Restaurants have to mark up the cost of food to pay for overhead and labor, but some foods have way bigger markups than others. By Sally French.
For all you frugal foodies out there, you may want to bring your own Kraft Single to sneak onto your patty the next time you visit your favorite burger joint.
Every time you opt to pay extra for cheese, you’re paying, on average, a 417% markup for that extra slice of creamy goodness, according to a study by PlateIQ.
Restaurants pay, on average, 29 cents per slice of cheese, but offer to add cheese to burgers for $1.50, on average — a 417% markup. For example, according to menu-tracking site Fast Food Menu Prices, at Shake Shack SHAK, -0.73% you’ll pay $4.29 for a hamburger, but $5.29 to make it a ShackBurger — the same thing plus cheese. And cheeseburgers aren’t even the biggest offender.
Every time you order a meat-lovers or supreme veggie pizza, you’re paying a 525% markup. Meat on pizza typically comes with a $3 additional price. But with the restaurant’s cost of 48 cents per serving, you’re paying a 525% markup. Add-on vegetables cost restaurants, on average, 32 cents, meaning the additional $2 charge for those pineapples is a 525% markup.
Another popular marked-up item is guacamole. The average cost of adding guacamole to your burrito is $2, though it costs restaurants 52 cents — a 285% markup. Chipotle CMG, -0.49% charges $1.95 extra for guacamole, though vegetarians can get guacamole for free in leiu of meat.
To be fair, every time you dine at a restaurant, you’re paying for more than just the food. About 30% of restaurant revenue goes to labor costs, 30% goes to general overhead and 30% is spent on the actual ingredients, according to PlateIQ. That means that restaurants still need to mark up ingredients by an average of 300% to break even.
And restaurants don’t exactly have it easy. U.S. restaurants in 2016 saw their weakest same-store sales in more than five years, according to industry tracker TDn2K, a trend that some analysts are calling a “restaurant recession.” The last time the restaurant industry saw declining sales all four quarters of a year was right after the financial crisis in 2009.
Often, the higher-end version can be a better deal than the standard item. The average $9 burrito has a 346% price markup. But make it a $14 deluxe burrito (we’re talking grilled tri-tip steak instead of carnitas, crema instead of sour cream, black instead of refried beans, cilantro rice instead of regular rice, and some onion and tomato), and you’re looking at just a 158% price markup.
Omelettes typically see huge price markups. A spinach omelette has a 471% markup, meaning you’re paying, on average, $8 for something that cost $1.40 to make.
And you’re definitely better off making pizza at home. A margherita pizza has a 580% markup, while a meat pizza has a 636% markup. So if you can’t cook at home, at least skip the pineapple and ham, and just order a cheese pizza. Hey, you shouldn’t be putting pineapple on pizza anyway.