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Comment by jen729w | Hacker News Reader

I'd love someone to build a tool that shows the price of that burger, say, and breaks it down to the input cost.

    Burger:    $5.00
    ----------------
    Meat:      $0.20
    Bun:       $0.05
    Staff:     $0.25
    Insurance: $4.50

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The problem with this model is that the staff and insurance are essentially fixed costs, so if they sell 500 burgers on Saturday but only 250 on Tuesday, then the insurance cost-per-burger on Tues is double what it is on Sat. Staffing might increase by an extra body or two on the busy days but won't double, so it also has a much higher cost-per-burger on Tues.

I am not a restauranteur, just a customer (and observer) but I dont think many restaurant operators understand this concept either. Many seem to be raising prices to cover higher costs-per-item due to fewer customers to spread the fixed costs over. And then the higher prices turn more people off, now prices need to be raised again. Death spiraling themselves.

Insurance is not a fixed cost. Property and auto insurance are, but liability is a percentage of sales, its fixed for a year then adjusted for next years planned sales.

"its fixed for a year"

I've heard the rule of thumb in a well run restaurant business is 30/30/30/10:

    1. 30% food costs
    2. 30% labor costs
    3. 30% overhead
    4. 10% profit margin

That’s a good rule of thumb, minus the profit margin.

Right. But how much of that 30% food cost is insurance that the farmer paid?

It's insurance all the way down.

You're getting very close to wanting to reinvent the Economist's Big Mac index: https://en.wikipedia.org/wiki/Big_Mac_Index

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