Read other letters about this article

• Monday, June 12, 2006 01:23 PM

  $20 steak

  Regarding restaurant portions, I've often referred to the "$20 steak" issue. (My numbers may be wacky, I haven't ordered a steak in a restaurant in a while).

  As the author says, most of the cost of a steak in a restaurant is the cost of getting the plate in front of you. Say they target a 40% gross margin (I don't know what typical gross margins are. It's a thought experiment!) and they can put an 8 oz steak in front of you for $9 and they have to charge you $15 for it. That seems like a lot of money for a little steak. But maybe they can put a 16 oz steak in front of you for for $2 more, and charge you $18.35 for it. You're going to feel like you've gotten a treat and a bargain. Then they put a (cheap) potato on the plate to make it look full and bring you a plate of cheap greens and a few slices of bread and you feel like you've really had a meal and even take home a doggie bag that you forget about and throw away the next day. They've made more money, you feel more satisfied, everyone's happy except when you go to see your doctor next time.

  You see this principle EVERYWHERE. For instance, college dorms. A hundred years ago (well, 25) when I was an undergrad room and board was about half the cost of a $8000 (as I remember) annual bill. The food sucked. Now at the same school room and board is maybe 20% of a $40k bill (guessing). When you're paying that much for an education, they can improve the food service without much impacting your bottom line and the food that your darling student is getting for your big bucks had better not suck!

  —swampdog Read swampdog's other letters
  Permalink
  Flag
  Click "Submit Flag" if you feel this post is inappropriate. Explain why below if you wish.

  Cancel