When you visit a restaurant, you’re not just paying for the food on your plate
Much is always made of the cost of dishes, especially when they seem high, but these clickbaity headlines used by critics and influencers massively flatten the issue of restaurant economics – something that’s hugely counterproductive when the hospitality industry is in crisis.
Running a restaurant is harder than ever. Operators are contending with rising energy costs, rising food costs, expensive rents, increased labour costs exacerbated by the rise in NICs, an increase in business rates as of this April, and a VAT rate of 20% – double what it is across most of Europe. New research has also revealed that the hospitality industry has been the sector hit hardest by inflation over the last decade. As margins shrink, prices have to grow to ensure survival. A UK Hospitality report last year found that a third of hospitality businesses were operating at a loss. Another predicted that there could be almost 1000 restaurant closures in 2026.
Revealing the reality of the restaurant biz is something we’ve been trying to do since last year. As part of our #TaxedOut campaign lobbying the Government for additional support for the sector, we broke down the cost and profit of dishes from some of London’s best independent restaurants.
In a cost-of-living crisis, price comparisons are inevitable but they’re not always helpful and, to be honest, it’s been this way for a long time. In his review of Tandoor Chop House in 2017, Jay Rayner contrasts the prices of two dishes to their equivalents at Tayyabs, with just a passing reference to the fact that Whitechapel is cheaper than Covent Garden. This is just one offending article, and we admit we know it because we worked on the restaurant at the time, but sadly the media is always complaining about prices and it doesn’t do anything to help the industry. The prices in a Dubai import located in Mayfair are always going to be high, certainly higher than the ingredients cost at retail, where, of course, no VAT is charged and you have to cook the produce yourself. Whether the difference in price represents good value is a personal opinion but it’s hardly a like-for-like comparison.
Comparing prices like this in isolation doesn’t paint the full picture of what’s involved in creating a dish. The cost of rent, and how this differs across the city, the cost of paying staff fair wages, and the cost of using quality ingredients over cheaper ones, are not flagged enough. Without this, it becomes harder to have balanced conversations about the economics of a restaurant and what value actually means.
Location, category and audience have to be considered too, and Chris Pople tackles this well in his Dip In Brilliant review. You know top-end restaurants like Jamavar in Mayfair are going to be expensive; and you know somewhere more budget-friendly, like Lahore Kebab House, in a different area, using different ingredients, is going to cost less.
Yes, getting masgouf in a Park Royal industrial estate is always going to be cheaper than getting turbot at Brat, but it won’t give you the same service, atmosphere and experience. One isn’t inherently better because it’s less expensive. A wine list made up of low-intervention bottles is going to have higher price points because these wines are more expensive to make. A meal featuring two bottles of wine, 400g of wagyu, king crab and truffle (amongst other dishes) for just over £100 a head including VAT and service is what you should be expecting to pay for such luxe ingredients.
Interestingly, Rayner has written his own piece about pricing, after being inundated with comments about how much the meals he reviews cost, where he references all the additional expenses tied up in a dish, writing “Despite what cynical people like you think, restaurants are not a license to print money. They are brutally tough businesses…one of the major problems is British consumers like you who begrudge paying a reasonable amount of money for the experience.”
Speaking to us last year as part of our #TaxedOut campaign, Missy Flynn, co-founder of Rita’s said: “I spend a lot of time thinking about how we can manage our pricing to keep people coming through the door but also pay our team a meaningful wage, create a living for ourselves, and provide the value and experience that we set out to do.” It’s a catch-22: putting prices up to cover costs turns potential customers away but not putting them up enough puts the viability of the business at risk.
Just as the price of a pint crossing the £10 mark made the news, the pubs offering them at a fiver also generate headlines, and the issue gets oversimplified once again. The venues offering markedly cheaper pints as a counterpoint do so in the hope of driving footfall but this won’t be sustainable financially for the long-term.
As Ash Corbett-Collins, the chairman of Camra, told the Telegraph: “It’s not surprising pint prices are rising across London and the UK, but our pubs and breweries should not be blamed. Extreme financial pressures from the Government are forcing publicans to either raise their prices or consider closing for good… They must recognise increased employer National Insurance contributions are adding to cost pressures, commit to a fairer business rates system, lower VAT on food and drink for hospitality businesses as well as alcohol duties so publicans can keep their doors open and pub-going becomes affordable again.”
Not conflating value with cheapness and understanding the bigger picture when it comes to pricing is what the hospitality industry needs from its customers right now. And support, like reducing the rate of VAT to 10%, which is what Tom Kerridge’s VAT’s the Problem campaign is asking for, is exactly what the industry needs from its Government.
