Americans are now spending more at restaurants than they spend at grocery stores. We know that's more expensive, but eating at a restaurant means you save time, don't have to shop, cook, or clean up, and you can eat things that are difficult to prepare at home. Meanwhile, restaurant operators must carefully calculate the price of their meals to cover costs while still attracting diners.
The restaurant business is notoriously tough, and owners have a myriad of costs ranging from health permits to commercial rent. On average, 30% of a restaurants revenues go to labor costs, 30% goes to general overhead, and 30–33% is spent on ingredients. Making a decent profit in the restaurant industry is a high hurdle. As a consumer, when eating out you’re paying for a lot more than just the food; it’s the excellent waitstaff, unique ambiance, convenient location, in addition to the delicious dish that makes for a memorable experience. In order to cover all of these costs and still make a slim profit (generally 3–5%), restaurants need to mark up ingredients on average 300%.That does not mean that every ingredient has an equal markup. Matt Hawkins did the math to show us the different markups on ingredients that go into foods such as hamburgers, omelets, burritos, pizzas, and other meals we get from restaurants quite often. Note that he uses West Coast prices. See the various comparisons at Plate IQ.