps. There’s nowhere for more people to go. So we have to make it work with only a couple of us on the floor.”
Fixed costs: $3.62
Commercial rent in Manhattan tends to range from $100-$200 a foot. But it easily goes beyond that for particularly desirable locations, or corner spots. Dame’s MacDougal Street location costs $9,000 a month. At 460 square feet, that’s $240 a foot. What makes Dame’s fixed costs so unusually low as a percentage of sales is that sales are so high. The restaurant does three full turns a night. In the summer, outdoor dining adds 32 more seats. This doubles capacity during the warm months, without an addition to rent or utilities. In the summer, that means fixed costs average around 10 percent of sales, which bolsters the tougher winter months, where fixed costs average about 15 percent.
“We’re very lucky that our concept has proven so popular,” says Szymanski. “But we also made the conscious decision to open a tiny restaurant, with these economics in mind — in our experience, restaurants that don’t do well financially are often running below capacity, and this leads to inefficiencies. We figured if we’re always at 100 percent capacity, we could operate with max efficiency, and the best way to get close to 100 percent capacity is open a small restaurant. Obviously this limits our revenue potential, but it makes our margins better than they would be for a larger restaurant.”
Third-party delivery and takeout costs
“The main reason we don’t offer delivery is we’re too small,” says Howard. “We can barely keep up with the number of covers we cook for each night. We don’t have extra bandwidth to offer delivery in the current kitchen.”
Szymanski is less kind, dismissing the third-party delivery industry as “manipulative scumbags.”
Profit or loss
Considering the well-paid employees, high standards of cooking, and the use of pricey seafood that pushes the dish well above the restaurant’s food cost target of 26-30 percent, it’s amazing that the fish and chips yields a 17 percent profit (Dame does even better on the squid and oyster dishes). Part of the credit goes to simply charging what is necessary for a healthy business. But Szymanski and Howard also have very low fixed costs and manageable labor costs (considering the fastidious nature of the cuisine) that, unfortunately, are not scalable beyond the small footprint of Dame.
“We’re planning on opening a larger restaurant, and we won’t have as good of margins because our labor model works for a tiny spot,” says Howard. “We know that most restaurants can’t do these same numbers.”
Margins, adds Szymanski, are not everything. “A 5 percent margin on $10 million revenue a year is more net profit than a 20% margin on $2 million revenue a year.” His math checks out. But while Szymanski and Howard know that there’s financial sense in opening a larger restaurant where they can earn higher revenue (even with lower margins), he also says that they are risk-averse — running the smaller restaurant first was important to them to get their footing. “Running a $10 million-a-year restaurant sounds like a logistical nightmare. Quality of life is much more important than profit.”
Corey Mintz, a food reporter focusing on labor in restaurants, is the author of the upcoming book The Next Supper: The End of Restaurants As We Knew Them, And What Comes Next (Public Affairs 2021)