The Terrible Economics of running a Restaurant

A new Indian restaurant had opened within walking distance of where we live. We, actually, discovered it on the day of its inauguration (Muhurta). The owner politely told us to come back the next day. We did. We were fifth in the queue on a long line outside the restaurant. A phone call came in from an acquaintance. The call was a good way to pass an hour-long wait. We would have certainly left the queue otherwise.

As I entered the restaurant, I couldn’t fathom why can’t, like airlines, restaurants charge me more for seating during such peak congestion. The reason most likely is cultural. In many parts of the world, during important days like New Year’s, restaurants have a high cover charge. But still, unlike airlines and car-sharing, they don’t have ongoing dynamic pricing.  Somehow, the patrons are happy to pay with their time than with their wallets. And that cultural aspect has terrible economic implications. A line outside might sound great but unlike airlines, a restaurant gets little more than bragging rights due to that.

Today that restaurant stands closed. And I wonder a dynamic pricing model/highest bidder model might have saved that restaurant and millions of others along with it.

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