Macro Economics and Micro Greens
“I want people to know that prices on a menu isn’t what the restaurant takes home in their pocket.” —Jason Ruffinelli, owner Ruff House BBQ
Prices are up. It is true for housing, groceries, insurance, energy; the basics are costing us more and more. So how do we justify going out to eat when one meal out might cost us the whole day’s budget? And what does that mean for the restaurant industry, which depends on the public being willing and able to pay for meals? It used to be that an average meal out on the town might cost around $15–20 per person including drinks and tip. Not so much today.
According to a recent YouGov report, 37% of Americans are eating out less than they were a year ago and of those 69% say it is because of rising costs. But why are restaurants becoming so pricey? In essence: Things cost more when things cost more.
“The biggest price changes I have seen in the last few years would be the increases in beef, eggs, dairy products … insurance is a big one as well. Insurance for the bistro, employees and myself have increased about 18% in the last two years for me.” —Danielle Saleh, owner, Onyx Bistro in Camarillo
BREAK IT DOWN
There are four basic cost categories in a food establishment that everything fits into: food cost, labor, overhead and profit. The basic math dictates that all of these percentages need to add up to 100%; anything above that would result in a net loss to the establishment.
How do we calculate this?
Food cost
Labor
Overhead
+Profit
100% Income
We look at how much we pay for food: How much did I spend on that pound of potatoes? What was the cost per pound on a steak? Who ordered an out-of-season fruit from another hemisphere? Come on!
Next, labor costs: How much do we pay the staff: dishwashers, prep cooks, line cooks, sous chefs,exec chef, bussers, servers, bartenders, hosts, general managers?
“Electricity has been a big one—especially during peak season, which is ironic. You’d think the costs would go down when you’re using more and supporting more business, but instead, they spike. We’ve also seen an increase in gas prices for the last two years, which means our transportation costs for deliveries and vendor pickups have gone up. And the cost of farm-fresh produce has steadily risen—understandably, since many of the farmers we work with are facing their own rising costs, from labor to water. It all adds up quickly.” —Svetlana (Lala) Safir-Steele, owner, Charcuterie LA
Third, overhead. What is the rent? How much do we pay for water, electricity, gas, trash removal, insurance, legal fees, marketing, permits to operate, maintenance on equipment, paper goods… you can see how this adds up quickly.
And last and possibly least, profit. The simple way to explain your profit is to add up your expenses, divide it by the net income (all sales in a given time period) and whatever percentage is left is your profit.
EXPENSE/INCOME = PROFIT
Most restaurants can generally expect a profit margin of anywhere between 3% and 5%. Wow, that isn’t much. So, what do owners get for every $100K of revenue they take in? $3,000–5,000 assuming nothing else happens that month. My point? It is a tough business.
Now, each restaurant is different. A steak restaurant in Santa Barbara’s Funk Zone or in the hills around the San Fernando Valley will have a much higher overhead cost and food cost than a taqueria in Somis. In addition, when we compare minimum wage in California to some of the Southern states, we have a much higher labor cost.
“There’s a reason there aren’t Texas BBQ joints on every corner here. It’s a culture that takes time to build and educate the public, what we do, how we do it, and the end goal for me is everyone comes together over a tray of food and we grow as a community. You have to be somewhat crazy to want to smoke meats for 14 hours and hope people show up to eat it all.” —Jason Ruffinelli, owner, Ruff House BBQ
“The biggest challenge for me has been to keep my pricing to the customers as stable as possible and eat the losses where applicable. Trying to offer a low-cost special or signature ‘$1 wing Wednesday’ as consistent as possible to be able to reach as many consumers as possible in an effort to showcase our products, quality and craft.” —Jason Ruffinelli, Ruff House BBQ
THE CHEF’S REAL JOB
So who is in charge of figuring this out? Well, the executive chef doesn’t spend as much time as you think cooking; they are controlling those percentages, creating menus that are in season and use cuts of meat that taste great but cost less, cutting staff when business is slow, finding vendors with better prices. The overhead is fixed; you cannot go to your landlord and say “this month I think I should pay less rent because I made less money.” The only way to increase your profit is by decreasing either your labor or cost of goods. Easier said than done.
“Honestly, not raising our prices has been the hardest part in the last year. We’re constantly balancing the true cost of what we do with what people can afford. Our business depends on people’s ability—and willingness—to pay, and that’s directly impacted by things beyond our control: strikes, fires, inflation. Meanwhile, our costs don’t pause. Rent is due no matter what. Licensing and permits have to be renewed on time. Taxes don’t wait. There’s very little room for error or grace in this industry, and that pressure is always there.” —Svetlana (Lala) Safir-Steele, Charcuterie LA
”I’ve had to make tough decisions— like scaling back staffing during slower weeks, reducing how often we bring in certain seasonal items, and doing more of the hands-on work myself. I’ve also looked closely at materials and packaging. For example, I used to pay $19 per large wooden tray, but now I custom-make some sizes for nearly half that. We’ve delayed some upgrades and paused expansion plans. I do not compromise on ingredient quality—that’s the heart of what we do—but everything else gets carefully reevaluated.” —Svetlana (Lala) Safir-Steele, Charcuterie LA
BUT THE COST TO ME…
But let’s get back to what matters to the consumer: “Why is everything so darn expensive?”
Well, let’s look at just one aspect: labor. In 2016 the minimum wage in LA County was $9/hour. In 2025 it is just over $17/hour.
In 2019 and 2020 there was a staggering increase in the legally mandated minimum wage, which sounds great to those working there, but we were in the middle of a pandemic, and restaurants saw a steep decline in revenue because of state and local closures and lockdowns. California had a chance to ease the burden of owners but didn’t pause the minimum wage increase. This put restaurants out of business and in turn those people who had been making the previous minimum wage now made nothing. With a total increase in labor costs of 70.2% in 10 years, how do we make these numbers work? There are three options: fire staff, decrease quality of food (cheaper food decreases cost of goods) or raise prices. Spoiler: All three are happening.
“I wish people knew how much intention goes into every part of what we do. It’s not just about putting food on a board—it’s sourcing the right cheese from the right maker, picking up produce at dawn from the farmers’ market, wrapping and tying and prepping by hand. It’s long hours, licensing, labor, late nights and deep love. We’re not a big operation with unlimited resources. We’re a small team trying to make something beautiful and meaningful— and sustainable—in a very challenging industry. When you support a business like ours, you’re supporting that entire unseen effort.” —Svetlana (Lala) Safir-Steele, Charcuterie LA
MAKING IT ALL WORK
Alright, chef ’s hat back on. Let’s take some of the numbers and start plugging them in. This is exactly what I do in my management class at Oxnard College— prepare for your world to be rocked.
No business can sustain this, and we should not be expected to either. Here is how we fix it: cut the number of staff, decrease the quality of food and charge you more for it, pass along the 3% surcharge on the credit card to you, the consumer. A $5 hamburger is now a $15 hamburger.
“We are just a small mom-and-pop shop. Most days it is only my partner/sous chef Will and I running the entire back of the house by ourselves. From shopping, prepping, cooking, dishwashing and deep cleaning, we handle 90% of the back-of-house operations by ourselves, which is very difficult. My kitchen is very small (about a third the size of most full-service restaurants) which makes it challenging to feed 60–80 guests a time during the happy hour or dinner rush. I think if new customers knew the challenges we faced with the size of our cooking space they would understand why it can sometimes take 30–40 minutes for entrees to arrive at their tables during the dinner rush. (We only have a six-burner stove and two small ovens).” —Danielle Saleh, Onyx Bistro in Camarillo
“I don’t pay myself a living wage. I’ve never been so uncomfortable financially and have been through the wringer over this growth period. None of that matters as long as the quality and employees never suffer.” —Jason Ruffinelli, Ruff House BBQ
WHAT CAN WE DO?
Restaurant owners aren’t greedy, in fact they’re barely making it. They want to serve you the best food at a good price, they just can’t anymore. Now that you understand the struggles and the choices they have to make, please be patient during service. They have less staff working.
Owners of restaurants are doing their best, often silent about the struggles they take on, knowing that failure is sometimes inevitable, letting down their friends, family and staff. We need to understand the struggles and be better patrons, support our local restaurants and, for the love of God, tell them tell them they are doing a good job. A compliment costs nothing and makes everyone’s day better.
