When I first arrived in Israel as an immigrant, a couple of things struck me about the restaurants. First, they seemed pretty expensive. And second, the service was not very good. Eventually, I realized two things. First, there is a 17% VAT in Israel. That’s going to push up prices in the restaurant making them higher than countries with a much lower sales tax. But that’s not the interesting part.
The interesting part is the service. How does the “bad” service manifest itself? The server takes your order and comes back later with your food. Then they pretty much disappear. They almost never come back to ask if you need anything else. If you ask for water, they almost always put a pitcher down on the table because they’re not coming back to refill your water or ask if you’d like something else to drink. They don’t come back to ask you if you’re happy with the food. And when you finish eating, they rarely bring the check unless you get their attention and ask for it. Clearing the table takes a while and often the table doesn’t get cleared unless you manage to get their attention and ask for dessert.
Americans (or at least this American) can find this maddening, at least on first arriving. “The service is terrible. The waiter disappeared on me. I couldn’t get anyone to clear my table/bring me a drink/see how I’m doing/pay any attention to me!” But then I discovered something after being here for a year.
Israelis (including this new Israeli, me) linger over their meals. They like to sit and talk. Dinner is leisurely. A lot of people who are eating aren’t in a rush to get somewhere else. Meals, especially dinner, are about hanging out and talking and schmoozing and laughing. The waiter doesn’t come back because there’s no reason to. We’re here for a while. Yes, eventually, we will ask for a check. But not right this minute. I’m enjoying dinner. I’m in the middle of a conversation. Why would I be ready to pay? I’m still “eating.” Or at least enjoying sitting at the place where I ate.
And in coffee shops, it’s even stronger. People will sit and sit with one cup of coffee. Nobody bothers them. The culture says it’s OK, just like it’s OK at dinner not to eat and run. So the service is actually wonderful. Nobody is hurrying you along trying to get the next group to your table. It just isn’t done. In all the meals I’ve eaten out here, that’s happened to me exactly one time and it was shocking. Nobody hovers over your table interrupting your conversation or making you feel self-conscious over how long you’ve been at the table.
This cultural norm of slow eating with lots of drinks and conversation also helps explain the high prices. The tables in a restaurant generally don’t turn over as many times in an Israeli restaurant as they do in an American one. A restaurant in America open from 6 pm to 11 pm, say, might have between 3 and 5 groups at any one table over the course of the night, depending on the kind of food and how much people drink. In Israel, it’s more like 2–3 groups. That means the markup on the food has to be higher to cover the fixed costs of rent, electricity, the liquor license, kosher supervision and so on. There are just going to be fewer transactions so any one transaction has to cover a larger share of those fixed costs.
I learned this fundamental insight from the UCLA economist Earl Thompson. He pointed out to me that the price of the food on the menu has to cover the implicit rent of the table — using the space that the restaurant itself is renting. So food that takes longer to cook or longer to eat will have a bigger markup. Coffee seems expensive in a restaurant. But that’s because the raw materials (coffee grounds/hot water) are a small part of the full cost. The real cost of the coffee is the time it takes to drink it or nurse it which means the price on the menu has to include the implicit rent of the table as you take your time, sipping.
As an example, imagine a restaurant with 25 tables each seating 4 people. So if every group takes an hour to eat and it’s open for four hours, the restaurant serves 400 meals. But if people take two hours to eat, they can only serve 200 meals. It’s like doubling the rent or cutting the restaurant’s tables in half. So each meal has to have embedded in it not just the raw materials and the time of the chef and servers but also a charge to cover the fixed costs like rent. The fewer the meals served, the larger is the implicit surcharge for rent.
This means that if you are in a hurry, you pay a premium. One option for you in that case is street food — a falafel or schwarma at a place with very little seating and a very small footprint. It also means takeout is sometimes cheaper than sit-down.
There is more to say on this, and I’ve talked about this in more detail once on an EconTalk episode with Mike Munger on milk. Go to the 26 minute mark:
Michael Munger on Milk - Econlib
Mike Munger of Duke University talks with EconTalk host Russ Roberts about why milk is in the back of the grocery…
Some have suggested that if this theory is right, then restaurants could charge a separate price for time at the table and that would attract customers who stay for a shorter time than the average. But would you really want a meter, actual or implicit, going during dinner? That ruins the whole idea of a nice leisurely dinner focused on the person sitting across the table. My guess is that most people take a similar amount of time eating — there isn’t a lot of variance — so it’s just as well to charge everyone the same amount for the time at the table by embedding it in the food and charging a bigger markup for food (coffee/wine) that people take a while to consume.
So the cultural difference between Jerusalem and Boston say about how long you are likely to sit at a meal helps explain why the menu price in Jerusalem seems high. It is high. But you’re not being gouged. You’re paying for the privilege of a leisurely meal. Competition among restaurants keeps prices lower than they otherwise would be, but it’s still the case that the markup in Jerusalem is going to be higher than in Boston because of the cultural difference in how long people expect to sit at the table while eating. And it turns out, I really like sitting in a nice restaurant, often outside, where no one is hurrying me along.
There’s one other interesting cultural factor about wait staff in Israel vs. America. In America, the waiter is there to serve me, to take care of me. They are literally, my servant. And often good waiters and waitresses in America are effusively eager to please. This results in the frequent water-filling and is-everything-OK that is part of the American restaurant scene.
In Jerusalem, not so much. The waiter does serve you in the literal sense. But the attitude is not as subservient. It’s more — I work here and I’m happy to bring you your food and the check when you’re ready. But I’m your equal. I just happen to work in this restaurant you’re eating in and my job is to bring the food. I’m not here to be your friend or tell you my first name when I approach your table. It’s just business. I’m not going to ooze any faux affection for you as your underling. I’m not going to be snooty either. I’ll bring you your food and a pitcher of water. If you need anything, I’m here, but you’ll need to find me. I’m not going to bother you.
Finally, Israelis have the reverse culture shock when they visit America. They find the politeness and the subservience of the wait staff annoying. It’s so fake, they tell me. And the waiters won’t let you eat and hang out in peace!