If you’re vegan, you’ve probably noticed that many vegan restaurants are more expensive than non-vegan restaurants. But have you ever wondered why?
Some of the factors that cause some vegan restaurants to seem more expensive are: lower demand and harder economies of scale, more expensive ingredients being used, and rent for prime locations.
Let’s take a closer look at each of them.
1. Lower Demand and Economies of Scale
With the rise in popularity of plant-based diets, it’s no surprise that vegan and vegetarian restaurants are becoming more common.
However, these establishments still make up a small percentage of the total restaurant landscape. This is due in part to the fact that vegans and vegetarians make up a relatively small percentage of the population. While the exact numbers vary depending on the source, it’s estimated that around 3-5% of Americans identify as vegan, and 7-10% identify as vegetarian.
This means that a vegan restaurant is catering to a smaller group of people than a traditional restaurant. As a result, vegan restaurants may have difficulty attracting enough customers to turn a profit.
Every business has fixed and variable costs associated with running that business. Fixed costs are those that do not fluctuate based on output or demand, while variable costs will change according to those factors.
Some of the fixed costs associated with owning and operating a restaurant would be items like rent, insurance, and salaries. These are all costs that must be incurred every month regardless of how many customers come through the door.
In contrast, variable costs like food ingredients will vary depending on how many meals are served. Obviously, the more customers there are, the more food will be needed and therefore the higher these variable costs will be.
The definition of Economy of Scale is a proportionate saving in costs gained by an increased level of production. Examples of how economies of scale can be beneficial include when a restaurant purchases expensive ingredients in bulk quantities and cooks them all at once.
For example, if a restaurant has higher sales revenue then it can afford to have lower prices because there will be more money coming in from customers who want good food at affordable rates.
The higher the sales revenue of a restaurant, the more the fixed costs can be diluted together with the variable cost, which means that the price of the sale can be lower.
However, in scenarios in which the income is not as high, the fixed costs still need to be paid, and so we tend to see a higher price for the meals.
This is because, in order for a restaurant to make a profit, they need to cover not only their variable costs (such as ingredients) but also their fixed costs (such as rent, utilities, and labor).
When income is low, it becomes more difficult to cover these fixed costs, and so restaurants must raise prices in order to stay in business.
This contributes to the reason why many vegan restaurants have higher prices compared to their non-vegan counterparts.
2. The Higher Cost of Ingredients
While regular produce will always be relatively inexpensive, most vegan restaurants will use specialty items that come with a higher price tag, such as plant-based milk, vegan meat, and JustEgg.
These ingredients are still higher in price, partly also because they also depend on higher demand to have an economy of scale and be able to lower their prices.
These higher costs of ingredients then need to be passed on to the final price of the dish. As a result, the final price of a vegan dish is often higher than the price of a traditional dish.
Additionally, many vegan restaurants are also very environmentally and socially conscious and will gravitate towards purchasing as many organic and fair trade products as possible. These products are often sold at a premium, and the restaurant must take this into account when setting menu prices.
Finally, it is important to remember that many animal products such as milk and meats receive subsidies from the government. This means that even though the cost of these products is much higher, the end consumer doesn’t pay their true cost of them.
Unfortunately, such benefit is not passed on to vegan ingredients. While veganism is often seen as a more expensive option, it is important to remember that the true cost of animal products is often hidden by subsidies. In light of this, veganism may not be as expensive as it initially seems.
3. Location and Rent
Rent is one of the highest fixed costs for a restaurant, which can vary greatly depending on its location. Prime locations come with a higher price tag, but offer restaurants increased exposure and easy access to their clientele.
In contrast, less convenient locations usually have lower rents; tradeoffs that allow these vegan eateries to keep their menu affordable. When looking for more inexpensive vegan restaurants, guests should consider those that may not be as conveniently located. These establishments likely made a conscious decision to pay lower rents in order to keep their menu affordable.
4. Bottom Line
Overall, there are several reasons why vegan restaurants tend to have higher prices than their non-vegan counterparts. The cost of ingredients, rent and other fixed costs all contribute to this phenomenon.
Due to the lower demand for vegan restaurants, they often have difficulty attracting enough customers to turn a profit. This is because they have to cover not only their variable costs (such as ingredients) but also their fixed costs (such as rent, utilities, and labor). As a result, vegan restaurants may seem more expensive than non-vegan restaurants.
However, it is important to remember that the true cost of animal products is often hidden by subsidies. In light of this, veganism may not be as expensive as it initially seems.
When looking for more inexpensive vegan restaurants, guests should consider those that may not be as conveniently located. These establishments likely made a conscious decision to pay lower rents in order to keep their menu affordable.