In restaurants there are three things that make up your prime costs. Everyone knows that food cost is an important part of the profitability equation. Even more understand that labor cost is often the biggest expense in most restaurants. However, you must not ignore the other third of this trifecta.
If you want to be successful, that is
Beverages are such an important part of making money in this business. People come to your restaurant for good food, but it is the beverage program that really keeps the place afloat. For most good restaurants they are lucky if they are able to keep their food cost percentage around thirty percent. A number that is way off the scale for beverages.
Think about it. If you get to go to a Blazer game, do you think those $80 tickets pay for those million dollar salaries? Of course not. It’s the $9 beer that does that.
So take that beverage program seriously. Wine list, beer options, spirits program, even non-alcoholic beverages all play an important role if you want to remain profitable and stay in business. Treat your bar as a separate business and manage it accordingly.
Earlier I mentioned that 30% food cost is often a goal of nice restaurants and that beverages should be considerably less than that. Let’s explore that a bit more.
Thank you corporate restaurants
Most customers don’t understand this, but you should. Thanks to our corporate restaurant friends we now can expect to pay four times more for a glass of wine than they paid for it. It used to be three times, but American greed has replaced the previous norm for gouging the customer. So you should be doing the same, or you are, as I have said in other posts, ‘leaving money on the table’.
I recommend that you look around at the competition. See what the market will support. No point in charging a price that customers wouldn’t be willing to pay.
Usually operators of restaurants will charge a higher mark-up for the less expensive items, and less so for the expensive ones. If you paid $50 for a bottle of wine, it is not likely that you will be able to charge a customer $200 for that wine. You could, but no one would buy it.
However, customers will pay $10 for a glass of wine. So if you pay $10 for a bottle of wine, you should be able to get four glasses out of that bottle and get your 400% mark-up. I can’t believe I’m saying this. After all of the complaining I have done about the ridiculous prices that places charge these days.
Even if you don’t, they will
Another thing to consider: Let’s say you have an extensive spirits program with lots of ‘craft cocktails’ (don’t you just love that term?). You must consider the labor involved, too. If a lot goes in to the making of a drink, you can justify a higher charge for that drink.
We sell value
Always look to add the value. Charge what you can, but serve it in a nice glass, with a smile–people will pay it.
Look around at what others are doing, charge what you can, but above all control your costs. We will talk about theft by your bartenders at another time…