The Zagat Guide as cultural history.

The Zagat Guide as cultural history.

The Zagat Guide as cultural history.

Moneybox
Commentary about business and finance.
Oct. 20 2004 4:15 PM

The Zagat Guide Turns 25

Surveying the surveys yields a history of Manhattan dining.

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Since it started in 1979, the Zagat Survey has become the indispensable Little Red Book of choice for New Yorkers. What started as a samizdat newsletter distributed to friends has evolved into a sprawling and valuable franchise for founders Tim and Nina Zagat. Zagat now publishes restaurant surveys in 70 markets and has rolled out brand extensions to rate shopping, nightlife, hotels, plays and even movies.

The slim rectangular volumes provide an Annales-school-style history of dining in Manhattan. Plowing through the surveys, one can chart the advent of Asian fusion in the early 1990s, the Atkins-inspired return of beef, the expansion of the Mario Batali empire, and the arrival of quality cuisine in Park Slope, Brooklyn. But the reader-compiled survey also tells us something about trends affecting the food business, the New York economy, and the economy at large. In an interview yesterday, Tim Zagat—this reporter rates him a 25 for accessibility, 18 for brevity—discussed the implications of the study.

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In the past 25 years, the price of many of the necessities of urban living—co-ops, taxi fares, subway rides, admission to the Museum of Modern Art and Knicks games—has risen relentlessly, and in many cases at a rate far greater than inflation. But dining out hasn't. Between 1982 and 2004, according to figures provided by Zagat, the average cost at the same restaurant rose from $29.23 to $50.32, a 2.62 percent annual rate. Inflation rose at 3.12 percent annually in the same period. "They have been pretty much consistently below the consumer price index for 25 years," Zagat said.

So even though the food press tends to salivate over the arrival of ultra-expensive new restaurants, "the prices of your regular restaurants that people eat in day in and day out have seen very minor inflation over the whole period of time," said Zagat. "And this is true pretty much everywhere in America."

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Zagat: Restaurants now compete with Betty Crocker

Why? Zagat singles out several trends that have moderated food costs. First, dining out isn't as discretionary as we think. More women are working outside the home. And, particularly in New York, many professional service industry workers simply don't go home for dinner; they dine on their employer's dime. In other words, eating out is part of the cost of living for many, and the cost of employing for some. As a result, most dining out takes place not in high-end foodie palaces like Ducasse but in inexpensive joints that Zagat calls BATH—better alternative than home. "These restaurants have to produce food at a price that is competitive to what it would cost people to buy at prepared food places or to make food at home," Zagat said.

In addition, managerial U.S.-style capitalism has finally come to restaurants. "We've had a larger shift from European-run kitchens, to restaurants owned and run by young Americans," Zagat said. These restaurateurs, who operate in an intensely competitive business, focus intently on controlling costs.

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The largest single cost for a restaurant is the ingredients, which can amount to 30 to 50 percent of total costs. "And the inflation for ingredients has been way, way low," Zagat said. The same tightly integrated and efficient supply chains that permit computer and toy companies to hold down costs by buying or making components and products all over the world produce similar effects on food. Chefs—and diners—get more varied and better quality goods for less than they used to. A branzino caught off the coast of Italy today can wind up at your plate tomorrow—alongside Peruvian potatoes, Moroccan couscous, and a coulis of tomatoes recently picked in California, all washed down with an Australian chardonnay—at a reasonable price.

The second-biggest input for restaurants is labor. Restaurant owners can't outsource the jobs of prep cooks, busboys, and dishwashers to lower-wage countries. But thanks to porous borders and lax enforcement, they can effectively import the labor. "If you look in the back of the average restaurant today, your food is being prepared by people who are coming from South America or Mexico," Zagat said.

The potential to engage in labor arbitrage is more limited when it comes to hiring waiters and bartenders, who must generally speak English fluently. But here, restaurateurs have seized on another mega-trend: relying on entrepreneurial contractors—a category that includes waiters and others who derive their income not from hourly wages but from tips—and then pushing costs onto consumers. And tipping has also been inching up for years. (If you think the 15 percent tip you left is generous, think again. The average tip in New York in 2004 was 18.6 percent—about the national average.) This trend has helped keep the base meal prices down.

Zagat also offered a tepid endorsement about another broad theme echoing in the economy: what "Moneybox" has dubbed the Two Americas shopping. Are there two Americas—or New Yorks—dining? Are those restaurants that cater to the masses struggling to increase sales and pass along higher prices, while those that serve the ultra-rich are going gangbusters? Zagat noted that "there is a lot more money floating around the higher end." And this year's survey notes that while restaurant bills on the whole were generally muted—the average cost per meal in the Zagat survey rose a mere 1 percent—"a growing contingent of NY restaurants report averages well above $100 per person." In other words, while the masses of diners pinched pennies and ordered wisely, the well-heeled continued to enjoy their breakfast (and lunch, and dinner) at Tiffany's.