BYO Wine and Corkage

[jaybee]

I recently took a wine which cost me £180 pounds to The Square, which charged me £25 corkage on it. The same wine was on their list for just over £400. The restaurant only loses if I was to either:

a) buy the wine from their list at £400- not a possibility

b) buy an alternative wine on which they were going to make more than a £25 profit- maybe I will or maybe I won't and they don't know which.

From a business point of view it makes sense to relieve me of £25 (£50, actually because I took 2 bottles) than refuse to allow me to BYO and run the risk that I'll drink tap water all night.

Was the £400 wine an odd man out or was it one of many in that price range? If a place has a large cellar of £400 wines, it suggests that they do a good business with them. I'm not suggesting that they charge £100 corkage, though some places in NY that average $300 bottles per two top could make a case for charging $75 corkage. (note, I said average).

If they averaged $100 bottles, then corkage exceeding $40 would be hard to justify.

(note, I've found the £ sign-- )

Edited February 11, 2003 by jaybee (log)

[Tonyfinch]

Tony -- The Square would make Pounds 25 profit on most of the bottles on its list.  Also, very few clients of The Square would likely be willing to drink tap water throughout the meal.

Cabrales, I don't think that's so. I don't know how much a wine has to cost the diner in order for the restaurant to make £25 clear profit on it but there were several wines on The Square's list which cost less than £25 and plenty in the £25-40 price range on which they're obviously not making £25 clear.

Maybe Basildog or another with restaurant experience will know how much a wine needs to cost the diner before the restaurant is making £25 clear. For a restaurant with The Square's overheads I would guess £50 plus minimum.

As for drinking tap water, well maybe not but I'm sure there will be plenty who maybe only drink a glass or two, or stick to the cheaper end of the list.

Edited February 11, 2003 by Tonyfinch (log)

[Basildog]

Tony..i think there are better qualified people than i to comment on these kind of prices.My house wines are about £10 rest of the list is mostly under £20 ,top price is Champagne at £35.We charge £7 a bottle corkage, but its not often anyone brings there own wine.We should be getting a new Wine Shop opening in Padstow soon..so maybe that will change.

I would guess a place charging £40 for a bottle of wine, which would have cost them approx £15, would be "losing" £25 if you brought your own .But these are guesses, no idea how proper places run ther wine list

The weird thing is that wine pricing was the subject that got me out of shadows here...just short of a year ago

[Tonyfinch]

Basil, if a restaurant buys a wine for £15 and sells it for £40, that £25 is not clear profit is it? There are all sorts of costs which must be taken into account first are there not?

[Scott]

But if the restaurant charges say £25 per bottle corkage,then it makes that money for free as it were.

BYO should cost no more than a bottle of house wine.

A customer has no obligation to pump a restaurant's beverage GP just because they can't price their food properly and need the money.

Oh, but they can cost their restaurant accordingly! That's why the wine is pricey and helps to subside the food costs. DOn't forget that it's a very competitive business and the 'average' diner (whoever he/she may be!) looks at the cost of the food principally - they may complain about the wine costs but it is the actual cost of the food they compare to other places. You may not but a business is not run based on 8 people but based on the overall revenue produced.

Sorry, but you have to look at the situation "as is" not how you or others think it should be. It is, after all, a business not some kind of charity organization.

Yes and you equally know, that the UK is unique in the skewed view of this.

The same peculiar pricing mix doesn't really exist anywhere else, except here. perhaps it's a cultural cringe thing, where people don't want to accept the cost of their food.

But referencing this anomaly is hardly 'telling it like it is'. especially given the struggles of the fine dining sector in London at the moment

Edited February 12, 2003 by Scott (log)

[Scott]

Scott - welcome.

v

thanks Vanessa.

[Scott]

I have never understood why this issue gives such contrasting views. To be fair it is argued in UK, USA, Britain and occasionally in France.

I have always beleived that a restaurant that undercharges food, and over charges beverage is running a risk. What if your cutsomers only drank House or worse water - they are entitled to.

The high GP contingent seems to think it is an obligation on the customer to pay whatever price is charged, again that the customer is a cash rich 'lemming'.

This is not the case, and perhaps should be described as "the way things were". At least if the current economic climate continues.

my 2 cents

[Scott]

Basil, if a restaurant buys a wine for £15 and sells it for £40, that £25 is not clear profit is it? There are all sorts of costs which must be taken into account first are there not?

Tony, you are certainly right that £25 is not profit.

3 items spring to mind:

1. Vat - a £15 bottle has VAT remove thus costing £12, and the restaurants selling price is £34 + 17.5%

leaving £22 to distribute to its various cost elements.

2. Overdraft & Bank charges on suppliers accounts

3. storage

the last 2 are regularly cited as major costs for the restauranteur - today many, many wholesalers will supply on sale or return. The market is that tight right now.

But for me, far more importantly a retailer incurs these charges also, precisely the same way. yet the restauranteur (i hate typing that word ) often uses these costs as way of distinguishing their commercial situation from that of the retailer - when in fact they are, in many instances, identical.

If said Restauranteur believes he can only stay afloat with a 67% GP on beverage, he is running his business very badly - imo.

[Tonyfinch]

Other cost factors which spring to mind are faulty/corked bottles and breakages. The former could admittedly be ameliorated if the restaurant has a sale or return relationship with its suppliers. Is that common?

[Basildog]

I think my GP for Food and Wine is running about 50%

Net profit is running about 8%

Example House wine Bought for £3 sold for £9 Gross Profit £6 (66%) YES 66% , NOT 300% , gross profit is expressed as a % of the selling price

NET profit..after Vat,Wages Insurance Rent blah blah blah 90p( if my net was running at 10%)

Breakages at my place are minimal...can't remmber the last time we broke a bottle...corked wine i get replaced by my very nice wine merchant

Edited February 12, 2003 by Basildog (log)

[Adam Balic]

Australia has a 44% sales tax on wine, yet there are many BYO places. How can these places survive, if they can't in Britian?

[jaybee]

Basil, if a restaurant buys a wine for £15 and sells it for £40, that £25 is not clear profit is it? There are all sorts of costs which must be taken into account first are there not?

That is why I used the term "margin" when discussing the corkage fee. The margin is the gross profit. Operating costs, overhead, etc, must then come out of that to arrive at profit before taxes. By the time you finish calculating, it beomes clear that corkage fees based on the concept of a lost sale of their highest tier wines, for a restaurant that depends on wine as an integral part of their revenue, are reasonable and fair as we've discussed. For the cutomer, who brings a wine frm their cellar that cost £20 and retails for £150, a £25 fee is not out of line.

[Steve Plotnicki]

To restate the usual debate here, this issue tips on how a restaurant views BYO diners. They can view us as the same as people who drink water, or they can view us as people who would buy a fancy bottle of wine if they refuse to allow BYO. While I can make arguments both ways, in reality, I don't go to restaurants very often if they do not allow BYO or if they offer it at an astronomical pricepoint. For example, I have been to Daniel once in the last two years, Jean-Georges not at all, and I can't remember the last time I ate at Le Bernadin on my own (I attended a private function there about 3 years ago) all because of their no, or excessive BYO policies. I would eat at these places on at least a twice a year basis, and probably more at J-G because of Nougatine, if they had a reasonable policy.

The only analysis I can do of this is the following. If a restaurant wants to play the "I will always be full" card, then it doesn't matter if they do not allow it. But if they ever have an empty table, well my BYO dinner might be the one that is filling it. The other way to look at it is the empty table I don't take, and which is given to someone else, might be a table full of tap water drinkers and they aren't making big beverage profits there. Finally, the BYO diner is typically the type of diner that often orders expensive tasting menus including expensive supplements. A typical BYO dinner among 6 people at Daniel will most likely include 3 bottles of brought in wine and is likely to result in the table ordering something off the list as well like Champagne or dessert wine. I assure you that the meal they order to accompany their wines will not be 3 courses and then ask for the check.

What you never see a restauranteur do when he does this analysis is calculate how much extra money he is making from BYO customers. You only see him talking about what he has lost. Well it seems to me, that with many BYO drinkers, he hasn't only lost their wine order, but their entire business. Certainly, there has to be some business arrangement he should be able to come to with BYO diners so both parties can be happy. After all, it's only a matter of money right? And if it is only a matter of money, how does that reconcile with a no BYO policy? That's it you guessed it. It can't.

[Adam Balic]

Steve - is there not room for a niche market, where people would actively bring their best wine to be served with excellent food? Certainly, there are places in Melbourne which I have specifically gone to for this reason.

[Scott]

Other cost factors which spring to mind are faulty/corked bottles and breakages. The former could admittedly be ameliorated if the restaurant has a sale or return relationship with its suppliers. Is that common?

Faulty/corked bottles are re-imbursed from the wholesaler.

Breakages - no more common than in a retailer. You would break more bottles during stock counting than dinner service.

PS. Tony, I do have to apologise, on 1 important level.

This is my soap box topic, and I can get carried away!

[Steve Plotnicki]

Adam - I don't understand your question. Do you mean places that are BYO only?

[Adam Balic]

Yes, BYO only.

[Steve Plotnicki]

The only places that are BYO only are places without liquor licenses. I think that in NYC, the rents are so high that restaurants can't survive without selling alcohol. 20 years ago, before the wine boom, those types of places were around but I can't remember the last time I saw one.

[cabrales]

Well it seems to me, that with many BYO drinkers, he hasn't only lost their wine order, but their entire business. Certainly, there has to be some business arrangement he should be able to come to with BYO diners so both parties can be happy. After all, it's only a matter of money right? And if it is only a matter of money, how does that reconcile with a no BYO policy? That's it you guessed it. It can't.

Steve -- The impact (if any) on a restaurant's economics of losing (assuming that is the case) the business of BYO drinkers depends, among other things, on whether the restaurant has other clients who wuld spend at least as much as the BYO drinkers. If a restaurant like French Laundry were to prohibit BYO instead of charging $50 corkage, I doubt that their seats would not be filled and I doubt that the client composition in general would experience a marked change.

On your point about BYO only being a matter of money, there are many explanations as to why that *is* reconciliable with a prohibition against BYO, including potentially: (1) the restaurant would want to charge a corkage like $50 or $100 per bottle, but believes that may result in bad press, and (2) the restaurant believes it has a sufficiently strong wine list, from which diners can choose, such that most diners need not BYO and the "outlier" diners in this regard are not worth courting.

[Basildog]

6.35pm 14th Feb 2003

A telephone rings...

"Good Evening

I have a table booked with you at 7.30pm

Yes sir

Do you have 1/2 bottles of Champagne?

No Sir, i'm afraid we don't

Oh, well i don't want to buy a whole bottle.Can i bring my own?

Of course Sir

Will you be charging me corkage?

Yes sir

Well i don't want to be charged an outrageous amount

Depends what you mean by outrageous Sir (trying to lighten the tone)

Well £10 would be alot

We charge £7 sir. If you mention when booking again that you would like a 1/2 bottle of something , we would be happy to get some for you

OK see you later

-------------------------------------

I didn't charge him corkage.

[Charlene Leonard]

6.35pm 14th Feb 2003

A telephone rings...

"Good Evening

I have a table booked with you at 7.30pm

Yes sir

Do you have 1/2 bottles of Champagne?

No Sir, i'm afraid we don't

Oh, well i don't want to buy a whole bottle.Can i bring my own?

Of course Sir

Will you be charging me corkage?

Yes sir

Well i don't want to be charged an outrageous amount

Depends what you mean by outrageous Sir (trying to lighten the tone)

Well £10 would be alot

We charge £7 sir. If you mention when booking again that you would like a 1/2 bottle of something , we would be happy to get some for you

OK see you later

-------------------------------------

I didn't charge him corkage.

you're a saint Basildog.

[Steve Plotnicki]

The impact (if any) on a restaurant's economics of losing (assuming that is the case) the business of BYO drinkers depends, among other things, on whether the restaurant has other clients who wuld spend at least as much as the BYO drinkers. If a restaurant like French Laundry were to prohibit BYO instead of charging $50 corkage, I doubt that their seats would not be filled and I doubt that the client composition in general would experience a marked change.

That's right. The person who takes the table instead of a BYOer might drink tap water or tea. Also, your analysis doesn't take into account that BYO diners quite often order extensive tasting menus, and splurge on additions to the regular menu which cause upcharges. So all in all, unless you can show me that a restaurant really makes a significant amount of money from not allowing BYO, I am not likely to believe that they have a reason for disallowing it other then their visceral reaction to the concept. And indeed, top level restauranteurs like Danny Meyer and Drew Nierporent among many others, allow it And I don't consider them to be the type of people who are looking to lose money. And as far as PR goes, among wine lovers, restaurants that do not allow BYO, or who charge excessive corkage fees, typically get trashed and ridiculed.. Just read some of the wine boards and you will see just how badly.

The best answer I have ever heard any restauranteur give on this topic goes as follows. BYO customers make up such a small percentage of their business, that allowing it has no effect. And it isn't that you make no money off of them, you make the money from the meal they order and the corkage they spend. In reality, the BYO customer is just like any other customer who has a special request, need or desire. You are either willing to be flexible and accomodate them or you aren't.

[Scott]

Steve,

I quite agree, a BYO'er will bring more bottles and will often order digestif's etc.

if I buy off list I am quite frugal, but will bring great wine and share it with the staff.

Also, I think the only reason a London restaurant doesn't allow BYO is that haven't adjusted to changing times. Many still don't like the fact that their list now consists of branded wines, available on the high street making their margins transparent.

They seem to pine for the days of unbranded, generic 'St Joseph' on the list - when they made real £'s without anyone knowing.

[Steve Plotnicki]

I have to say that the basic wine list at an upscale London restaurant is both way overpriced and piss poor in quality. I have never seen so much cheap plonk being sold as good quality wine for such outrageous prices, anywhere else in the world. To me it smells of monopolistic practices where agents and wholesalers have strangleholds over restaurants and force them to buy fourth and fifth tier bottlings. Even in places where you would expect to find a good wine list based on regionality like The Sugar Club, the list is shit. Why they can't have a good selection of New World wines that are reasonably priced doesn't make any sense. Only a handful of places like the Nigel Platts Martin restaurants and a few others break out of this mold. But in general, I have never seen so many 40 pound bottles of plonk on lists anywhere else in the world.

[Tonyfinch]

Some more for the file. Aubergeine, Bonds and 1 Lombard St do not allow it. Pied A Terre and Zafferano charge £25 per bottle.