If Restaurants Are the Entertainment, They’re Going to Get a Lot More Expensive

So, restaurants have moved from being the thing you do before or after you see a show to the show. What does this shift do to the average big city restaurant’s business model?

Let’s take the example of a very good downtown New York City restaurant that’s just gotten a great review from the New York Times. They have 100 seats and an average turn time of two hours (that’s quick, but let’s also assume it’s an experienced operator). Theoretically, if they filled every seat at 6 PM, 8 PM and 10 PM, they’d do three turns, or serve 300 people a night. Staggering these tables to give the kitchen healthy pace, we’re talking about three time zones: 6-7:45, 8-9:45, 10-11:45.

If you looking at this from a reservations management perspective, it means at any fifteen minute interval you can book ~13 total seats. Say, one four-top, one five-top, and two two-tops. Assuming people want to eat at different times, this restaurant has the wind at its back.

Let’s look at two scenarios where nightly demand is 360 people. Here’s what the demand curve might look like for our theoretical restaurant historically. Some people want to eat before they go onto another activity, some people will eat in prime time, and some people eat after they’ve, say, been to the theatre:

Our restaurant is doing 226 covers or 2+ turns. A good restaurateur in NY can turn a profit at this volume.

Now let’s look at the case of the restaurant being the main event. What happens if everyone wants to eat at 8 PM?

Our restaurant is now doing 178 covers, less than two turns.

The restaurateur, whose margins are thin to begin with, has to make a change. If average check at the restaurant is steady at $50, nightly gross with the historic and new demand curves, respectively, are $11,300 and $8,900. The restaurant faces a deficit of $2,400 or 21%. Revenue per customer has to go up to compensate for the new demand curve, by $13.15/head.

So, maybe this is where the notion of restaurants as entertainment becomes dicey—or, at least, our expectations as customers have to change. The restaurant business model is based historically on the assumption that customers don’t all want to eat at the same time; a successful restaurant can do two turns a night. If diners have evolved into a more time-specific lot, more restaurants will do one turn, but many fewer will do two. Prices for eaters who do get prime time seats have to increase substantially for these restaurants to survive.

So, the entertainmentization of restaurants is good for the restaurant economy, yes. More people are spending more money on restaurants. But the new show has a price of admission, too.