Why does my salad cost $15? The cost of running a restaurant.

It’s a hot summer day, and you’ve just spent the last eight hours working. You’re hungry, tired, and need to find a great place to relax, unwind and get a really good meal before heading home.

You walk in the door of your favorite restaurant and instantly feel the stress begin to leave. The air-conditioning is cool and the wonderful aromas from the kitchen waft out over the dining room.

As you’re seated by the window, you can finally simply enjoy the ambience. You know you won’t be rushed here – you are graciously greeted by a server – the person who is responsible to take your order, make sure it’s cooked to your desire and deliver it to you.

You order a salad – and when it comes, you’re struck by the colorful presentation. Crisp spinach, romaine, fresh corn, black beans, and red pepper are artfully arranged in a shallow bowl. With the first bite, your taste buds exclaim their joy.

Your salad is $15. Do you know where that money goes?
Here’s the average breakdown for your delicious salad in California restaurants:

Building Lease                                                            1.09
Equipment and depreciation                                     .19
Electricity, Heat and Air-Conditioning                   .98
Payroll*                                                                         3.81
Payroll taxes paid for employees                              .52
Employee Health Insurance                                       .48
Worker’s Compensation Insurance                         1.49
Liability Insurance                                                        .63
CPA, Bookkeeper, other overhead costs                 .38
Ingredients (food)                                                      4.68

Expenses                                                                  $14.23
*Payroll covers servers, hosts/hostesses, chef, line cooks, prep cooks, dishwashers, bus persons, management, etc.

Profit? Typically it’s 77 cents (roughly 5%)

THEN, the owner must pay income tax on that 5%. If your adjusted gross income is over $45,000, your federal and Calif state income tax will often be upwards of 42%. (Keep in mind that self-employment tax is 15.3%)

So…….. the owner of the restaurant takes home his paycheck for your $15 salad – a whopping 32 cents.

How do restaurant owners make a living and why do they do it?

The number of meals served. It’s important for restaurant owners to have guests at the tables during open hours. Of course, this number varies. The restaurant you see that’s packed at noon may have only a few guests at 2pm. The monthly average number of guests will determine the overall profit.

But if you own a business, you must be rich, right?

The perception is that small business owners in California must be wealthy. Most of those will tell you it’s far from the truth. Why do they do what they do? Because they have a passion.

The median income for individuals who are self-employed at their own incorporated businesses for twelve consecutive months was $56,142 in 2015. For individuals self-employed at their own unincorporated firms, this figure was $24,364. (Source: ACS)

What’s the takeaway? Next time you think your meal is pricey, take a look at what it includes.

  • Restaurants are one of the largest sources of employment in California.
  • They provide jobs, often entry level, to people who are attending college or helping to support families.
  • Restaurants create a need which is often filled by small farmers and local vendors.
  • California restaurants are the #1 generator of sales tax. Where do these sales taxes go?
    • Schools
    • Health programs
    • Public safety
    • Road repairs

Information provided by California Board of Equalization

Enjoy your salad! It’s providing much more than the tasty meal you’re eating.


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