Bryan Caplan  

Taking Out the Competition

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Two resolutions of the take-out paradox that I'm not buying:

1. Fairness, best expressed by Nathan Smith:

Maybe different prices for take-out and dine-in would be perceived as "unfair" by customers, and undermine business. Or maybe the restaurateurs themselves feel that would be "unfair." Perhaps there are restaurateurs out there who say to themselves, "Ah, if only I could raise prices for dine-in customers, to cover the extra expenses! But one can't sacrifice one's honesty for the sake of profit."

This fails to answer the key question: Why doesn't someone set up a high-end restaurant that only does take-out? It's hard to see anyone complaining about fairness if it's a different establishment altogether.

2. Take-out Ruins High-end Food, best expressed by Vincent Clement:

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.

This reduces the demand for high-end take-out. So not only should high-end take-out be cheaper for supply-side reasons (lower overhead and labor costs); it should if be (slightly) cheaper for demand-side reasons as well. So why isn't it?


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COMMENTS (14 to date)
Matt writes:

Selling take-out food for less will negatively affect product image. Take-out is low status.
There's no demand for it because it's not worth it- the food isn't that good. And when you're eating it in your kitchen, or in front of the tv, you only care about 2 things: price & taste. When do most people get take-out? When they're in a rush or feeling lazy. It's practical.

Also, what's on the menu? What kind of food am I getting that I can't get anywhere else for 80% less?

Where does catering and room service fit in? Is that high-end take-out?

Maniakes writes:

The second argument can be salvaged if you take into account the effect on the restaurant's reputation of people eating takeout food from the restaurant and not liking it.

Vincent Clement writes:

Matt: I would treat room service as a hybrid. The food is prepared in the same building and is delivered by hotel staff - so there is some ability to control quality, presentation and temperature.

Jesse H: Decent company and great service will not make up for poor food quality, especially in a high-end restaurant. That said, I agree with your last paragraph.

Bryan: I'll bite again. The reason high-end take-out is not cheaper is that the restaurant is charging you a 'convenience fee'. Instead of you wasting your time cooking, you are willing to pay a premium for high-end food that you can enjoy in the comfort of your home or office.

Nothing like enjoying some Roasted Lemon Salad with New Potatoes, Dodonis Feta and Roasted Almonds Tossed in Brown Butter in your sweat pants watching 24.

Dining-in you are paying an "experience premium" - the presentation, the decor, the service, the patrons (and anything else Jesse H said), in other words the experience of eating out.

Jesse H writes:

Vincent Clement,

I never once explicitly or implicitly suggested that

Great service will make up for poor food quality.
I stated that there are other factors. Think of an econometric model with multi variables. You completely misinterpreted my original post.

Nevertheless, people make purchasing decisions based on the food, prestige, fellow patrons, etc. What if a restaurant served bad food but had a trendy design, hired really attractive servers which attracted all the movers and shakers of the area. This could more than replace the fact that the establishement had bad food. Contrary to your post

Decent company and great service will not make up for poor food quality, especially in a high-end restaurant.

Remember that high-end restaurants aren't just selling food but also environment.

Richard Pointer writes:

I think there might be a reason:

What if there is actually a limit to the quality of the food that is served. Meaning that a two hundred dollar meal is remarkably close to a 25 dollar meal. Take-out might not convince you that the extra 175 bucks was worth it. It is the atmosphere that tricks you into believing that 200 dollars is a good price for the meal.

JKB writes:

There is high end take out. Only the chef comes to your home to prepare the meal. I read this was a growing trend. To have a chef or team, prepare your meal in your home.

High end restaurants sell the experience and the immediate presentation of the food. If the restaurant names the chef on the door or menu then that meal is planned to appear on your table at the peak. Throwing it in a box ruins the whole purpose of having a top line chef overseeing your meal. True a lot of so-called high end restaurants sell poor food but would you want them as take out anyway. The top line chef's goal is to do an Emril and either end up on TV or with is own brand of products. Take out just degrades the brand.

Cyrus writes:

Many restaurants will prepare an order for takeout if asked, but never advertise or promote that service. If they are not advertising the service, the consumer's lack of information about who even provides it insulates the restaurants from price competition.

David R. Henderson writes:

Take-out meals are substantially cheaper than eating in the restaurant. We systematically tip less when we pick up, or not at all. Moreover, we typically supply our own drinks at home, which reduces the cost of the meal substantially.

aaron writes:

I think my two previous comments capture the main factors:

My guess is that good business models are still in development. I think we will be seeing more in the future, and we may see lower prices for take out service, but there's a learning curve and it will take time. Krues and Muer is opening restaurants which focus more on take out (I think they may have a takeout only operation).

Another problem is that it's hard to take the leap from a traditional restaraunt to a take out only operation. Most take out is still tied to dine in a resaurant, making it difficult really focus on the take out. Good locations for dine in aren't likely to be good for takeout and a high volume takeout operation would probably interefer with the dine in operation. I think this makes it difficult to develop the knowledge base needed for a successful stand alone operation.

And more importantly, most good food needs to be eaten immediately. After a 20 drive and tranferring it to plates, it's just not the same. The temperatures aren't right, and food continues to cook while it's sitting.

Jason writes:

I think a consensus is emerging here that there just aren't enough people who want high-end take out. So, to answer Bryan's key question: Restaurateurs are simply responding to market forces. I would think that if high-end take-out were more popular you would see at least a couple restaurants that started out as mainly dine-in with a little take-out evolve into a mainly take-out operation.

Jason writes:

Even a Ruby Tuesday sandwich and fries is more enjoyable at the restaurant than at my dining room table.

Vincent Clement writes:

Jesse: I did not misinterpret your post. I totally understand what your were saying: food quality should have less weight, while other variables should have more. It was clear to me - just because I disagree with you does not mean I did not understand it.

I don't disagree that high-end restaurants offer more than just excellent food. But you are being dishonest in your reply. If the food is bad, the reviews will be bad and the word-of-mouth will be bad.

Why would the movers and shakers want to be seen in restaurant that is getting bad reviews or the word on the street is not positive? If anything, the movers and shakers would likely be more critical of the menu then your average customer off the street.

I'm willing to give a little, and agree that food quality, service, environment and so on are important in attracting customers. But poor food quality will likely mean that some customers, including those movers and shakers, may not return. And that is not good for any restaurant, regardless of how trendy the design is or how good the service is. Watch Ramsay's Kitchen

Enrak writes:

What about alcohol? Most restaurants make their money on alcohol, not the food. I think this is true even for high end restaurants. Alcohol, in effect, subsidizes the cost of the meal. For take-out food this subsidy goes away. Therefore the price to the customer remains the same.

Chuck writes:

Those of you trying to ascribe a single motive for a decision of a market are anthropomorphizing the market. A single entity *might* have a single motive, but it is nearly impossible for a market made up of numerous individuals to have a single motive because they have so many different needs.

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