Saturday, October 20, 2012

How bribes affect everyone!

I know everyone is against bribes (except I suppose the people taking them) but we're all paying them anyway, either willingly or unwillingly. Let's try and figure out how much its really costing us!

Let's take the most basic license required for any business in India, the Trade License. The official cost of a trade license varies from Rs. 25 to Rs. 50000 depending on the type of business you're thinking of opening. The bribe one gets asked for, for the license is usually about 2 - 4 times depending on how big a restaurant you want to open. Let's assume you're asked for 1.5 L in bribe. This brings the price of the license to Rs. 2,00,000 or Rs. 550 per day. This is the cost of just one license. Add to this the fact that you have to get a food license, labor license, music & entertainment license, get harassed by the traffic cops for money and you can see how this figure suddenly climbs to a substantial amount. If a restaurant gets 50 customers a day, between Rs. 25 & Rs. 50 per person is going in "incidental expenses" for a restaurant in Bangalore. This money can be used to get drinking water to everyone in Tamil Nadu!

PS: if you want a wine, beer or a full alcohol license in Karnataka the bribe is anywhere between 10 - 18 times the cost of an actual license. a Rs. 6000 wine license can cost anywhere upto 1,00,000, beer about Rs. 50 L & a full alcohol up to Rs. 80L!!!

Wednesday, October 17, 2012

The real cost of restaurant food?

When a lot of us go to a restaurant, we’re not quite sure why the price of a plate of potato wedges or chicken wings is what it is. This usually leads us to believe that the restaurant is pricy. What most of us don’t realize is that the process of pricing a menu item is a very complicated equation. Things like the cost of raw ingredients, rent, salaries, electricity and water all make up the equation. 

Let’s take a simple example of the chicken wing; if the cost of 1 kg of chicken wings is Rs. 280, we get 4 plates from 1 kg of wings, this implies the cost per plate is Rs. 70. The other ingredients that include honey, herbs, seasoning etc. cost Rs. 15 per plate. The cost of fuel being burnt is Rs. 10 (remember the cost of commercial gas is 3.5 times the cost of domestic gas), baking the wings in the oven results in electricity of Rs. 10 being used (a small restaurant pays about Rs. 50,000 in Bangalore for electricity). The salary of the person making this is about Rs. 50 per hour & the salary of the waiter serving you the dish is about Rs. 40. All this adds up to Rs. 185. On top of this take the astronomical rents restaurants have to pay, the large sum of money that has been invested in opening the restaurant and there is the salaries of the manager & owners. Add all this and suddenly you’ll be surprised if the cost of wings cost you less than Rs. 380!

So the next time you’re tempted to complain about how expensive a plate of chicken wings is because you had to pay Rs. 250 for it. Think again!