How a New York City restaurant loses money on a $14 sandwich

Breaking down the food, labor, and fixed costs of Dirt Candy’s popular spinach croque-monsieur

We often presume to understand restaurant economics because we know what a chicken breast costs at the supermarket. “I could make this dish at home for $5,” goes the refrain. Could we? Here, Eater looks at all the costs in a popular restaurant dish to see what goes into it, and how much profit comes out.

Like many restaurants, New York’s Dirt Candy was a different business before the pandemic. With a staff of 35, it served only a tasting menu (plus a half-dozen a la carte items available at the bar), guests leisurely eating courses of fennel tagine, seaweed caviar with creme fraiche, or beet yakitori. “The food [at] Dirt Candy doesn’t lend itself to delivery,” owner Amanda Cohen said in the spring of 2020, unsure when she’d be able to reopen. “We would’ve had to come up with a new menu.”

That’s exactly what she did. Since July 2020, Cohen and a much smaller crew of six have produced intricate soups (fava bean bouillabaisse), salads (pomelo and watercress), and sandwiches for takeout and delivery, and opened limited dine-in service on a street patio. Now that the staff is fully vaccinated, Dirt Candy is scheduled to reopen for lunch and dinner on May 20.

Starting on the 21st, the takeout/delivery menu will only be available during the day. Here’s what it costs to make the $14 spinach croque-monsieur: a slice of country loaf topped with spinach bechamel; thinly sliced celeriac that’s been smoked and confited in olive oil; shredded gruyere; sauteed spinach; more spinach bechamel; grainy mustard; another slice of bread, smothered with a third layer of spinach bechamel; spinach puree; and more shredded gruyere, all popped into the oven until the cheese is bubbling and browning, and topped with an egg sunny side up. It’s been a popular item on Dirt Candy’s pandemic menu, but it also requires a lot of hidden work.

Menu price: $14

Total cost to the restaurant: $14.80
Profit (pickup): -$0.80 (loss)
Profit (delivery): -$2.92 to -$2.48 (loss)
Profit (outdoor dining): $0.90 (profit)

Food Costs: $3.45

Bread: $0.48
Bechamel: $0.27
Gruyere: $0.71
Celeriac: $0.34
Spinach (sauteed): $0.30
Spinach puree: $0.03
Grainy mustard: $0.05
Fried egg: $0.14
Butter: $0.03
Cornichon: $0.01
Packaging: $1.10

Overall, the business averages 20.7 percent food cost. By outsourcing bread (“Pain D’Avignon makes it way better than I ever could”) and using expensive cheese sparingly, the ingredients for this dish manage to stay just over 16 percent. Until we include packaging, a current requirement for the takeout and delivery sales on which restaurants depend. The choice of an oval container, made of biodegradable and compostable sugarcane pulp, hurtles food costs upward to 24 percent.

But the cost to make any dish at a restaurant goes beyond the food itself. There’s also paying the people who cook and serve it, owning and maintaining the equipment that enables them to do so, and, also the space in which to do it all in the first place. The price on the menu reflects the costs of operating the business; here’s how.

Labor Costs: $7

Since relocating in 2015, Dirt Candy has been one of the handful of full-service American restaurants to operate without tipping. Paying employees a livable wage, rather than allowing their earnings to be subsidized by tips, is expensive. Comparable restaurants typically operate at around 30 percent labor cost. Dirt Candy runs closer to 50 percent. Because of that, workers’ wages account for half of what customers spend on the dish.

Fixed Costs: $4.34

With the shrinking of revenue, fixed costs (rent, insurance, bank charges, POS, garbage, dishwasher, security, exterminator, hood cleaning, phone, and so on) as a percentage of sales have effectively doubled, from 15 percent to 31 percent. The $14,500 rent has not gone down. Meanwhile, there are new costs, like heating a patio. Dirt Candy’s electricity bill jumped from $2,000 in February 2020 to $6,000 for February 2021.

Third-Party Delivery and Takeout Costs

Despite all that, the croque-monsieur is almost profitable, until third-party delivery commissions. Companies charge different rates to different clients. For Grubhub/Seamless, it’s 13.05 percent plus 30 cents. That’s $2.12 on a $14 order. Instead of using Grubhub’s couriers for orders placed through its app, Dirt Candy uses Relay for delivery. Relay charges $5.50 per order, which is passed on to the customer.

For DoorDash/Caviar, it’s 20 percent for delivery, adding up to $2.80. For pickup orders, DoorDash charges 12 percent, which is $1.68.

If you order through ChowNow, which charges a flat fee of $149/month, there is no commission, so the restaurant holds on to more revenue. Like Grubhub, ChowNow uses Relay for delivery, with the $5.50 fee charged to the customer.

Profit or Loss

These numbers show Dirt Candy is currently operating at a loss when it comes to selling food. The croque-monsieur’s math applies across the Dirt Candy pandemic menu, except for cocktails, which do generate profit. Over the last year, between forgivable Paycheck Protection Program and Economic Injury Disaster Loan grants, Dirt Candy has been subsidized with about 27 percent of the projected revenue for a healthy year. It is effectively operating at a loss, with help, until economic and safety conditions allow Cohen to operate the kind of business she wants to again.

Until then, if you call in your order and pick it up yourself, Dirt Candy only loses 80 cents on the croque-monsieur. Placed through Grubhub, it costs the restaurant $2.92, and with DoorDash, $2.48.

“I think about closing at least once a week,” says Cohen, who supports the restaurant through side gigs, and is committed to making it to the other side of this cataclysm. “I don’t think the story of Dirt Candy is over. I don’t think we have done everything we are capable of doing. We get better year after year and I am always excited to see what’s going to happen next.”

What’s next is coming soon: When Cohen reopens the restaurant for indoor dining on May 20, she is raising prices to better compensate the staff she feels she failed this past year. This is a clear step forward on an issue long discussed among restaurateurs, who have argued that to pay everyone well, menu prices have to jump to a level that may scare off customers. Cohen has calculated that increase at an additional $30 for the tasting menu. She’ll be one of the first American restaurant owners to find out if diners are willing to pay the true value of a meal for which workers are fairly compensated.

“If you paid any attention to food media in 2020 you would have walked away thinking it was the year of the worker,” says Cohen. “That was the year we called restaurant workers and delivery drivers essential. We called them heroes, over and over again. We said we had their backs. Right now is when we all have to put those words into action.”

By Corey Mintz www.eater.com