A restaurant selling goats’ brains. A problematic high-top table. And amazing insights into the structure behind restaurant profits, and how different factors interact in order to make a restaurant profitable (or not).
In this podcast, Stephani Robson from Cornell University jumps on board to help struggling restaurant owner Ronny improve his problematic “table 101” – a high-top right at the window, which just doesn’t make the same revenue as other tables.
Now, apparently, the margins in the restaurant business are small. Like, really small.
And Ronny is a smart enough business owner to know his numbers – the most important one being “spend per minute”.
That’s the amount of income, on average, that a table (or the sum of all tables) is worth in each minute. Of course, there are high times and low times, and a lot of other things that need to be taken into account (some of which are discussed in the podcast, too), but it all boils down to this:
As a restaurant owner, you want to increase your spend per minute as much as possible.
Luckily (for us – not so much for the restaurant owners), this isn’t a simple one-dimensional problem where you fiddle with one variable to increase another.
I.e. if your first thought was “just raise the price, man” – well, that’s not how this works.Unlike in maths textbooks, there is rarely THE one optimal solution to a real-life problem. Click To Tweet
Also luckily (for us and for Ronny), Stephani Robson is an expert in restaurant design and table spacing.
In the podcast, she explains the multidimensional structures behind a restaurant’s profits:
First, there is the relation between prices and seating arrangements:
E.g. if prices are higher, expectations are also higher. In the price range of a three star restaurant, customers won’t accept the same seating as in a fast food joint.
If prices are lower, a restaurant can get away with less space between tables – it can fit in more seats, which in return leads to higher profits.
And the same holds in return: More spacious seating allows for higher prices, as the expectations of customers differ.
There’s a similar relation between prices and timing:
The more time customers spend at a restaurant, the more money they are prepared to spend (and vice versa: If prices are high, we don’t enjoy feeling rushed.)
And of course, the timing and the spaces between tables are also related:
Less space, and people will feel rushed and eat faster. More space, people will take their time.
So this is a multidimensional optimization problem which looks like a neat triangle:
Prices depend on space and on the timing. Table spacing depends on timing and prices. And Duration of a visit depends on prices and seating arrangements.
And profit depends on all three of them.
(Kinda self-evident, right? The higher the prices, and the closer the tables, and the sooner people leave and tables can be offered to the next customer, the higher the profit.)
As in many optimization problems, there is not one “correct” solution – otherwise we’d only have profitable fast food restaurants, or only profitable three star restaurants.
Instead, what works or doesn’t work for a certain restaurant is a careful balance of these three factors, and also of other things.
There is room for profitable restaurants at a lot of points on this scale, but with the tiny margins, you’ve gotta get the balance right in order to stay in business.
And, as I said before, there are other factors to consider as well: e.g. how flexible your table layout is. Smaller tables are easier to fill, but could also be moved together to create one bigger table. Round tables look more comfortable, but are impossible to combine.
With all these complexities in mind (and neatly explained in the podcast), it’s no wonder that Stephani Robson says:
Restaurants don’t really sell food, they sell space.
While the above image captures the essence of the dependencies, I’ve also put the details in a more, uhm, detailed image for you:
This second diagram illustrates the main factors and dependencies that restaurants face in this area – but I’d still encourage you to listen to the podcast yourself.
It’s entertaining, and insightful, and well worth the time – I never thought I could get so excited about seating arrangements!
PS: Here’s what Stephani Robson wrote to me after reading the article you’ve just read:
You have beautifully summarized about 8 years of academic work into one entertaining piece. […] I am sorry that I have ruined restaurant experiences for you forever — you may never look at the dining room the same way again!
I love this quote, because it shows something that’s very important for The Hidden Things: If you start looking at things from a different perspective, your life will change forever.If you start looking at things from a different perspective, your life will change forever. Click To Tweet
Image: Zakaria Zayane on Unsplash