By Roberto A. Ferdman On Dec 30, 2015
If you're heading out to dinner with the family this long weekend, order some dessert. That's what we found in this February 10 piece: Economically speaking, you might be getting more bang for your buck. Desserts are not that profitable for restaurants, not only because they can't charge that much, but because it's time for you and your family to linger while each enjoying—or perhaps, more likely, sharing—a single slice of cheesecake or key lime pie. Read on to discover how restaurants are dealing with the bad economics of desserts.
If you think you're doing a restaurant any favors by ordering dessert, you might want to think again.
Dessert can be delicious. And it can be profitable, too. But generally speaking, when diners extend their meal with slices of chocolate cake, cups of ice cream, and servings of crème brûlée, it can come at restaurants' expense.
"It's hard to make money on desserts in the restaurant business today," said Tyler Cowen, an economics professor at George Mason University who has written extensively about the economics of eating out. "I don't think many [restaurants] benefit when people order them anymore."
There are many problems with dessert, but it all starts with one pretty simple truth: The restaurant industry is a place of razor thin margins, and dessert tends to offer one of the thinnest.
Food in general is tough to make money on. Restaurants have long relied on the mark-up they tack onto drinks, not grub, to boost profits. As food costs soar, that reality has only become more true, because there's a limit to how much people are willing to pay for different parts of their meal. For many mid-scale restaurants, that limit is $30 for entrees, no matter the ingredients, Todd Kliman noted recently in the Washingtonian. For desserts the ceiling is much lower, and much less flexible, says Cowen.
"Dessert needs good ingredients to taste good, but you can't psychologically convince people to pay even $20 for dessert," Cowen said. "You can't really go cheap on it, but you really can't charge extra either."
Forbes, for that very reason, noted in 2011 that dessert is often a great deal — for diners.
But it's also made serving it a growing pain for many restaurants. The cost of serving a house-prepared line of desserts includes employing a pastry chef and dedicated space in the kitchen to the craft. Some restaurants, instead of using pastry chefs, have opted to serve simpler desserts made by line cooks, while others "have given up entirely" and outsourced their sweets, according to Kliman.
Dessert is also problematic for restaurants because the course creates a bottleneck at the end of meals. At restaurants serving food in some of the country's busier cities, turnover is essential to their bottom line. Time is quite literally money.
"The more people they serve, the more revenue they get," Cowen said. "A lot of restaurant costs are fixed. Being able to serve more people, to sell them food, drinks, and especially expensive wine, is what varies."
Parties that might have finished their dinner in a little over an hour instead linger for closer to two when they opt for dessert. And they stay the extra 30 minutes while consuming only a fraction of what they did during the first part of the meal. It would be different if people ordered drinks more often alongside cake, but they often don't. It would change things if dessert wines were more popular, finer and more expensive, but they aren't, Cowen said.
"A cocktail brings in twice as much money as a dessert, and it doesn't hold up a table at the end of the meal. You have to turn the tables," Mark Bucher, who owns D.C. restaurant Medium Rare, told Kliman.
Dessert isn't, of course, problematic for all establishments. Restaurants with slower traffic, where open tables are less of a rarity, would obviously prefer to sell more food than sell no food. Higher-end restaurants, where prices are less elastic and people are willing to spend well over $20 for a dessert, aren't as affected either. It's the popular, mid-priced restaurants that don't benefit as much.
Desserts aren't going to disappear from restaurant menus. Too many people like them (rightfully so, I would say, though Cowenbegs to differ). People also expect them, which makes eliminating them a risky endeavor. The price of alienating people is probably too great, especially in the age of Yelp reviews.
But the next time a waiter is being coy about showing you the dessert menu, know why: He probably would prefer it if you and your party asked for the check instead. Unless, that is, you might be interested in another round of drinks.
Catch up on my current posts along with industry articles