We've all looked at the $35 price tag beside a main on the menu and wondered, where did that number come from? I could make that dish (or some rough approximation), you think to yourself, for half the price at home. Well, yes you could, assuming you're handy in the kitchen. In fact, probably for a quarter of the price.
But you'd be mistaken to conclude the other three-quarters is tidy profit. Far from it, chefs who agreed to open their books (well, partially) for this story, are making profits of 10 per cent or less on the food - perhaps $2-$3 on that $35 main.
But how do they come up with the price tag on a dish? Well, the standard approach is to take the cost of the protein and multiply it by four. But as Jeff Piper, Ben Willis and Christian Hauberg explain, it's not as simple as that. And however careful their number-crunching, none can afford to get it wrong. The future of businesses with $1 million-plus turnovers relies on it, as does their own livelihoods (in the case of Hauberg, he spoke to us before selling his restaurant earlier this month).
Restaurant consultant Tony Eldred suggested this month that restaurateurs make so little money they would be better off putting their money into a fixed deposit in the bank. Eldred, Writing in Fairfax's National Times, quoted Tax Office estimates that restaurants make five per cent profit, and Restaurant and Catering Association figures of four per cent. It's unsustainable, Eldred says, and a plunge from the 15 per cent profits in the late 1980s.
At Thirst, the Thai eatery in the Melbourne building, Jeff Piper says the standard way to work out your pricing is to weigh and price the protein first - if it's salmon, a 150g portion will cost $5. Add $1 or $2 for the other ingredients, and if you're working to 25 per cent food costs, multiply it by four, to $28, then add GST. Which means a $31 price tag on the menu for that $5 piece of salmon. Piper served this kind of food at Anise, the upmarket restaurant he ran until two years ago, when he did away with the finery and the French menu and went cheap and ethnic. At Thirst, his Thai cafe, he runs food costs quite a bit lower - charging more like $22 for a dish, including $4 in food costs.
At Pulp Kitchen, Christian Hauberg cites food costs of nearer 35 per cent. Hauberg kept things unadorned in the look of Pulp, and matched that with a simple, bistro-style menu with an emphasis on big flavours and cheaper cuts. This worked with the concept, which he felt was sorely needed in Canberra, but also had a cost benefit. Liver is not expensive to buy.
At Aubergine, one of Canberra's top restaurants, Ben Willis works with more complex dishes, and says food costs him an average 30 per cent. But he's also looking to persuade diners of the joy of cheaper cuts - not only more exciting to cook and eat, but more affordable to put on the plate. This, he says, is what's behind most restaurant trends.
''The trends in restaurants aren't brought about so much by a real desire to do what they're doing - it is headed in the best direction, but it's brought about by a series of events that are all cost-based,'' he says. He points to the latest shift to shared meals, which are faster for restaurants to put together. The disappearance of tablecloths means savings in storage, washing and ironing. The use of secondary cuts: ''That's creative chefs saying there's something out there for $2.99 a kilogram.''
Eldred says the ''no bookings'' policy is the latest of the cost-saving measures. Twenty years ago, it began with menus charging extra for vegetables and sides. Then they began ''piling'' ingredients on a plate, which allowed portion sizes to be cut. Next came secondary cuts, and hiking the price of entrees and desserts and drinks while leaving the main course prices relatively stable. Now shared plate menus and no bookings.
Willis says he doesn't crunch numbers too carefully - leaving his wife to do the accounts and let him know month to month when he's spent too much in a given area. ''I come in in the morning, I've got my head down at the bench filleting meat and that sort of stuff, so you don't have time to analyse costs. Every manual you read is you have to cost everything out, but in practice, how do you factor in wastage and labour?'' His food is labour intensive - sourdough bread made each day, fish and other meat boned out on site, and lots of detail in each dish.
Nor does he work out portion sizes by weight. ''I get no excitement over sitting down with a calculator and adding things up, so I play to my strengths and somewhere along the way my wife says, is it working out? I'll go home and she will have the numbers with a big highlighter [mark] on it and leave it for me, and I'll go, shit, okay.''
Nevertheless, Willis recites the prices of key items without hesitation; he clearly knows the costs intimately. Skate wing is one of the cheapest things he serves, at $4.99 a kilogram. Also blue mackerel, at $6.50 a kilogram. Compare that with barramundi at $33 a kilogram, which he serves with prawns. Or Cape Grim beef at $16 for 500g.
''Hospitality's about generosity; it's not about analysing everything down to the ninth degree,'' he says. ''But having been in the industry so long I guess I have a knowledge of things you just have to stay away from.'' He points to Bangalow sweet pork, no longer on the menu, given it cost him $35 a kilogram, compared with $15 a kilogram for ordinary pork. But including cheaper cuts means convincing customers to order them - and ensuring they like what they get, so they'll trust you and order them next time.
He uses the term ''menu engineering'' to describe his cost structure. This extends to a set price for two ($62) or three ($75) courses. At the weekend, he only offers a three-course menu and there's no BYO. The set price gets a mixed reaction: ''I have some people who come in here and think $75 is ridiculously expensive, and people who come in here and think it's ridiculously cheap. For some reason nobody comes in and says your pricing's about right,'' Willis says, looking bemused.
The figures Willis provided suggest a nominal main course cost of $36, with food costs averaging 30 per cent of that, at $10.80, and the biggest expense in labour. (The dish he has costed for us yields a higher profit than the average 6.2 per cent - see overleaf.)
For a restaurant that seats an average of only 60, staff is a big expense and not nearly as flexible as at cheaper places like Thirst. In the kitchen, preparation is in six sections (meat and fish; garnishes for hot; cold entrees; desserts; clean-up; and Willis plating and checking), so he needs six full-time staff in the kitchen, plus a full-timer on the floor (and eight casuals and part-timers). While award wages are less than $20 an hour for a chef, Willis and Hauberg point out that to keep good staff, they have to pay more, with top chefs paid $90,000 or more, even in Canberra.
Willis pays himself just $35,000 (for long days - 8am till midnight, six days a week) and acknowledges the equation only works because his wife earns decent money in the public service. ''It's a labour of love, it's a job, it's a hobby and it's an interest all rolled into one. You get a kick out of impressing people or cooking a good meal for people and them saying it was great.''
He also watches other costs - ''every week I kick myself for realising I could have got something cheaper somewhere else'', he says, pointing to the extraction unit over his stove, for which he has been paying $40 a fortnight to have the filters changed. But he's just discovered that for $600 he could have filters that don't need changing. But it's not always easy to find cheap options. At an upmarket restaurant, wine glasses cost $12 each and water glasses $9.
He has to feed the staff each day, and here, too, it's a juggle. ''I fed eight staff for $10 yesterday,'' he says, a broad, proud smile on his face. ''Two kilograms of chicken drumsticks, some rice and kimchi, all for the cost of $10. I was very happy with myself.''
For any restaurant, of course, no matter what pricing structure you apply to a dish, the equation only works if you get people through the door. As Willis says, if he's half full, he's losing money; three-quarters full or more, he's doing okay. At Thirst, Piper stresses numbers are the key, which means repeat customers. When he creates new dishes, he works on a profit of 10 per cent. But to translate that into a 10 per cent profit for the year, he needs an average 400 people a week through the door.
''The last couple months have been pretty dead, some restaurants have said May was the worst month since they opened,'' he says. ''March was better than last year, but it was like after Easter everyone hit a hit brick wall and no one's worked out how to get over it yet.''
Piper has the advantage of low food costs with his Thai curries and salads. But he has low menu prices as well (an average main $20-$22). He also has more flexible staffing, with only three full-timers, the rest casual and part-time. He and wife Justin Kavanagh both work part-time, making up one position between them, and together take home about $1000 a week.
But rent is a big expense, with Piper paying $2700 a week in the Melbourne building. Piper says running a restaurant is all about controlling costs, and he believes that as the cost of food, staff and other overheads has increased, restaurants are getting relatively cheaper for the customer.
He wonders whether the days of expensive fit-outs are numbered.