Bryan Caplan  

My Take on Take-Out

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Thanks for some excellent comments on the take-out paradox. On reflection, Arnold's beverage-centric explanation seems more important than the one Tyler and I agreed on over lunch. But you be the judge:

Dine-in patrons provide an important advertising benefit for restaurant owners that dine-in patrons do not. If you see a resaurant empty during peak times, you infer that it's no good; if you see a restaurant full during off-peak times, you infer that it's excellent.

As a result, restaurants are willing to give a price break to dine-in customers to encourage them to sit down and serve as human billboards. Or in other words, dine-in customers actually double as covert employees, whose job it is to advertise the restaurant. Their implicit pay roughly matches the extra cost of the dine-in experience, bringing it into parity with the cost of take-out.


So why are high-end restaurants that only do take-out so rare? Perhaps there is a lot more variation in quality for high-end restaurants, partly because the market is thinner, leading to a smaller role for franchising.

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TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/690
The author at Modeled Behavior in a related article titled Take Out Paradox writes:
    I like the general theme but I think the advertising concept is weak. What I do think is happening is that there is an interactions based effect. People prefer to go to a restaurant where there are lots of people in part because it is more excitin... [Tracked on April 26, 2007 12:50 PM]
COMMENTS (10 to date)
Maniakes writes:

I'd expect the human billboard effect to vary with the type of restaurant, and to have steeply declining marginal value.

On the declining marginal value point, when a restaurant approaches capacity, customers start factoring in wait times to the cost of dining (waiting costs the customer, but doesn't provide value to the restaurant), and the quality of the dining experience declines as the restaurant becomes noisy and crowded. Past a certain point, additional dine-in customers drive away further customers. As Yogi Berra observed of one restaurant: "Nobody goes there anymore. It's too crowded."

But I'd expect the value curve to be different for different types for restaurants. Sushi bars, for example, need to be busy in order to appear good. Raw fish needs to be very fresh in order to be good, so sushi bars need enough customers in order to keep their stock turned over rapidly, and most customers know this and watch for busyness when choosing a place to get sushi.

Vincent Clement writes:

Human billboards? Drink profits? Talk about over complicating a simple issue.

Most high-end restaurants are high-end because of the quality and the presentation of the food they serve. They typically only use the best, freshest and most unique ingredients. Food is cooked to order and served promptly. Presentation is part of the meal. It's difficult to control the quality, temperature and presentation of take-out food.

No doubt, a good chef could create a take-out menu that differs from the dine-in menu, however, one of the reasons that take-out exists is the ability to take dine-in food with you and eat it elsewhere. Does an already stressful kitchen need the additional stress of dealing with two menus?

Curt Gardner writes:

I agree with Vincent. A big part of the 'high-end' dining experience is the setting, which enhances the overall meal. That same high-end meal, once sloshed around on your backseat then eaten under the bright lights of your kitchen, just won't taste the same! Controlling presentation and setting is a huge part of the the high-end market.

The real answer: our perceptions of "quality" are skewed by social norms. There ARE in fact high quality restaurants that specialize in high quality food, and they do indeed charge a lot less than dine-in restaurants. They're called taquerias and Indian take-away joints.

mike writes:

I think you're leaving out the advertising effect of eating in a fancy restaraunt for the people there. A large benefit of eating at a fancy restaraunt is signalling that you are somebody who appreciates fine food.

Matt writes:

I can't count how many high-end restaurants I've been to where the food is marginally better than a much cheaper establishment. Comparing the two takeout possibilities, the cheaper food wins.

A good comparison would be with China. There the high end restaurants are far more elaborate in their decor, service, freshness (having indoor aquariums), etc. The expensive restaurants will offer some complex food or rare ingredients, but otherwise it is easy to find excellent food, even superior food, for less money, in a cheaper restaurant. This is reinforced by the fact that the act of spending a lot of money is more important than the food.

Jesse writes:

I believe that the true answer to why there are few high-end take-out restaurants is that many don't go to high-end restaurants just for the high quality food. I would argue that most go to high-end restaurants for the experience and the prestige. They're not there to buy just simply good food but indulge in the great service and very decent company.

I think that food quality as a variable should have much less weight than everyone assigns it. Environment, service, prestige, and fellow patrons should be given much more weight.

As such, people pay much more to dine in because they are paying for the environment. Therefore, the chance to buy the same food at the same price but with no environment provides little incentive.

Cortney writes:

Others are right when they say that the food at a take-out only restaurant wouldn't look as good, be as hot, or as fresh. In some cases it might even be more expensive for costomers, so then they might loose business. If people are going to have a restaurant they might as well have dine in too, because they would make more money.

ricardo writes:

Arnold's 'beverages' story explains why restaurants would prefer customers to dine in (with a nice bottle of wine), but doesn't explain the lack of entrants offering high-quality dine-out. Or are there barriers to entry?
Your signalling story, on the other hand, CAN explain why there are no dine-out entrants of high quality. But I just don't buy it.
I'm with those suggesting something intrinsic to the dine-in experience. Sense of occasion or self-satisfaction, fresher food...

(-_-) writes:

I remember reading this one book about the business of experiences. The reason people dine out is due to their want of not only food, but also the environment that the restaurant creates. Also, any price cuts in this case would be insignificant.

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