Restaurateurs always say that it costs more to do business in NYC than other cities, and a new analysis and report from the Times confirms that they’re 100 percent right. Writer Karen Stabiner finds that rent, labor costs, and food costs in New York City all surpass costs in other urban areas like Los Angeles and San Francisco by quite a wide margin — with expenses sometimes double the price in New York versus major West Coast cities.
For real estate, the average restaurant rent in Manhattan and hot Brooklyn neighborhoods costs $120-per-square-foot, while LA’s priciest neighborhood averages out at $52-per-square-foot. Rent in the business district of San Francisco has gone up by 19 percent since 2007, but even then, it’s still far less than half of New York’s at $45-per-square-foot.
Everything from fresh produce to red meat is also more expensive in New York than on the West Coast. Midtown restaurant Michael’s owner Michael McCarty, who also owns an outpost of his restaurant in California, says an order of strawberries costs 44 percent less in California than it does here, with a flat priced at $65 in New York and $36 in Santa Monica. In another example, a six-ounce lamb rack costs just $8.85 for McCarty in LA — about 65 percent less than it does in NYC, where it runs $24.95.
And hiring people costs way more in NYC. The average salary for a cook in New York was less than $29,000 in 2015. In San Francisco, it was slightly above $31,000, and in LA, it was $25,300. With minimum wage going up, the margins at restaurants becomes even tighter.
So what does this mean for the restaurant scene in New York? More fast casual, quick-service chain restaurants, experts tell Stabiner. Restaurants need about a 10 percent profit margin to survive, and the rise in costs means that restaurants with multiple locations and financial cushion tend to fare better. Plus, the number of people going to full-service restaurants has gone down since the recession. Cheaper, chain options "have to be stealing from someone," one restaurant analyst tells Stabiner.
Bottom line — it’s really hard to run an independent restaurant in New York. Union Square Hospitality Group’s chief development officer Richard Coraine even ominously predicts that the city’s already "forfeited its culinary supremacy" because of the costs. "People are leaving to find their dreams elsewhere," he says. See the Times’ full, in-depth report here.