Pour costs...

[marty mccabe]

A friend of mine asked me about pricing mixed drinks, cocktails, etc., at his new restaurant. Any guidance or advice? I know about pricing wine (I sell it), but cocktails are a mystery to me.

Appreciate it...

Marty

[KatieLoeb]

Recipe it out. If you pay 24.99 for a bottle of Belvedere vodka and are making a cocktail that requires 2.5 oz. of it then the formula is thus:

25.4 oz (in a standard 750 ml bottle) @ 24.99 = .98/oz.

.98 X 2.5 = 2.45

Not counting mixers or any other liquor(s) that might be in the drink, it's costing him $2.45 to make that cocktail. Other liquors should be calculated the same way. Mixers and garnishes tend to fall into the "cost of doing business" for me, unless it's something really special or expensive. Then figure out what's an acceptable Cost of Goods for that drink and multiply. If you want to have your cost of goods at 25% then quadruple the cost.

2.45 X 4 = $9.80

So you then charge $10 for the cocktail with 2.5 oz. of Belvedere in it.

I know you're all shaking your heads now, but how do you think bars make money?? And that dive corner bar is making a hell of a lot more money charging you $4 for a shot of cheap well bourbon than a nice upscale place is charging you $10 for a shot of Knob Creek. Do the math people.

- Banker's Club Bourbon = $8.99 per liter (33.8 oz.) = .26 oz. (even cheaper if they use 1.75L bottles)

- Knob Creek Bourbon = $26.99 for 750 ml (25.4 oz.) = 1.06 oz.

for a 2 oz. drink the dive bar charges $4.00 for something that costs them .52 = 13% Cost of Goods

for a 2 oz. drink the upscale establishment charges $10.00 for something that costs them 2.12 = 21% Cost of Goods

Factor in service, ambiance and accoutrements (nice linens, quality stemware) and the upscale place starts looking like more of a bargain.

[eje]

One of the things I've noticed in the last few years is the proliferation of restaurants serving cocktails. In the 90s, when we first moved to San Francisco, it was relatively rare for new independent restaurants to have a full bar. Wine with dinner was the thing. Many of the most well known bay area restaurants still do not serve liqour. Now it seems to have tipped the other way, with few new restaurants opening without a full liquor license and some sort of custom cocktail menu.

I'm not a front of house person. In fact, when I worked in restaurants, I studiously avoided having anything to do with service, money, and the like. But, I'm curious, how much can full bar service add to a restaurant's bottom line?

-Erik

[KatieLoeb]

But, I'm curious, how much can full bar service add to a restaurant's bottom line?

Simple answer - A LOT!

Depending on what type of place it is and whether you are serving "well" drinks or using well liquors for Happy Hours and other such promotions it remains a separate and valuable revenue stream. Even at upscale places where the cheap "well" brands are replaced by call or even premium brands, the cost of goods will generally be lower than food or wine and the profit protential tremendous. The only thing that can make more money than selling liquor is draught beer.

[jamiemaw]

EDIT

for a 2 oz. drink the dive bar charges $4.00 for something that costs them .52 = 13% Cost of Goods

for a 2 oz. drink the upscale establishment charges $10.00 for something that costs them 2.12 = 21% Cost of Goods

Factor in service, ambiance and accoutrements (nice linens, quality stemware) and the upscale place starts looking like more of a bargain.

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Thank you for doing the math, Katie. I found it very interesting and wish that there was more discussion of comparative costing, from detail like this, to inclusion of pricing during restaurant discussions. It puts a lot of things into perspective, especially on an international website where there are also conflicting taxes and currency considerations in the mix.

[KatieLoeb]

Thanks Jamie. I like my dives when I'm feeling so inclined and my upscale establishments as well. It's never really a fair comparison though, because the dives will use the 1.75L bottles or sell the cheaper "well" brands whereas an upscale establishment doesn't really have those options open to them. Factor in the costs of "ambiance" in terms of design, better real estate, accoutrements, service, etc. and the "downscale" bar owners are making a killing, even though their clientele would never suspect it. And the upscale customers continue to bitch about getting "price gouged" by nicer establishments with higher costs. It's a tough balance to achieve appropriate pricing, fair profit and good value for the customer.

[jamiemaw]

Thanks Jamie.  I like my dives when I'm feeling so inclined and my upscale establishments as well.  It's never really a fair comparison though, because the dives will use the 1.75L bottles or sell the cheaper "well" brands whereas an upscale establishment doesn't really have those options open to them.  Factor in the costs of "ambiance" in terms of design, better real estate, accoutrements, service, etc. and the "downscale" bar owners are making a killing, even though their clientele would never suspect it.  And the upscale customers continue to bitch about getting "price gouged" by nicer establishments with higher costs.  It's a tough balance to achieve appropriate pricing, fair profit and good value for the customer.

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True story. By the way, I like my dives when I'm so reclined.

Edited October 23, 2005 by jamiemaw (log)

[melkor]

Factor in the costs of "ambiance" in terms of design, better real estate, accoutrements, service, etc. and the "downscale" bar owners are making a killing, even though their clientele would never suspect it.  And the upscale customers continue to bitch about getting "price gouged" by nicer establishments with higher costs.  It's a tough balance to achieve appropriate pricing, fair profit and good value for the customer.

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I think while the items you list are relevant, people don't look at the cost of their drink based on percentages. The examples you used show that the dive bar is making the same drink using a cheaper ingredient and has a $3.50 margin while the upscale example has an $8 margin. That's what your customer is looking at when they bitch about being "price gouged". The drinks don't take twice as long to make, so it seems like a reasonable comparison to me. Sure rent is a bit higher, and someone needs to pick up the tab for the guy who designed the lighting but maybe if the upscale bar is making $5 a drink instead of $8 then people wouldn't complain so often. Then again if the upscale bar were charging more reasonable prices the answer to the question eje asked wouldn't be 'A LOT!'.

[Mark Sommelier]

A friend of mine asked me about pricing mixed drinks, cocktails, etc., at his new restaurant.  Any guidance or advice?  I know about pricing wine (I sell it), but cocktails are a mystery to me.

Appreciate it...

Marty

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Multiply the bottle cost by 5 and divide by 16 to get your drink price. Round it up to the nearest dollar. This ain't rocket science......

[marty mccabe]

Multiply the bottle cost by 5 and divide by 16 to get your drink price. Round it up to the nearest dollar. This ain't rocket science......

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Mark,

Your formula actually leads me to my next, related question: I crunched the numbers on two examples:

Appleton White Rum: $13.50/ltr - $5.00/drink - on a 2oz. pour, 16% pour cost

Maker's Mark: $26.99/ltr - $9.00/drink - on a 2oz. pour, 17% pour cost

So, my question: in a nicer bar (with a premium well, etc.) is a 20% pour cost (approx) on mixed drinks your target? And what do you do with martinis, given the larger amount of alcohol that usually goes into one? Do you just accept a higher PC?

Thanks,

Marty

[slkinsey]

The examples you used show that the dive bar is making the same drink using a cheaper ingredient and has a $3.50 margin while the upscale example has an $8 margin.  That's what your customer is looking at when they bitch about being "price gouged".  The drinks don't take twice as long to make, so it seems like a reasonable comparison to me.  Sure rent is a bit higher, and someone needs to pick up the tab for the guy who designed the lighting but maybe if the upscale bar is making $5 a drink instead of $8 then people wouldn't complain so often.  Then again if the upscale bar were charging more reasonable prices the answer to the question eje asked wouldn't be 'A LOT!'.

People complain about a $10 drink made with top quality booze?

One could make the same argument about restaurants. If Babbo is charging twenty bucks for a plate of linguine with clams, pancetta and hot chiles and some other place is charging thirteen bucks, you have an even larger price differential. And in the restaurant comparison we're talking about dishes that are functionally identical, made with the same ingredients, etc. (the food cost on this dish is probably more in the 10% range for Babbo). It's just like with wine. People don't understand that there is a lot more going into the price of their booze than picking up a bottle at the local package store. Just like with wine, at an upscale restaurant or bar/lounge your drink is paying for a lot more than the booze in the bottle. It's also paying for the fancy glass, the fancy napkins, the investment on the fancy lights/music/bathroom fixtures, barbacks, hostesses, rent, etc. When all is said and done, these places are not exactly making a huge profit. I do agree with Katie that adding bar service can add greatly to a restaurant's bottom line, but not because it's got such a huge profit margin on the cocktails. Rather, I think it's mostly simply because the restaurant is now moving a lot more product.

Another big difference you're not figuring into your comparison is that a Banker's Club Old Fashioned will taste like ass and the Knob Creek Old Fashioned will taste amazing. But, in reality, of course, the Banker's Club at the dive bar is likely to come in the form of a shot in a shitty chipped shot glass, whereas the Knob Creek is more likely to come in a nice glass with a few dashes of bitters, a few strips of peel fresh off the lemon and trimmed of pith, a big lump of ice, etc. So, in reality the high priced drink often does take twice as long to make (if not longer) and requires more skill from the bartender.

[KatieLoeb]

So, my question: in a nicer bar (with a premium well, etc.) is a 20% pour cost (approx) on mixed drinks your target? And what do you do with martinis, given the larger amount of alcohol that usually goes into one? Do you just accept a higher PC?

I program the POS system with three different buttons for each vodka and two for each gin. I calculate a 2 oz. pour for "ABSOLUT", a 2.5 oz. pour for "ABSOLUT COSMO/RX" and a 3.5 oz pour for "ABSOLUT UP". Using a priced modifier key to add a certain amount for "Cosmo" or "Rocks" or "Up" doesn't tell me anything at the end of the week when I look at a sales report. Knowing I sold 300 shots of Absolut doesn't tell me how much liquor should be gone from my inventory. Knowing that I sold 100 Absolut mixed drinks, 100 Absolut Cosmos and 100 Absolut Martinis at an average pour of 2.7 oz. DOES tell me something useful. I can also price the liquor on a fair sliding scale depending on the price of the bottle. The customer is being charged for the fair portion that goes into their drink and I can keep tighter control on costs, loss, theft, overpouring, etc. I also have a spreadsheet with all the cocktails "reciped out" on it so I can calculate the total number of ounces of each liquor used that way. Definitely saves a lot of money in the end. Just as a business can make loads of money on liquor, it's the easiest place to lose it as well. If these sorts of controls aren't in place then you could be bleeding from every orifice and never know it until you went broke.

[melkor]

People complain about a $10 drink made with top quality booze?

One could make the same argument about restaurants.  If Babbo is charging twenty bucks for a plate of linguine with clams, pancetta and hot chiles and some other place is charging thirteen bucks, you have an even larger price differential.  And in the restaurant comparison we're talking about dishes that are functionally identical, made with the same ingredients, etc. (the food cost on this dish is probably more in the 10% range for Babbo).  It's just like with wine.  People don't understand that there is a lot more going into the price of their booze than picking up a bottle at the local package store.  Just like with wine, at an upscale restaurant or bar/lounge your drink is paying for a lot more than the booze in the bottle.  It's also paying for the fancy glass, the fancy napkins, the investment on the fancy lights/music/bathroom fixtures, barbacks, hostesses, rent, etc.  When all is said and done, these places are not exactly making a huge profit.  I do agree with Katie that adding bar service can add greatly to a restaurant's bottom line, but not because it's got such a huge profit margin on the cocktails.  Rather, I think it's mostly simply because the restaurant is now moving a lot more product.

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I honestly don't pay much attention to the price of drinks in bars. Katie said earlier in the thread "And the upscale customers continue to bitch about getting "price gouged" by nicer establishments with higher costs.". I'm just offering my 2 cents on the topic as someone who has a drink or two at a bar maybe twice a month - my math comes from the example provided earlier in the thread.

Bars can charge whatever they want, but how can you say that a restaurant bar can be a huge source of profit and that the customers are wrong for thinking their drinks are overpriced?

I don't think your food cost example is relevant. If someone shows up at your house and asks for a martini, you'll smile and make them one - not so if they knock on the door looking for a plate of fresh pasta with clams, pancetta, and chilis. One takes a couple of minutes to make and most people have the ingredients on hand, the other takes an hour plus cleanup and requires some skill and ingredients most people don't have on hand.

[slkinsey]

Bars can charge whatever they want, but how can you say that a restaurant bar can be a huge source of profit and that the customers are wrong for thinking their drinks are overpriced?

I'm not 100% sure it can become a huge source of profit, although others are certainly in a better position to speak on that than I. But I look at it this way: If you add cocktails to a restaurant, you are likely to find that your customers are having a cocktail while waiting for a table, ordering a cocktail when they sit down, etc. in situations where they probably would not have had a glass of champagne or wine. Although this is not true of all customers or all restaurants, I find that people are more likely to order a before-dinner cocktail than a before-dinner glass of wine (maybe because they know they're going to be having wine later with their meal?). That means you're making money in a situation where you wouldn't have been making money before -- and, depending on the restaurant and the customer base, I think it can be a lot more money. I'm just not sure it has to do so much with the markup. Again, I'm sure we have members who can actually draw from before-and-after experience and have much more to contribute on this subject than I.

If customers complain about $10 dollar cocktails, it may simply be due to the fact that they've never had a cocktail in an upscale place. Similarly, someone who is used to spending 13 bucks on a relatively simple plate of pasta and has come to think that "a plate of pasta costs between 10 and 13 bucks" will probably complain about the 20 dollar plates of pasta at a more "fancy" restaurant. Indeed, we have a number of people in these forums who do just that with some regularity.

[crabbjay]

I don't think your food cost example is relevant.  If someone shows up at your house and asks for a martini, you'll smile and make them one - not so if they knock on the door looking for a plate of fresh pasta with clams, pancetta, and chilis.  One takes a couple of minutes to make and most people have the ingredients on hand, the other takes an hour plus cleanup and  requires some skill and ingredients most people don't have on hand.

Are you saying that making a cocktal does not take skill? Your post makes it sound like making a martini does not require any skill. I totally disagree.

And yes, cocktails are a huge profit center for restaurants. I certainly don't mind paying for well-made cocktails that are prepared with skill and with premium spirits.

Edited October 24, 2005 by slkinsey (log)

[eje]

Of course top shelf ingredients and high prices are no guarantee of quality.

The $5 Old Overholt Sazerac made by the surly 60 year old bartender and served in a chipped Old Fashioned Glass at the Le Richelieu hotel bar in New Orleans may well be better than the $10 featured cocktail using top shelf rye made by the well coiffed actor wannabe and served in a Martini glass at the trendy new restaurant in downtown San Francisco.

-Erik

[mbanu]

Are you saying that making a cocktal does not take skill?  Your post makes it sound like making a martini does not require any skill.  I totally disagree.

←

A martini is a bad example. An extra dry martini does indeed take no skill to make. After all, it's merely a shot of cold gin or vodka. A proper martini is only slightly more complicated, as then the only thing to do is to determine how much vermouth the person is looking for.

There are some drinks that are more complicated than a Martini, however. If someone were to order a Mai Tai or a B-52 it'd be a slightly different story.

[fatdeko]

Are you saying that making a cocktal does not take skill?  Your post makes it sound like making a martini does not require any skill.  I totally disagree.

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A martini is a bad example. An extra dry martini does indeed take no skill to make. After all, it's merely a shot of cold gin or vodka. A proper martini is only slightly more complicated, as then the only thing to do is to determine how much vermouth the person is looking for.

There are some drinks that are more complicated than a Martini, however. If someone were to order a Mai Tai or a B-52 it'd be a slightly different story.

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And I thought I knew You!

Any Martini takes a bit of skill and panache to pull off. Too often the cold gin is not cold enough, or worse, shaken, or even worser, barely stirred. And why order an extra dry Gin Maritini in the first place? There's Synergy in that there dance between the Vermouth and the Gin--they have relatives in common, don't you know.

And the glass has to be prepped too. Our first sensation of our Martini, the one that we've waited all day for, our first impression comes not from the drink itself, but from the glass! If it is warm, or even just room temperature, or worse, simply lifeless on our lip, then the whole illusion is shattered. Our prayers have gone unanswered, God is elsewhere than in His Heavens and even momentary transcendence is futile.

Cold, crappy, American Pilsners are more satisfying, if quickly drunk and in quantity.

Ales will do in a pinch.

myers

Edited October 24, 2005 by fatdeko (log)

[slkinsey]

Of course top shelf ingredients and high prices are no guarantee of quality.

The $5 Old Overholt Sazerac made by the surly 60 year old bartender and served in a chipped Old Fashioned Glass at the Le Richelieu hotel bar in New Orleans may well be better than the $10 featured cocktail using top shelf rye made by the well coiffed actor wannabe and served in a Martini glass at the trendy new restaurant in downtown San Francisco.

This is a good point, but the principle still extends beyond liquor. There are plenty of Italian restaurants selling an amazing plate of pasta for 12 bucks and plenty of Italian restaurants selling a not-so-good plate of pasta for 17 bucks.

Tangential thought, but I think it's a mistake to think of Old Overholt as the "Popov of rye" (rye whiskey being the "new vodka," don't you know ). Old Overholt is a quality product.

[eje]

This is a good point, but the principle still extends beyond liquor.  There are plenty of Italian restaurants selling an amazing plate of pasta for 12 bucks and plenty of Italian restaurants selling a not-so-good plate of pasta for 17 bucks.

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Sorry, this was really more like venting about my experience on Saturday night than participating in the discussion.

I'm over it now. At least the food at said trendy restaurant was better than the cocktails.

[lancastermike]

And yes, cocktails are a huge profit center for restaurants. I certainly don't mind paying for well-made cocktails that are prepared with skill and with premium spirits.

In my experience many places that charge upscale prices for cocktails do not deliver on value for price. The place may be nice, and the food top notch, but the bar is not tended by anyone with any skill. I have been to nice restaurants that serve good food only to find the drinks made by a hostess or someone because they do not have a real bartender. it seems to me this is due to not really having a bar were someone can work and make some money. That is nothing but a glorified service bar were they stash people . These places charge upscale prices, and may pour top shelf brands, but the drinks are no good.

I have no proplem paying for a well made drink at a nice place, but it seems to me many places do not take their bar seriously as a place to make their customers happy and as a place to make money for themselves and the staff.

That is why more places should hire Katie to teach them.

[KatieLoeb]

That is why more places should hire Katie to teach them.

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Aw shucks, Mike!

You're too kind. I appreciate the props.

[slkinsey]

That's an interesting point, Mike. And it's all the more frustrating when you consider that making a basic menu of specialty cocktails and most of the standards at a "very good" level of quality in a restaurant setting (low volume compared to a lounge or bar) isn't exactly rocket science. All the people behind the bar have to do is care. I'm not saying the cocktails are going to be like they are at Flatiron Lounge or Milk & Honey, but there is certainly no excuse for them to not be "very good" so long as there is a good recipe book and people willing to follow it.

[KatieLoeb]

That's an interesting point, Mike.  And it's all the more  frustrating when you consider that making a basic menu of specialty cocktails and most of the standards at a "very good" level of quality in a restaurant setting (low volume compared to a lounge or bar) isn't exactly rocket science.  All the people behind the bar have to do is care.  I'm not saying the cocktails are going to be like they are at Flatiron Lounge or Milk & Honey, but there is certainly no excuse for them to not be "very good" so long as there is a good recipe book and people willing to follow it.

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Very true, Sam. Sadly the new generation of bartenders have been raised making chilled shots of vodka or gin and calling them martinis or are well schooled in margaritas or mojitos because that's what the bar they worked at last was known for, but can't make a proper manhattan to save their lives. An Old Fashioned? Say What? I think it should be required to know at least the ingredients and preparation of a few of the classic old standards before you can move on to funkier concoctions. I don't care if you know how to make a Pink Squirrel, but damm it, you'd better reach for the bitters when you mix that Manhattan! And chill the glass ferchrissakes!

[Alchemist]

Before a bartender startes on the esoteric cacktails they must not only know how to make a Daquri, but WHY it workes so well. The understanding of balance, tequnique (over/under shaking) presentation. Jackson Pollack understood form, perspective, and context, and had the skill to draw before he went off on his tangents.

When a resturnat is hiring a cook, they don't ask them to cook haute cuisine, they ask for a simple omlette, or some such thing. One can tell if someone understands how to treat food by such a test because there is no flam-flimmery to cover up incompatance. Same with a bartender. I want to see them make a sidecar, not a Sloe Comfortable Screw Against the Wall.

Sorry this a wee bit off topic. But what are the qualitys that make a good bartender? Enough intrest to start a thread?

Edited 4 typos

Edited October 25, 2005 by Alchemist (log)