Yesterday I put out a call to the restaurant industry to band together to encourage local eating. There are some natural economics behind the industry working together that helps these local businesses become more profitable through cooperation.
But what does this mean for the other 99% of us who are just looking to spend our money on something to eat?
Besides receiving a quality meal that is typically tastier, fresher, and better for you, there are also some economics behind this as well.
To understand the impact lets say you want to a pizza tonight and you take two restaurants options: one that is deeply local, one that is deeply corporate. ZaZa’s Pizza and Pizza Hut.
ZaZa:
- Sources the vast majority of their ingredients locally.
- They pay no revenue sharing or franchise fees.
- Corporate owners are local and spend their money locally.
- On average pay a higher employee wage than national competitors.
Pizza Hut:
- Buys all ingredients through national distributors.
- Pays 6.5% of all profits back to the national franchise in addition to as much as $3 million to corporate to open the franchise in addition to other fees related to running the business. (source)
- Corporate owners are not based in the state, franchise owners are not necessarily based here.
- On average pay much lower than local competitors.
In short if you spent $100 at each location roughly $95 would go back into the local economy from ZaZa. From Pizza Hut it might break $50 for a long-standing location with a local franchise owner.
That money going back into community helps pay farmers who then buy other things local with they money. It pays employees a higher wage giving more disposable income to spend in local businesses. It pays owners who are more likely to invest that money into additional local businesses. Yellow Rocket, the owner of ZaZa, now has 5 restaurants with another 2 opening this year. Same can be said for a number of additional businesses.
Again, all this without talking about the taste quality. I think few would argue that ZaZa makes a better tasting pizza than Pizza Hut. If convenience is your thing you will find no better tasting pizza delivery than Damgoode Pies, same economics as above. Both done at a cost that is very similar to their national competition.
