How Can You Increase Your Restaurant’s Beverage Revenue?
March 12, 2020
Knowing food and beverage costs can make the difference between high and low profitability in your restaurant. Drink prices play a crucial role in maintaining healthy profit margins.
Every restaurant has unique needs, but some basic rules of thumb can help you establish a starting point.
Increase Revenue by Understanding Beverage Costs
In the simplest terms, beverage costs can be thought of as the amount you spend on your wholesale beer, wine, liquor, and nonalcoholic beverages. It’s important to assess your costs periodically (weekly or monthly) to see how much of your revenue you are spending on these items.
Alongside the cost of beverages, you should also examine your beverage sales in relation to their costs. Doing so can reveal the amount of profit you are making.
Calculating beverage costs, profits, and markup margins are rather nuanced. There are specific ways to determine different kinds of costs and each has a unique formula.
A great way to get started is to familiarize yourself with the restaurant industry’s definitions and best practices:
To get an even deeper understanding of your profit percentage margins, and tactics for healthy markups, you also need to consider your pour costs.
What is a Pour Cost?
Every restaurant and bar always deals with theft, spillage, over-pours, and breakage. It’s crucial to keep this in mind when pricing out your beverages. This is where determining your pour costs come into play.
One way to think about pour costs is how much you are spending (including breakage and spillage) per beverage. Loss happens and it directly impacts your overall profits, which is why you need to anticipate and factor it in your pricing. If you go by industry standards, plan to expect about 20 percent in bar beverage shrinkage.
At the end of the day, beverage costs must be controlled to reach maximum potential of bar and beverage profits. Alcohol beverage costs above average industry standards can negatively impact your profitability. A highly profitable bar typically generates a 20 percent or lower liquor cost.
4 Ways to Maximize Your Restaurant’s Beverage Profits
Now that you’ve evaluated your beverage and pour costs, let’s talk about maximizing profits. Use these tips for maximum profitability:
1. Compile Your Cocktail Recipes
Create a cocktail recipe book, also known as a cocktail bible. Having all your recipes in one place, and requiring your bartenders to follow them, can help you keep cocktail costs in check.
2. Measure Your Pour
Heavy wine pours can also affect your bottom line, so make sure your servers and bartenders are trained on the proper pouring technique.
3. Periodically Review Your Recipes
Liquor costs can fluctuate, so it’s important to always do a review of your recipes. Did the price of your well vodka go up? If so, it's a good time to evaluate your drink prices to ensure high profitability.
4. Purchase Cost Effective Beverage Staples
If you aren’t careful general bar condiments can skew your bottom line. Think about partnering with a wholesale restaurant supply store. You can find standard bar garnishes like olives, lemons and limes, and mixers at affordable price points. Don’t forget to check out their selection of coffee, teas, and flavored syrups for your non-alcoholic beverage needs.
If your beverage costs are slightly higher than the averages above, it’s time to investigate your pricing and focus on bartender training. A few small changes can have a big effect on your bottom line.
A good resource for restaurateurs is The Uniform System of Accounts for Restaurants. This trusted guide provides restaurant industry averages and general approaches on how to manage primary margins and expenses.
Smart Foodservice, Your Bar and Beverage Solution
Looking to increase bar profits without sacrificing quality? Make a visit to Smart Foodservice today. We stock bar garnish essentials, fresh herbs and produce, non-alcoholic beverages, and basic bar equipment. Shop online with ease as well as create an account to track your purchase history and more.