On Monday night, Irene Li, the six-time James Beard-nominated chef and owner of Boston’s Mei Mei restaurant, did something few business owners would ever even consider: In front of an audience of more than 100 people, she opened up her books, quite literally, and went over her 2019 profit-and-loss (P&L) statement.
The hard numbers told a universally acknowledged truth about the restaurant industry: Margins are razor thin.
Last year, the critically acclaimed Chinese-American 35-seat counter-service restaurant that Li started with her brother and sister as a food truck in 2012 pulled in a net income of just $22,116, or 1.8% of a total annual income of $1.2 million.
She wasn’t sharing numbers just to share numbers, or to provide further evidence that running a profitable restaurant business is hard. “This is not about Mei Mei’s expertise,” she says.
Instead, Li, who also shared the numbers with Eater, is testing out a hypothesis: If diners really knew what impacts a restaurant’s bottom line, would they be more selective about where and how they dined? Would they have better dining experiences, too? Could opening up a dialogue between restaurateurs and diners fix what ails the restaurant industry, from wage inequality to high closure rates?
“Secrecy is overrated,” Li says. “I think that what we are increasingly realizing is that a lack of transparency only benefits the man, so to speak. In maintaining secrecy we’re actually often working against our own interests rather than for them.”
Full transparency is something Li has maintained with her employees for the past three years. Every four weeks, she shares P&L statements with her entire staff, from the dishwasher to the general manager. Each employee knows exactly how much money the business is making and what it costs to keep it running.
Li credits open-book management for allowing her to consistently raise wages and add benefits for her staff — and keep turnover relatively low at 19% versus the industry average of 73%. “It is really about making sure everyone is working on improving the business and then everyone gets rewarded by it.”
Now, she’s hoping that same level of transparency with diners can improve the dining experience.
Take sticker shock. When you’re paying $10 for avocado toast, for example, that $10 doesn’t just cover the cost of the ingredients. That price tag is covering all of the costs diners may not think about, like labor, rent, or even the toilet paper in the bathroom — all of the “invisible things” restaurants aren’t directly charging you for.
Knowing about those unseen costs opens up a bigger conversation about issues like affordability. “Even if it’s not to make you sympathetic to restaurants, I think it helps a diner understand the experience they are having and why certain choices are getting made,” Li says. “Finances really shape the whole dining experience, and if you’re not aware of it, then you’re kind of getting a very small picture of it.”
Li said that even if a diner thinks he or she shouldn’t care about what a cook gets paid, or where a restaurant sources its ingredients from, they really should. “Even if you have no moral attachment to those issues, you’re paying for it,” Li says.
“If you’re really focused on getting your money’s worth,” she adds, “you should choose restaurants that are paying for the highest possible version of their expenses.” Li wants to see diners be more selective about where they choose to dine and how they spend their money. “If we all spent the same amount of money but were more choosy with it, I feel like we would have the right number of restaurants and they would be the really good ones.”
Joshua Lewin, owner of Juliet + Company, also practices open book management at the two Boston-area restaurants, Juliet and Peregrine, he runs with his partner, Katrina Jazayeri. He calls Li a “trailblazer,” and is interested to see how diners respond to Li’s event — or if they’ll even be interested.
“This is one of the most notable Boston chefs and here she is going off into this uncharted territory,” Lewin says. “Luckily for me and others watching and hopefully for her staff and other stakeholders in her business, that’s a really positive trend with Mei Mei.”
So far, Li has been surprised in the public’s interest. One guest at last night’s event told her, “Now I understand why restaurants do certain things.”
Li adds: “That’s exactly what we want.”