The 60-40 Restaurant Rule Is Breaking—and It’s Not Because the Food Got Worse

GLP-1 drugs have reduced millions of customers’ appetites, but that’s not the only culprit in the profit crunch.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

Illustration: Inc.; Photos: Adobe Stock

There are plenty of ancient rules that are akin to gospel in certain industries. Most of them have long outlived whatever limited value and usefulness they once had. Spilling salt, whistling in the kitchen, changing menus on a full moon, or directly handing someone a knife are among the many restaurant “rules” that I had to contend with when I ran Kendall College, a large Chicago-based culinary school, which turned out hundreds of cooks and chefs every year. Modern business operators regard the vast majority of these beliefs—and the often irrational behaviors that are based on them—to be little more than superstitions.

But to date no one in the food service industry—which has plenty of its own customs and peculiarities—has ever even questioned the core proposition that for a restaurant to succeed over the long term, the ratio of food to liquor revenues needs to be about 60 percent drinks to 40 percent eats. That critical assumption is now under attack due to emerging major macro changes which are largely outside the control of even the most experienced restaurateurs. For new entrants and young entrepreneurs, the stakes are even higher, and the obstacles far more daunting.            The first-year failure rate of new restaurants is less than 18 percent, which is........

© Inc.com