We often assume that we understand restaurant economics because we know what a chicken breast costs at the supermarket. “I could make this dish at home for $5,” goes the refrain. We could? Here, Eater breaks down all the costs in a popular restaurant dish to see what’s included and how much profit is made.
Despite the constant rumors about inflation, it’s still surprising to see that a Thanksgiving pecan pie costs $50.
While the national inflation rate has finally started to ease (down to 7.7 percent in October from a high of 9.1 percent in June), the impact on groceries has been much larger, with prices rising on the shelves 12.4 percent. For consumers, the cost of butter has risen 24.6 percent in the past year. For bakeries like Fat + Flour of Los Angeles, which were used to the wholesale prices enabled by buying 30-pound boxes, it shot up 64.4 percent, from $2.59 a pound to $4.26. Consequently, Nicole Rucker, founder of Fat + Flour and author of Dappled: Baking Recipes for Fruit LoversIt has increased the price of his apple pie from $45 to $55 this year.
It’s not all bad news though. “Holiday sales are important because if you play your cards right, you can get a flurry of sales in one go with little effort,” says Rucker. She estimates that pre-orders (no one wants to arrive at the bakery to find their special cake is out of stock) during the holidays are 10 times the normal volume. Many small businesses don’t have the cash flow to support the extra hours needed to meet the vacation volume, but there’s a secret: high-fee loans through companies like PayPal, Square, and Shopify. Rucker uses loans like these often (she currently has two, totaling $35,000 with a $5,000 fee) because, like many other small business owners, she couldn’t get a better loan from a bank. “It’s [costs] more than a bank’s interest rate, but much less than most credit cards. They are useful, but I hope the business flow can come back and we can stop using them, because they currently make whatever profit I have.”
To understand how this all works, and why Fat + Flour will only make 30 Hidden Rose apple pies this Thanksgiving, let’s look at all the costs.
menu price: $55
Total cost to the bakery: $50.07
Lunch cost: $14.60
Pie Crust: $2
Sugar and spices: $1
Tin of Cake: $1.41
“Something I’m passionate about is fruit,” says Rucker. “I love spending money on fancy fruit. Hidden Rose apples are literally bright pink on the inside. They are super juicy and tart and taste like caramel watermelon but still apple.” They are also around $43.50 per box, compared to the more commonly used Granny Smith or Pink Lady apples, which are around $35.
Committed to reusable cake pans, the bakery eschews standard aluminum for a pressed metal (engraved with its logo) that can be baked 200 times. Then there’s Plugra, a European-style brand of butter that’s 82 percent butterfat. The bakery uses conventional butter (usually 80 percent) for most products, but bakers like Rucker prefer European butter for the lamination (hand layers of dough and butter) required for pie and croissant crusts. More fat and less moisture means it melts faster and the dough retains more of the butter flavor. It’s also 36 percent more expensive than regular butter. Altogether, these cakes cost a little more than 26 percent of the cost of food.
Labor costs: $22
During the holidays, a bakery works overtime. “Overtime is 1.5 wages per hour,” Rucker explains. “It also significantly increases payroll taxes to operate in OT. Obviously, that needs to be taken into account when deciding how to achieve this. Will the order volume and profit from that be worth the stress?
In the past year, with store hours no longer constrained by pandemic closures, Fat + Flour sales have increased 60 percent. At the same time, the cost of labor has risen 19 percent. Most of that is due to the price of retention: keeping the same number of staff, but paying them more. Additionally, there has been a new cost of retail purchases of ingredients that were previously available wholesale. Throughout 2021, due to nationwide shortages, a Fat + Flour employee had to drive around Los Angeles, sometimes visiting five stores, only to find condensed milk and whole-grain crackers. This cost the bakery more in wages, more gas, which is expensive these days.
Then there’s the invisible cost of making cakes: time. Fat + Flour pie crust takes three days to make. On the first day, the ingredients are weighed, cooled, mixed into a dough, shaped into bricks, and then left to sit overnight. On day two, the dough is laminated and laminated, then left to rest again. Finally, on the third day, the dough is cut, curled, and stored. “You don’t have to do it this way, of course,” Rucker admits. “But this is how we do it so that the gluten relaxes between processes and the dough is fully hydrated before use. This process is why our pie crust shines and is actually flaky, rather than tender and crumbly.”
While wages make up 31 percent of Fat + Flour’s total sales, buoyed by more profitable items, the pie is closer to 40 percent of labor costs. It’s part of why the bakery can’t just be a pastry shop, and it’s why Rucker has to put a limit on how many pies the shop makes per day.
Fixed costs: $13.47
As a tenant with a mere 100-square-foot booth in Los Angeles’ Grand Central Market, Fat + Flour pays rent as a percentage of sales, plus a flat fee in a separate prep space. In addition to credit card charges and hosting fees to order sites like Tock, there’s also the ongoing expense of paying off the loans needed to get you through the season.
“Small businesses make vacations a reality with the help of high-interest loans. The Small Business Administration takes months to issue a decision and is based primarily on personal income. But these loans usually automatically deduct a percentage of your daily sales. They help cover the increase in the cost of goods and labor to prepare for the holidays, but they also reduce overall profit margins.” Fixed costs make up about 24.5 percent of the cost of the pie.
third party delivery
The bakery allows DoorDash delivery through Square, which passes the fee ($8 to $15) directly to the customer.
profit or loss
“I used to think that the holiday sales hold up and save the January diet season,” says Rucker. “But now I just think, how can we make some money and not burn everyone for two weeks of sales?” Rucker also likes to use the money to generate new ideas to retain sales in the new year. Fortunately, he says, “the January diet hasn’t been that strong” in the past two years, and Valentine’s Day has seen a surge in demand. He now uses January “as a development month” for a big fun Valentine’s Day project.
From his 30 Hidden Rose apple pies, for a profit of $4.93, Rucker will net $1,650, and in general Thanksgiving bake sales, Fat + Flour will barely break even. However, during the month of November, Rucker expects to sell about 8,000 cookies. And that’s what keeps the lights on: the cookie profits, which help cover the cost of the more labor-intensive cakes. There’s a small profit on the cakes, but considering the volume of time and space they require, they’re only on the menu to satisfy the creative passion of the shop’s bakers and meet consumer demand.
Still, to maintain profitability, prices have tripled in the past two years. Twice per inflation reduction, gradually making cookies smaller for more than one batch. They started at a massive 5 ounces, then went to 4 ounces last year, and again a little smaller on some of them this year. And Rucker raised the prices from $3 to $4.
“At this point, a small bakery is a community service, which is something a former business partner used to throw at me as a slight,” Rucker sighs. “But I guess I’m okay with that now and I don’t consider it an insult. This cake is something I’m making for myself. It is precious and special. I chose to make this fancy cake because it made me feel good and reminded me of why I started baking and love this business in the first place.” That his Thanksgiving pies are almost gone suggests that his community loves them too.
Corey Mintz, a food reporter who focuses on restaurant work, is the author of The Next Dinner: The End of Restaurants as We Knew Them and What Comes Next (Public Affairs 2021).