Venkat Mangudi wrote [at 01:10 PM 10/11/2007] :
If you were to distribute those costs to your sales, how would you do it? You cannot, hence the term break-even. At some point in time, every business breaks even. After that, the setup cost cannot be included in calculating profit.
Sure. However, amortization schedules for setup costs in a restaurant would tend to be in the 5+ year range (I'm sure Madhu can add to that, I'm just making a WAG).
Secondly, even with operational costs and import duties, most (if not all) restaurants have high rates for drinks (not just the alcoholic kind). Try to BYOB, and the restaurant charges corkage. So what is really the operating model here? Wish I knew, or could find out...
Simple - the restaurant is charging for teh use of its premises and facilities, to the optimum extent that (they think) the market will bear.
Udhay -- ((Udhay Shankar N)) ((udhay @ pobox.com)) ((www.digeratus.com))