restaurant food pricing

Russ Roberts asks why take-out food at sit-down restaurants is not less expensive than the sit-down prices. The assumption is that the price of food at a restaurant covers the fixed cost of operating a table. Russ wonder why those who are not eating at a table still pay those prices. Why isn’t the take-out food cheaper?

The short answer is that it is cheaper. Professor Roberts (and I am surprised he didn’t think of it) forgets that take-out food avoids the customary tipping. In America, it is customary to tip waiters. The percent is ever increasing and now sits around 20%. When I was working as a waiter, the restaurant only paid me $3.50 per hour. If that was my only pay (or even a majority of my pay) I would have never stayed. Tips supplemented my pay. In other words, customers were paying part of the input costs of dine-in directly. And this wasn’t an insignificant amount. I averaged at least $13 per hour in tips (not bad for an 18 year old). Those who purchased take-out rarely tipped, and when they did the hostess was overjoyed. There was a mini-party at the hostess station.

Those who chose to rent a table either were faced with societal shaming or by a 10-20% tip. Small purchases seemed to have a tip price floor (if the person only ordered a cup of coffee you can assume they would at least leave a dollar) but there was not price ceiling. If the waiter did an exceptional job, the individual would be guilted into even exceeding the 20% threshold. It is a risky business, going out to eat.

One commenter on Russ’ blog notes that in Europe, where tipping is not as customary, that prices of take-out are actually lower.

About christopher fisher

The blog is meant for educational/entertainment purposes. All material can be used and reproduced in any length for any purpose as long as I am cited as the source.
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