Are restaurants too expensive? This is a question that people all over the world always ask. And there is no good answer, except perhaps: Yes, sometimes.
The funny thing is that many of the restaurants that people think are way too expensive are actually the ones that make the least money: they’re often unprofitable. To get three Michelin stars, a restaurant must keep a certain distance between tables (i.e. fewer guests); There must be a large number of servers (thus high payroll); It has to use the best ingredients (i.e. very high food costs) and it usually has to be in a desirable area (i.e. high rents).
As a result, such restaurants rarely make much money despite the high prices: some actually operate at a loss. For this reason, many chefs have returned the stars their restaurants had received and told Michelin that they would rather operate simpler establishments.
But there are many restaurants that practice what is known as demand pricing: They charge whatever they think the market will bear. And experience has shown that if there is enough hype around a restaurant, people will pay high prices even if the food is not good.
The most widely cited example of this practice are the restaurants run in the name of Nusret, a Turkish chef whose steakhouses have attracted a loyal following of non-foodies, soccer players, gullible tourists and trend-hungry wannabes
Although his restaurant in Istanbul (terrible) has been around for a few years, Nusret only gained global recognition after he opened in Dubai (not a bad restaurant). He has since opened restaurants around the world, much to the ire of foodies and critics who are amazed that he can charge such high prices: a single steak can cost £1,000.
In London, for example, his steakhouse in Knightsbridge has been described as an “idiot magnet,” but the bad reviews make no difference because the restaurant thrives on a clientele of tourists, Arab millionaires and people who don’t read reviews. When a Nusret hamburger joint closed in New York recently, you could almost hear the critics cheering.
The steaks and burgers at Nusret can sometimes be good, but they are much, much more expensive than necessary. The difference between revenue and the actual cost of running the restaurant is a huge amount of money that is pure profit.
Foodies find this sacrilegious. But I have a slightly more philosophical take on demand pricing. If you are purchasing a designer bag, there is a good chance that the actual cost of the handbag will be around 15% of the retail price. Likewise with perfume from major designer brands. If people think this is acceptable and are happy to pay exorbitant prices, why should they crucify restaurants for adopting the same policy?
Prices in restaurants can be debated, but in one area the prices charged to customers have nothing to do with the actual cost of operation: in the so-called trendy clubs and bars, which can charge pretty much as much for food and drinks, what you want. Sometimes the overpriced bars actually have long lines of people waiting to get in so they can get ripped off.
But are they really being ripped off? In terms of normal accounting: yes. But how do you put a price on the trend or “place to be seen” factor? People who run clubs assume that a drink is worth what someone is willing to pay for it. The actual cost of alcohol is irrelevant.
That’s why I’m always careful not to judge demand prices too much. I wouldn’t waste money on a drink in a so-called trendy bar. And I think people who pay Nusret’s prices are crazy. But it’s their money and their choice. Who are you and I to decide what fair pricing is?
Even in the world of fine dining, where France once set the standard, the popularity of top-notch Japanese cuisine around the world has changed all the rules.
The best restaurants in Japan are places you and I will never hear about. They are so exclusive that they don’t give bookings to people they don’t know well. It’s very unusual for a non-Japanese to even be allowed to eat at one of them.
Since it’s almost impossible to find them, Michelin won’t list them, let alone give them stars. What works for these restaurants is that they don’t want recognition from the Western world. If you are allowed into one of these restaurants, it is assumed that you are so rich that the price doesn’t matter.
Is this just a price demand? Well, there is a certain amount of demand pricing as they are often small restaurants with a sushi counter and space is limited. But people who eat there don’t feel like they’re being cheated. This is only partly because the ingredients used are so expensive.
This is also because they are paying for the skill and experience of the chef. In a restaurant like this, a chef spends 15 years learning how to make the perfect bowl of rice. It will take just as long to learn how to cut a fish perfectly.
And then there is the chef’s instinct. In great Japanese restaurants, chefs disregard the Western notion that all fish must be absolutely fresh. They believe that fish must be aged until the chef deems it ready to eat. (It’s the same principle as aging a steak).
How does a chef know when a fish is at its best? Instinct and experience. How do you quantify that?
None of this applies to India, where there are few Japanese chefs of note. In fact, in our country, we often don’t value the chef’s skills enough when it comes to Indian food. Great Indian food is only partly about recipes. Mostly it’s all about the eye and hand of the chef. How do some chefs make soft rotis every time? How does a chef know when to add which spice? How does he come to the conclusion that the meat is marinated enough for a kebab? These are instinctive decisions, and because we don’t value the chefs who always get it right, our restaurant prices rarely reflect our appreciation for the chef’s skills.
The French understand the difference. At the top level, French food is about imagination; Skill is a given. But ask any French chef which cuisine they respect most (other than their own) and chances are they will express admiration for Japanese cuisine because of the skill of the chefs who work at the highest level.
In some ways, the West is now beginning to understand why it is worth paying so much for the skills of a Japanese chef. In London, the most expensive restaurants are now Japanese establishments, and foodies marvel at chefs who can tell when a steak is ready to be removed from the fire only by the way they look: they’ve cooked so many steaks that the sizzle now speaks to them.
In India, our most expensive restaurants are usually in five-star hotels. And with a few exceptions (e.g. Bukhara), they really aren’t worth the price. As the standalone sector explodes, you can eat better outside of luxury hotels for half the price.
This is a welcome change. The next step is for us to learn to pay for the chef’s skills, not for fancy surroundings or perceived trendiness.
But never forget the golden rule: expensive is not a synonym for good. So always be suspicious of places that charge too much money.