Chinese restaurants

[leviathan]

In western style places, the restaurant makes its money on beverages such as wine and drinks. Its on those items that the restaurants enjoy the highest markup, and where they really make their money. But, with chinese restaurants, I don't often see customers drinking anything more than tea. So, how do chinese restaurants make their money then?

[Kent Wang]

Very good question. And considering that Chinese restaurants often have menus offering up to ten times as many dishes what Western restaurants offer, how do they minimize spoilage?

[Chris Amirault]

What kind of "Chinese restaurant" are we talking about here? US Chinese-American? They rely on frozen items tossed into the fryer and premade sauces in large cans dumped on top of boiled sliced chicken pieces. Good margins there.

If you're talking about regional Chinese places that focus on good ingredients and preparation, my guess is that a careful analysis of the cost of each dish reveals that the ingredient cost is pretty minimal. After all, most Chinese cuisines involve relatively small amounts of protein per dish.

My favorite restaurant is Lucky Garden in North Providence RI. The time I've spent there (both dining and a bit in the kitchen observing) suggests to me another possible source of cost saving at some places: the entire extended family works there, prepping pea pod shoots, wrapping dumplings, and, of course, waiting tables.

[piperdown]

I agree with Chris, the ingredients aren't that expensive, so the food costs are pretty low. I did a 7 course Thai dinner party once, and I was shocked at how little it cost me to do it.

Plus, a lot of the miz for the dishes are similar, it's just the saucing that is different, and maybe a few other things, so I would assume that very little goes to waste in these restaurants, which lowers food cost as well.

[snowangel]

In the local Chinese joints in my neighborhood (all of the American Chinese variety; take out and lunch buffets are big business), yes, the ingredients are all cheap.

The other thing I've noticed is that they are true family operations, which to me signals that there is probably low payroll overhead, and who knows how much of it is under the table (meaning low or no work comp, payroll taxes, etc which can mount rapidly!).

[kiliki]

At the Chinese restaurant I frequent most, I see lots of people drinking beer (Tsing Tao). We always have a couple each as do our friends. The groups of Chinese men (business dinners, it looks like) I see there really knock 'em back.

[Gastro888]

What kind of "Chinese restaurant" are we talking about here? US Chinese-American? They rely on frozen items tossed into the fryer and premade sauces in large cans dumped on top of boiled sliced chicken pieces. Good margins there.

...

←

Not true. Many places do things from scratch because it's cheaper. Pre-made items are friggin' expensive. Things like egg roll & wonton skins are labor intensive so those are purchased (and they're relatively cheap) but everything in the back of most Chinese-American places aren't made from Sysco. The only thing that comes frozen in usually the shrimp, peas & carrot mix and scallops.

The majority of restaurants have a bunch of "under the table" practices so it's not just the Chinese ones. Yes, being part of family operation saves on labor overhead. It's the whole, "You're going to work. Period." business philosophy, you know.

[Julian Teoh]

In response to Kent's query, I'm not sure what the menus of Chinese restaurants in the States are like, but if they are anything like the corner takeaway ones here in Australia, the large number of dishes is often due to a variation in protein. For example, there will be around 8-10 standard sauces (like sweet n' sour, plum, satay, kung pao, mongolian, honey etc etc) and they will form the base of the dish with proteins such as prawn, chicken, lamb, fish, duck, pork and beef. Whilst the menus are still large, there is a huge distortion effect due to this kind of menu listing.

Also, if takeaway forms the bulk of their business, expenses like rent, waiters, dishwashers etc decrease greatly. Huge turnover also helps.

The comments about "under the table" practices are spot-on; in many Chinese places, for example near the college where I studied, there is a whole street of Asian restaurants catering to the student population. Sometimes, you would see the Asian international students working there for straight cash payments. Having said that, I am reminded of an immigration raid on the famous Doyles Restaurant at Watsons Bay, Sydney. Around 12 staff were expelled for working without legit permits. Goes to show indeed that it can happen anywhere.

[Chris Amirault]

What kind of "Chinese restaurant" are we talking about here? US Chinese-American? They rely on frozen items tossed into the fryer and premade sauces in large cans dumped on top of boiled sliced chicken pieces. Good margins there.

...

←

Not true. Many places do things from scratch because it's cheaper. Pre-made items are friggin' expensive. Things like egg roll & wonton skins are labor intensive so those are purchased (and they're relatively cheap) but everything in the back of most Chinese-American places aren't made from Sysco. The only thing that comes frozen in usually the shrimp, peas & carrot mix and scallops.

←

That's fascinating! It's my understanding that the vast majority of chicken fingers, egg rolls, szechuan sauces, and the like served in C-A restaurants here in New England come prepared from New York City. Maybe my information is shoddy, though. Of what region of the US (or elsewhere) are you speaking?

[leviathan]

What kind of "Chinese restaurant" are we talking about here? US Chinese-American? They rely on frozen items tossed into the fryer and premade sauces in large cans dumped on top of boiled sliced chicken pieces. Good margins there.

If you're talking about regional Chinese places that focus on good ingredients and preparation, my guess is that a careful analysis of the cost of each dish reveals that the ingredient cost is pretty minimal. After all, most Chinese cuisines involve relatively small amounts of protein per dish.

My favorite restaurant is Lucky Garden in North Providence RI. The time I've spent there (both dining and a bit in the kitchen observing) suggests to me another possible source of cost saving at some places: the entire extended family works there, prepping pea pod shoots, wrapping dumplings, and, of course, waiting tables.

←

I think the third point might turn out to be the most valid one.

It seems to me that a Chinese restaurant could use the same sources as other elite restaurants, but there's always going to be a barrier on how much white customers are willing to pay because its a Chinese restaurant. I've had seafood dishes such as crabs and lobsters at Chinese restaurants, so the ingredient costs should be similar to other restaurants. Yet, if this had been a French restaurant, I would have been paying more for the dish.

I think it might just come down to the fact that Chinese restaurants are willing to take lower margins and profits to squeek by. Aren't most of these restaurants run by immigrants. And, historically, immigrants have been willing to take the lower paying jobs that nobody else wanted.

[Gastro888]

What kind of "Chinese restaurant" are we talking about here? US Chinese-American? They rely on frozen items tossed into the fryer and premade sauces in large cans dumped on top of boiled sliced chicken pieces. Good margins there.

...

←

Not true. Many places do things from scratch because it's cheaper. Pre-made items are friggin' expensive. Things like egg roll & wonton skins are labor intensive so those are purchased (and they're relatively cheap) but everything in the back of most Chinese-American places aren't made from Sysco. The only thing that comes frozen in usually the shrimp, peas & carrot mix and scallops.

←

That's fascinating! It's my understanding that the vast majority of chicken fingers, egg rolls, szechuan sauces, and the like served in C-A restaurants here in New England come prepared from New York City. Maybe my information is shoddy, though. Of what region of the US (or elsewhere) are you speaking?

←

In terms of the type of restaurant, I'm talking about your classic Chinese-American carryout, not your urbanized Chinese American carryout that has non-Chinese items (ie: chicken fingers, fries, subs, apple pies, etc) on the menu. Your typical #1 combo with chicken chow mien, fried rice, egg roll and/or soup.

I am speaking of the northeast region but I am pretty sure that most Chinese American restaurants do not purchase many pre-made items. Cost and pride would be a factor. Speaking of cost, notice that many carryout places are in relatively low rent areas. That makes for a lower overhead cost. It also makes for a more dangerous situation as well but that's why the Chinese cleaver's so multi-functional.

I assume that most C-A places would rather buy those Western items because not many people order those items in relation to the Chinese items on the menu. So ordering a pack of chicken fingers makes more sense than prepping a whole chicken for say on average, one chicken finger order a day. Think about it, if you really wanted chicken fingers are you going to Popeye's or to the local C-A carryout?

(Although I must admit there is this one C-A carryout that I go to for the Spanish-style fried chicken and plantains. Even the Latinos in the area say they make the best chicken and plantains compared to the Latin restaurants! It must be the soy sauce. )

Yes, it's true that historically immigrants are the ones who are more willing to take on the unattractive jobs and work for less wages. From the Irish to the Italians to the Chinese to the Vietnamese and all across the board. It's just the truth of the matter.

PS: I wanted to add that volume is also key to profits at a C-A carryout. You might not make much on one order but if you're firing the woks all day and all night, you're gonna make money in the end.

[leviathan]

Another thing I realized that unlike most western style restaurants, Chinese places don't get the same revenue stream from desserts. Most of the time, you'll get complimentary fortune cookies(they're not indigineous to Chinese cooking but were invented in SF) or slices of fruit. Or, maybe, some almond flavored gelatin or sweet soup, but my experience have been that those are usually complimentary as well where everybody at the table gets some. With the increasing prominence of pastry chefs in today's restaurants, it would seem that that would be another major source of revenue, probably one of the higher margin food items on the menu.

I read somewhere that sweet deserts aren't that popular in Chinese cuisine in part because Chinese cooking uses sugar in its savory dishes, and that may explain why Chinese eaters don't feel they need a sweet desert.

They rely on frozen items tossed into the fryer and premade sauces in large cans dumped on top of boiled sliced chicken pieces. Good margins there.

If we're going to say that the restaurant is using a lot of under the table labor, where wages are below minimum wage, then I would think you wouldn't need to resort frozen or premade items because those are usually more expensive. Just go to a grocery store, and see how much more expensive that prepackaged meals and salads cost vs. buying it yourself and making them. You'd turn to frozen or prepackaged items to save time or labor, but if you have cheap labor, it would probably be cheaper to use your labor than buying the items almost made. Why add unnecessary expense when you can go to asian markets, and get groceries that are fresher and cheaper than their western style counterparts. Although, how those asian markets are able to do belongs in another thread.

And, as somebody already pointed out, the use of cheap, probably illegal labor is not something unique to Chinese restaurants, but something that happens in most restaurants including the famous, luxurious ones as well.

Edited March 2, 2007 by leviathan (log)

[leviathan]

At the Chinese restaurant I frequent most, I see lots of people drinking beer (Tsing Tao). We always have a couple each as do our friends. The groups of Chinese men (business dinners, it looks like) I see there really knock 'em back.

←

I'm not sure how liquor licenses work, but I've noticed a number of Chinese restuarants where they've converted the bar, which the previous restaurant probably used, into something non-alcholic. Even then, I would think the profits on the beer would be less than if you could sell wine to those businessmen.

[Busboy]

What kind of "Chinese restaurant" are we talking about here? US Chinese-American? ....The time I've spent there (both dining and a bit in the kitchen observing) suggests to me another possible source of cost saving at some places: the entire extended family works there, prepping pea pod shoots, wrapping dumplings, and, of course, waiting tables.

←

I think the third point might turn out to be the most valid one.

It seems to me that a Chinese restaurant could use the same sources as other elite restaurants, but there's always going to be a barrier on how much white customers are willing to pay because its a Chinese restaurant. I've had seafood dishes such as crabs and lobsters at Chinese restaurants, so the ingredient costs should be similar to other restaurants. Yet, if this had been a French restaurant, I would have been paying more for the dish.

←

A well-regarded and very good Chinese restaurant here in DC, Yanyu, closed down a couple of years ago and among the rumored reasons was that Americans just wouldn't pay "that much" for Chinese food, no matter how good it the food was or delightful the decor and service were.

[Gastro888]

Another thing I realized that unlike most western style restaurants, Chinese places don't get the same revenue stream from desserts. Most of the time, you'll get complimentary fortune cookies(they're not indigineous to Chinese cooking but were invented in SF) or slices of fruit. Or, maybe, some almond flavored gelatin or sweet soup, but my experience have been that those are usually complimentary as well where everybody at the table gets some. With the increasing prominence of pastry chefs in today's restaurants, it would seem that that would be another major source of revenue, probably one of the higher margin food items on the menu.

I read somewhere that sweet deserts aren't that popular in Chinese cuisine in part because Chinese cooking uses sugar in its savory dishes, and that may explain why Chinese eaters don't feel they need a sweet desert...

←

The majority of Chinese-American restaurants in the States originated with first wave of Chinese immigrants, the majority of whom were Cantonese. Since they were the first here the Chinese food that America knows stems from the Cantonese/Guangzhou cuisine. Cantonese food on the whole is not sweet and the "sweet tooth" pheonomeon isn't common among Chinese. (In America, however, things are a bit different.) In general, sweets and desserts are not common everyday occurances in that cuisine. It's usually reserved for dim sum and special occassions.

But think as if you were in their shoes - if you had to make a living, would you sell what the market demands or try to sell them what you like? Granted some may be able to succeed at doing the later and have the luxury to do so. But if you're struggling to survive here, you do what you need to do to survive. And that means adapting to market demands in order to make sales. You sacrifice authenticity for what sells.

Imagine trying to sell sweet black sesame soup as a dessert when the majority of people wouldn't accept having a sweetened black "sludge" at the end of their meal. It's authentic, it's what we would eat at home for dessert, it's sure as hell good but imagine trying to sell this at a Chinese American carryout now - imagine trying to sell it 10 years ago. Even 5 years ago!

[leviathan]

A well-regarded and very good Chinese restaurant here in DC, Yanyu, closed down a couple of years ago and among the rumored reasons was that Americans just wouldn't pay "that much" for Chinese food, no matter how good it the food was or delightful the decor and service were.

The irony is that these same customers would probably have no problems with paying a premium if we were talking about a non-Asian chef's take on Asian food, as we've seen with Jean-George V or Wolfgang Puck. They'd probably sniff their nose at authentic Thai food like Sripraphai yet are more than willing to go out and support Jean-George's interpretation of Thai street food.

Its unfortuante that not enough Americans are willing to support higher priced Chinese food, even if there's a concommitant increase in quality. No restauranter is going to be willing to risk that investment into decor and service if the market appears unwilling to support it. I guess if we ever see a breakthrough, that restaurant would have to offer dishes different than from what we've seen before.

It will be interesting to see what happens to Chinese food in america in the future, if it will ever break out of this surly bonds of this restaurant hierarchy. Will we see something similar to what happened to Japanese food in America, when Japan become a economic superpower?

[hzrt8w]

I want to comment on “where did the Chinese restaurants’ profit come from”:

I have worked in a few different Chinese restaurants in San Diego as a waiter long ago. Chinese restaurants survive primarily from volume and low cost operations. Some restaurants would offer wine and beer. The license (at least in California) is not easy to get. A full bar liquor license is even harder. Some restaurant owners would not even bother trying to get the license. Most who do would only serve wine and beer. Selecting wine is another headache. Most Chinese restaurant owners just don’t know what wines to get (type, brand), let alone how to recommend pairing to customers. So they typically stock up on some cheap ones or popular ones as they know them.

Business volume typically is done via low-pricing. For a meal that would feed a family of four, Chinese food typically would come up as a more economical choice. That tends to draw more business revenues.

As for controlling costs. One of the big expenditure is the skilled labor - i.e. the chef and other helpers. For family run business, many would use immediate family members as the labor source. There is also a darker side where owners employ the undocumented from China. I don’t think Chinese are unique in this practice, among all ethnic food restaurants. But Chinese restaurants may have the biggest job market for these undocumented workers across the country, especially that Chinese food is ever so popular.

Some of you might have all seen incidents of human cargo transportations in container ships (some died making the journey) and got intercepted by US Coast Guard. Those were only the ones you know about. What happened to those who successfully got in to the US unnoticed? Many work in the restaurant business or other sweat shops as dirt-cheap labor.

There was a good article I read on-line that talked about one of those living in such an underworld. Being an undocumented, having no Social Security Number, they know they cannot get employment like regular US residents. They pay cash to some of these employment agencies, many of which located in New York City, for match-making. One phone call: Where is the restaurant? How long is the "contract"? How much? Second phone call is to the restaurant owner. Done. Buy the next bus ticket to North Carolina or wherever that restaurant happens to be. The owner would typically pick him up and get him settled. Many owners would provide living quarters. Not a nice apartment. One would wish! Just a half-okay place to pack 4 to 5 workers in the same unit. Some of these living spaces might just be right on top of the restaurant itself. I have seen some of those.

These "chefs" or assistants don't make US minimum wage. It's all cash payment, however worked out between the owner and the worker. How is it possible? You have to consider that per China Embassy in the US, China's national per capita annual income is only US$1740 in 2006:

http://www.china-embassy.org/eng/gyzg/t268200.htm

Even half of US minimum wage would be ten times better than what they can make back in China. And no income tax! Many would live the underground lives, work 6 or even 7 days a week, 12 hours a day, for weeks on end. Until the owner no longer wants or needs them, they move on to the next one. Many of these "single" men have families and kids back in China. They would send some of what they earned back home to support their families. Most hope to get settled down and become legit at some point of their lives. And they have been mis-informed by peers or the agents who got them here that amnesty happens once every few years. If not… oh well…

Edited March 7, 2007 by hzrt8w (log)