12/16/2011

Why do dinners cost more than lunches at the same restaurant?

Well, I am glad that my book Freedomnomics mentions a couple of those explanations (I don’t have the one about the A-team). The competition explanation doesn’t seem right. You can see this phenomenon in DC with a whole row of restaurants right next to each other. Lunch might compete with “in-house cafeterias, the dirty water hot dog cart, chain restaurants, and delivery businesses,” but for dinner you are also less likely to eat right near where you work or live. Jonas M Luster has this discussion:

. . . Some things are static, such as my lease, power, linens, licenses, etc. Other things vary between lunch and dinner:

Lunch isn't prepared and served by my A-team. Many times waiters and cooks have to prove themselves during lunch before being allowed on the dinner line. This means I pay less in payroll.
Lunch doesn't usually serve a full menu. The menu is optimized for faster production and oftentimes smaller portioned. Smaller menu means less storage, smaller dishes mean less storage, and faster turnaround means less secondary storage costs (hot/warm holding, etc.)
Lunch diners spend an average of 45 minutes from entry to exit, dinner guests take over twice as long. This means faster turnaround during lunch hours, which either means more covers or less staff needed. Both saves me money.
Lunch guests don't want/need candles and expensive bottles of water. They want food. We cater to this by dropping down to the bare bone of fine dining hospitality, removing fluff.

Last, but not least, lunch is a competitive market. We compete with in-house cafeterias, the dirty water hot dog cart, chain restaurants, and delivery businesses. By pricing ourselves competitively we ensure good covers every day of the week (low day is Tuesday, high day is Thursday, by the way) and a hot, pre-stocked, kitchen for dinner. That saves us money (I don't have to pay someone to come in at 3pm and set up stocks and sauces, for example, I can have the lunch crew do those during slows and as part of their prep) and time, which in and by itself is money. . . .

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