Comparison of Cost Structures of Food Stores and Eating and Drinking Places

Eating and drinking places have increased their dollar share of the total food market. They have a gross margin estimated at 2½ times that of food stores. Although gross margins for the two differ greatly because of the kinds of functions and services performed, individual operating expenses as a share of gross margin are similar. Labor, the largest expense, accounts for slightly over 40 percent of the gross margin of both type of businesses. Operating expenses as a proportion of sales tend to be lower for larger firms, indicating higher profit ratios.