The cost of a ‘free’ basket of chips at your favorite Mexican restaurant

As my loyal readers know, I’m the first one to call out restaurants for bad service, lack of management, and employees who spend more time on their phones than with the guest. To me these are real complaints that the restaurant needs to fix.

Today’s article was inspired by a person who wrote the following on social media “I recently went to a local Mexican restaurant. I know times are tough for many restaurants, but they now charge almost $4.50 for a second basket of chips for the table.” The restaurant still gives the first basket free. Instead of understanding that this restaurant they say they enjoy is struggling, this guest is looking for somewhere else to go because they don’t get as much as they want for free.

I’m starting to lose patience with guests whose constant whining is that “prices are going up” and “I don’t get anything for free anymore.” These are guests I would like to talk to directly and find out where they are getting their free gas and where they are shopping at stores that still have 2019 prices.

I don’t deny that restaurant pricing has gone up substantially over the past few years and receiving food for free is declining and will continue to do so over the next few years. Let’s look at the reasons all of this is happening so quickly.

Prices are skyrocketing

This example of free chips is a great place to start. The person who complained that the second round of chips now have a cost that is passed on to the guest doesn’t understand that the chips have a real cost to the restaurant.

I took a few minutes to calculate the cost of “free” chips to the average Mexican restaurant. A single basket of chips given to each table costs the restaurant $20,000 per year. If the average table enjoys two baskets per visit, that cost now is $40,000. I would like the person who wrote that social media post to contact me and let me know how much of their product is given for free to their customers.

Restaurants are battling rising food prices and labor costs that have gone up faster than any time in the past 50 years.

The relationship between employee wages and ‘free chips’

Again, I went back three years to review one of my clients and look at their sales vs. costs. In simple math, they did $1 million in sales and paid $420,000 in labor. Today, sales are about the same but their labor cost has jumped to $550,000. These operators have been in the industry a very long time and they know how to run a restaurant and control costs. However, when the government raises wages by 30% in less than a year there is no cutting costs to profitability.

So, I ask my social media friend: When wages increase by $2,500 per week, what choices does the restaurant have in trying to make up ground? You should be thrilled they still give you the first basket of chips for free, because at this rate I guarantee you that practice will end soon as well.

Don’t get me started on food prices

Chicken wings are something we all understand. In 2020, an order of eight wings was under $10. Today, an order of eight chicken wings is going to be upward of $13 — a 30% increase. Pre-pandemic a case of chicken wings was about $50. During the pandemic and for another year that same case of chicken wings would jump to $150 per case. While the prices have come down, they still have not hit that pre-pandemic level.

The world is changing

Free — If the only reason you go out to a restaurant is because you get something free, then your options will continue to decrease as the economy gets tighter, and wages and food prices increase. Many restaurants charge for chips and salsa, other restaurants charge for bread, and I have seen more than a few that no longer offer an infinite amount of soda or iced tea.

Service charges — I will soon be writing an article about how service charges will be changing the restaurant world. Suffice it to say not only will you not be receiving anything for free, but you can expect your bill to be 10%-15% higher in fees alone, not including gratuity.

Things are changing quickly and it’s hard for both the restaurateur and the consumer to keep up. Unfortunately, I don’t see any leveling off for at least another three to five years.

• Izzy Kharasch is the founder of Hospitality Works, a consulting firm that has worked with 700+ restaurants and small businesses nationwide. He is offering Daily Herald restaurant owners a free consultation by contacting him at Izzy@HospitalityWorks.com.