BYOB Part II

[Mano]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another on page 22 by LaBan. Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee). Many restaurants with liquor licences are accomodating them rather than lose a customer.

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

[Jeff L]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another  on page 22 by LaBan.  Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee).  Many  restaurants with liquor licences are accomodating them rather than lose a customer. 

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

←

Very interesting articles indeed. I didn't know that there are no laws on the books that prohibit patrons from bringing their own bottles to a full service restaurant. It is up to the individual owner to allow a corkage fee, impose none or refuse to allow one to bring their own bottle.

LaBan's piece goes on to note that many of the full service places are learning to adapt to the will of wine friendly and value driven patrons by instituting a limited byo policy or providing for corkage fees.

Lastly, it was quite interesting to learn that a survey by opentable.com found that in Philadelphia, 63% of patrons brought their own wine to a white tablecloth restaurant in their last 10 meals out. The national average was 27% and New York's average was 25%.

[JohnL]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another  on page 22 by LaBan.  Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee).  Many  restaurants with liquor licences are accomodating them rather than lose a customer. 

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

←

There has been wide ranging discussion here about wine markups and BYO policy in general as well as the thread you recently started focusing on the Philadelphia BYOB situation.

First, to get facts straight--I am not sure where you get a markup of 300%. Wine at retail is usually marked up three times--producer to importer, importer/ wholesaler and then at retail.

Second, the situation in Philadelphia is somewhat unique. Pricing of all alcohol is controled by the state government. There is a lack of any real market competition at retail. There are also some tax situations (Pennsylvanians are paying an 18% tax/markup via something called a "flood tax."

(Katie Loeb has really helped me understand all this arcane and confusing stuff--a great resource).

In short, it is difficult and expensive for restaurants to offer an alcoholic beverage service.

Hence the proliferation of BYO restaurants. It would be hard to make a case that the situation in Pennsylvania is the result of a healthy and competitive market.

Third, I always find it interesting that some people will rail about wine markups and not food markups. really, ya think that bottle of Beaujolais is a bad deal check out the markups on a dish of simple pasta!--and guess how much those snazzy Air Jordan's you are wearing have been marked up!

Restaurants are complex operations with all sorts of overhead. In a vital and open market with competition and variety of choices I rarely find many places where my experience is tainted because I feel I am being gouged. In fact, I am happy that any place where I enjoy dining, makes a healthy profit--I want them to thrive.

Fourth, I believe that historically, restaurants in general have marked wine up pretty steeply.

As more people are interested in and ordering wine restaurant wine lists are becoming much more reasonable and interesting! If the wine list makes sense and the restaurant cares about wine then more people will order wine.--this is the current trend in most places.

Fifth, BYO's are fine--they do serve a nice niche. However, they are not the way of the world nor the future of the restaurant business. They have some benefits but they also have drawbacks.

On the restaurant side and for consumers.

In fact if one lists the benefits of BYO's vs the drawbacks using real world scenarios-- that list will be very lopsided, indeed.

[Mano]

Jeff, I'm with you on most all points. My understanding is that in PA restaurants pay retail for wine but not sales tax. In NJ and other free market states they pay wholesale, which is about 60% of retail. Restaurants generally then mark up the wine about 300%. In PA the hands of the restaurants are tied in a variety of ways and their base cost of any alcoholic beverage tends to be much higher than elsewhere.

In this thread I'm not railing against anything! Been there, done that.

Restaurants have various formula to make sure they turn a profit taking into account all costs. I don't take issue with that at all. Every business needs to have a "mark up." Pasta dishes may be marked up 700% while prime dry-aged meats may have only a two-digit markup. However, customers generally don't think about food markups in that way. At least I don't. But at least here in Philadelphia, many of us scrutinize wine markups. Hence, today's article in the Inquirer.

I'm just wondering how the general 300% markup for wine developed.

The articles brought into sharper relief just how precarious the restaurant business is, particularly for those establishments that paid a premium for their liquor licenses. Those that allow BYOB but don't charge a corkage fee are, IMO cheating themselves out of revenue they deserve. Making $15 on corkage, plus the profit on food is better than having a table sit empty. I'm also wondering if there is a way for restaurants that serve wine to charge less for the wine, sell more of it, and make more than the corkage?

Edited March 12, 2006 by Mano (log)

[JohnL]

where are you getting your 300% markup from?

most retail establishments mark up about 30%.

many wines are marked up less than that at high volume retailers.

as for restaurants two and one half times wholesale is often considered

a fair mark up.--I believe.

Lower price wines are often marked up more than higher priced wines.

so if one is interested in bargains--often the hundred dollar bottle is a better deal than

the house wine.

It is all relative.

I agree with your view on corkage.

[Mano]

where are you getting your 300% markup from?

←

Years ago I worked at several restaurants in California and all marked up wine about 300% More recently, a friend who worked for a wine distributor told me about the general wholesale/retail/restaurant mark-up. When I go to PA restaurants and am familiar with the retail cost of the wine, the mark-up varies but is generally 250-350%. Perhaps Katie or other restaurant folk can weigh in on whether there is a "standard" mark-up and if so, how was it established.

[MarketStEl]

where are you getting your 300% markup from?

most retail establishments mark up about 30%.

many wines are marked up less than that at high volume retailers.

as for restaurants two and one half times wholesale is often considered

a fair mark up.--I believe.

Lower price wines are often marked up more than higher priced wines.

so if one is interested in bargains--often the hundred dollar bottle is a better deal than

the house wine.

It is all relative.

I agree with your view on corkage.

←

You're in the industry and I'm not, but that 300% figure sounds like something I've heard before too.

A bottle of wine that costs the restaurateur $5 and which she sells for $20 is marked up 300%. Based on my reading of wine list prices and what I see comparable wines selling for in State Stores, I'd say that most wine markups are at least 100% (double the cost to the restaurateur).

30% markup for most retail also strikes me as about right--but restaurants aren't most retail. (Edited to add: For starters, they're far more labor-intensive than just about any other retail sector, and even at restaurant wages, labor is still the biggest share of total costs--which is why restaurant wages are what they are.) And there are certainly retail items that are marked up more steeply as well.

I'm not surprised that costlier wines aren't marked up as much. You can mark a more expensive wine up by a lower percentage and still make a higher dollar profit on it.

I had been led to believe that--whatever the markup on food may be--alcohol is a far more profitable item for the restaurant.

Edited March 12, 2006 by MarketStEl (log)

[mattkantor]

Most places have minimum markups of 300% in the philadelphia area, and in general. Thats based on 10% off Pennsylvania retail pricing plus a delivery charge of 1.50 a bottle or so - Katie can verify if this is correct, but that is my understanding from people I work with. Our markups average 240% I think, but I know that is below the norm.

I think most retail markups are more along the lines of 40-50%. Places like Canals on 38 in Pensauken may only mark up 30%. I don't know about the PCLB. They are on their own planet with that stuff. Really, its a regional thing...based on economics of rent costs, traffic, customer profile and types of wine sold, etc, etc....blah blah blah.

Just my $.02

[shacke]

First a joke. A prostitute walks up to a guy’s car and says it’s $200 for a date. The guy says how bout $100. She says OK but I want you to know I am not making a penny off this.

In the same vein, I don’t accept any sob story that even with the flood tax and the PLCB and all these factors that alcohol is not profitable for an establishment. Last I checked, no one was in it for the charity. If the licenses were not so limited, there would, I suspect, be a lot fewer BYO’s in the area. I also think Starr is not going to open a BYO anytime soon. Ansill said if he didn’t get a license for Ansill, he wouldn’t have done it. That says something to me – the ignorant consumer. If an establishment sinks because of the alcohol – whose fault is that? Maybe I haven't looked hard enough but are total prices here really any different than prices in NY or SF or Chicago? I suspect not but that is a guess. Would wine really be much cheaper without the 3 tier state system?

Is it a sin or unconscionable to mark up a wine 100, 300, a 1000%? No. Anyone is free to charge whatever they want and let the market decide whether that is wise or not. Maybe people in this city pay more attention to wine prices because the presence of the BYO on every corner has bred a knowledgable wine consumer – myself included – that perhaps are more in the know about how much someone is charging over retail market prices for a bottle of Frog’s Leap merlot. It doesn’t make it more wrong or right. There is still a great number of people who don’t know, don’t care both or neither. Two years ago, I was clueless. Now this week I am headed to Django with my folks and a damn fine bottle to celebrate their visit. How is that bad for me? Are BYO's a house of cards?

I can’t make a plate of pasta like the folks at La Famiglia but the bottles in their cellar taste no better than the ones I have in mine. People may feel safer launching invective over high wine prices than they would over food they can’t dream of making in their home with Georges' spoon and Shola holding your hand as you mix with it. Charging $30 for a plate of pasta is just not the same as charging $30 for a bottle of $10 XYZ vineyards to the average Joe. I can see how a talented someone on the other end of the stove can disagree.

I admire these folks who run restaurants and I wouldn’t do it for anything. There must be a great balancing act – charge more for the plate of pasta that costs $3.00 to produce, less for the hangar steak, lose money on the truffle, whatever. It seems that wine prices are an easy variable and who hasn’t grown up just assuming that wine in decent restaurants just costs a whole lot more?

There is no shame in wine pricing. There should be no excuses and that is not to say that gouging is the norm - I would doubt it. If you don’t like paying for the wine, don’t give a place your business. In PA, it's got to be tougher since they are starting at a higher price point for sure but high prices are everywhere and restauranteurs seem to really want these liquor licenses.

The article is showing an attempt on the part of some establishments to capture another not insignificant piece of the market. People like me. It will work too.

That’s my rambling 2 cents. I certainly don't know anything about the "biz" but I am the guy who is plunking down the money in a lot of places in town - pretty often. That should make opinion worth at the least the bandwidth its written on - however misguided it may be. ........... STOP

edited to reduce rambling ....

Edited March 12, 2006 by shacke (log)

[Bobby 2 Shakes]

I say kudos to Chairman Newman for revamping the PLCB in a way conducive to cultivating opportunities for BYOs to flourish. Don't think for a minute that robust profits at BYO restaurants don't affect the price-setting decisions at the restaurants with liquor licenses.

[Jeff L]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another  on page 22 by LaBan.  Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee).  Many  restaurants with liquor licences are accomodating them rather than lose a customer. 

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

←

Third, I always find it interesting that some people will rail about wine markups and not food markups. really, ya think that bottle of Beaujolais is a bad deal check out the markups on a dish of simple pasta!--and guess how much those snazzy Air Jordan's you are wearing have been marked up!

Restaurants are complex operations with all sorts of overhead. In a vital and open market with competition and variety of choices I rarely find many places where my experience is tainted because I feel I am being gouged. In fact, I am happy that any place where I enjoy dining, makes a healthy profit--I want them to thrive.

←

The key difference in your argument is that I think most wine people feel ripped off having to pay several times (not sure about the 300% markup either) the price for the same bottle they have in their cellars. I know I do.

It's really not a fair analogy to compare the price of sneakers with wine marked up in a restaurant. I mean everyone is certainly entitled to a profit, and I agree with you in that absent one, they shut down. It becomes a question of what is a reasonable profit in the minds of the patrons.

I really have no idea what a pair of Air Jordans cost (although I suspect it's a fraction of what they sell for) but I do know know what most wine on wine lists retail for. That's the difference. Further, if you don't like the price of Air Jordan's keep shopping. Ditto with usurious wine list prices, keep shopping or don't patronize.

[Capaneus]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another  on page 22 by LaBan.  Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee).  Many  restaurants with liquor licences are accomodating them rather than lose a customer. 

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

←

Third, I always find it interesting that some people will rail about wine markups and not food markups. really, ya think that bottle of Beaujolais is a bad deal check out the markups on a dish of simple pasta!--and guess how much those snazzy Air Jordan's you are wearing have been marked up!

Restaurants are complex operations with all sorts of overhead. In a vital and open market with competition and variety of choices I rarely find many places where my experience is tainted because I feel I am being gouged. In fact, I am happy that any place where I enjoy dining, makes a healthy profit--I want them to thrive.

←

The key difference in your argument is that I think most wine people feel ripped off having to pay several times (not sure about the 300% markup either) the price for the same bottle they have in their cellars. I know I do.

It's really not a fair analogy to compare the price of sneakers with wine marked up in a restaurant. I mean everyone is certainly entitled to a profit, and I agree with you in that absent one, they shut down. It becomes a question of what is a reasonable profit in the minds of the patrons.

I really have no idea what a pair of Air Jordans cost (although I suspect it's a fraction of what they sell for) but I do know know what most wine on wine lists retail for. That's the difference. Further, if you don't like the price of Air Jordan's keep shopping. Ditto with usurious wine list prices, keep shopping or don't patronize.

←

Also, another key difference is that the restaurant isn't a retailer, really: they're a re-seller. I have no problem with paying the money that enables a winery to stay in business. I will endure the markup that allows the distributor and retailer to stay in business, because, in the end, I have no choice. But the BYOs in Philadelphia give me an alternative to paying the re-sale markup as well, so I choose, by and large, not to.

The other issue, of course, is that the elephant in the room is the fact that restaurateurs don't practice what I view as fair pricing: pricing under which all their products, and all their customers, face a similar markup. All hue and cry to the contrary, I often hear tell of liquor sales being a "revenue center" and providing the "profit margin" for a restaurant, because the markup on the food is not large enough. Well, to me, that amounts to a sin tax on drinkers. We are, in essence, being asked to subsidize the meals of all the non-drinkers. That bugs the daylights out of me. So when I find a business model that treats me as an equal, by placing all the burden on the food - which BYOs have to do, obviously - I hop aboard.

[Rich Pawlak]

The article wasnt on the front page of MY Inky!!!!

[Mano]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another  on page 22 by LaBan.  Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee).  Many  restaurants with liquor licences are accomodating them rather than lose a customer. 

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

←

Restaurants are complex operations with all sorts of overhead. In a vital and open market with competition and variety of choices I rarely find many places where my experience is tainted because I feel I am being gouged. In fact, I am happy that any place where I enjoy dining, makes a healthy profit--I want them to thrive.

←

The key difference in your argument is that I think most wine people feel ripped off having to pay several times (not sure about the 300% markup either) the price for the same bottle they have in their cellars. I know I do.

It becomes a question of what is a reasonable profit in the minds of the patrons.

I really have no idea what a pair of Air Jordans cost (although I suspect it's a fraction of what they sell for) but I do know know what most wine on wine lists retail for. That's the difference. Further, if you don't like the price of Air Jordan's keep shopping. Ditto with usurious wine list prices, keep shopping or don't patronize.

←

But the BYOs in Philadelphia give me an alternative to paying the re-sale markup as well, so I choose, by and large, not to.

The other issue, of course, is that the elephant in the room is the fact that restaurateurs don't practice what I view as fair pricing: pricing under which all their products, and all their customers, face a similar markup. All hue and cry to the contrary, I often hear tell of liquor sales being a "revenue center" and providing the "profit margin" for a restaurant, because the markup on the food is not large enough. Well, to me, that amounts to a sin tax on drinkers. We are, in essence, being asked to subsidize the meals of all the non-drinkers. That bugs the daylights out of me. So when I find a business model that treats me as an equal, by placing all the burden on the food - which BYOs have to do, obviously - I hop aboard.

←

One of the main points of the article is that because many Philadelphians are given so many BYOB alternatives, restaurants that serve wine are, in effect, being asked to "price match". I can't imagine a low corkage fee yielding the same profit as the wine and the restaurant is not moving product that cost it money. They're just grateful they didn't lose a customer who bought fod and paid corkage. This is a win situation for the customer but not a good long-term outlook for the restaurant.

Putting aside the value judgements regarding fairness, gauging etc. for the moment, I'm still very interested in what folks here think the restaurants can do to make this a win-win situation? Friday, Saturday Sunday had a cost + $10 charge for wine. Is this policy still in place and how is it working for the restaurant? Inded, is this the future of restaurant wine sales in Philly?

Taking into account that I'm as much an economist as I am a winemaker, I'll take a stab at it:

Mano Hills Winery (one can dream can't he?) produces 1,000 cases of wine a year at a hard cost of $6 a bottle. A distributor doesn't have a demand for all the wine and buys 900 cases for $10/bottle. (A Mr. Newman from PA buys the other 100 cases at $4/bottle direct from the winery. ) From the original 900 cases, 500 are sold to restaurants at $20/bottle and are put on the wine lists at $70 (250% markup). It takes a year for the restaurants to sell the wine.

Given the same basic cost scenario, but changing the price at the restaurant to $45 (cost + $25 fixed markup) the wine sells out in six months and the winery sells the other 100 cases at $10/bottle to the distributor. The distributor then has the winery increase production to 1,200 cases and so on. In this scenario, having sold the original wine in six months, the restaurant, which was making $25 less per bottle than at $70, replaces it with another wine with the same $25 profit. The restaurant moves more product but makes the same profit. The customer is happier, the winery sells more wine, the distributor makes more money and so both winery and distributor and their employees have more money to spend on Nike Air Jordans, and to pump into the economy in general. You get the picture.

One down side, I imagine, is that by selling more wine restaurants incur more breakage of stemware and cork screw worms. Also, there's the increased workman's compensation insurance premiums resulting from the carpal tunnel and repetitive motion injuries of sommeliers and servers opening all those bottles of wine.

I also imagine that an $8 retail bottle of wine isn't going to appeal to customers at that restaurant if it's $33. Accordingly, a graduated or tier structure may be appropriate, much like our beloved tax system. Wines for which the restaurant pays <$10 are on the list for cost + $5, $10 - 20 wine + $10 and so on.

Please feel free to find the gaping holes in my logic.

Edited March 13, 2006 by Mano (log)

[Jeff L]

The article wasnt on the front page of MY Inky!!!!

←

Rich, we're talking about the Philadelphia Inquirer not the National Enquirer

[JohnL]

I say kudos to Chairman Newman for revamping the PLCB in a way conducive to cultivating opportunities for BYOs to flourish. Don't think for a minute that robust profits at BYO restaurants don't affect the price-setting decisions at the restaurants with liquor licenses.

←

"Chairman Newman"

sounds Kinda like Chairman Mao!

[JohnL]

Today's Inquirer has a front page article about Phillie's BYOB "revolt" and another  on page 22 by LaBan.  Philadelphia is truly a BYOB heaven where, according to the article, some patrons will pass on a restaurant with a liquor license if they're not permitted to bring their own (and pay a corkage fee).  Many  restaurants with liquor licences are accomodating them rather than lose a customer. 

While I'm interested in the discussion these articles will surely generate on this forum, I'm also curious about how the 300% markup for wine came about. Also, for those of you in the restaurant and wine business, do you have any thoughts about the effect on profits if restaurants lowered the price of wine in order to sell more?

←

Third, I always find it interesting that some people will rail about wine markups and not food markups. really, ya think that bottle of Beaujolais is a bad deal check out the markups on a dish of simple pasta!--and guess how much those snazzy Air Jordan's you are wearing have been marked up!

Restaurants are complex operations with all sorts of overhead. In a vital and open market with competition and variety of choices I rarely find many places where my experience is tainted because I feel I am being gouged. In fact, I am happy that any place where I enjoy dining, makes a healthy profit--I want them to thrive.

←

The key difference in your argument is that I think most wine people feel ripped off having to pay several times (not sure about the 300% markup either) the price for the same bottle they have in their cellars. I know I do.

It's really not a fair analogy to compare the price of sneakers with wine marked up in a restaurant. I mean everyone is certainly entitled to a profit, and I agree with you in that absent one, they shut down. It becomes a question of what is a reasonable profit in the minds of the patrons.

I really have no idea what a pair of Air Jordans cost (although I suspect it's a fraction of what they sell for) but I do know know what most wine on wine lists retail for. That's the difference. Further, if you don't like the price of Air Jordan's keep shopping. Ditto with usurious wine list prices, keep shopping or don't patronize.

←

You hit it on the head!

This is about choice.

Restaurateurs having a choice to offer a beverage service via a licensing system that is not so cumbersome or expensive and having access to wines and liquor at fair market prices.

Consumers free to choose a BYO or a full service restaurant and free to patronize the places they are comfortable with.

The system of alcoholic beverage distribution and sales and taxation in PA works against a healthy atmosphere of competition and choice. detrimental to business and detrimental to consumers. I have been around long enough that I have seen no one who does not work for the state make any coherent argument for this system.

That said--I always find these debates about profit margins etc amusing. We often seem to miss the forrest for the trees. Restaurants provide an experience. In most of the world that experience includes food and beverage served in an atmosphere conducive to enjoying that food and beverage. Restaurants are also in business to make a profit.

It is very fair to ask why people are willing to focus on on aspect of dining--wine pricing and not other areas where goods and services are "marked up."

Where folks like to immerse themselves in hypothetical situations costing out every step of wine production etc to arrive at a "fair markup"--they seem reluctant to do the same for that plate of simple pasta or their clothing items etc.

I suspect that much of this is due to the fact that wine list prices are often obvious and there is a history of restaurants charging a hefty markup for wine. Especially lower end wines that are readily available in local shops--everybody knows the cost of say a Kendal Jackson whatever.

Restaurants often price items they offer at what their market will bear--that is restaurants with high overhead operating in "mid town" with a clientel of business accounts and wealthy patrons and travelers will often be --is everyone ready?---Expensive!

Big name in demand wines at high prices.

So yes the food and wine at per Se are costly--the patrons are not there for a "bargain" in dining.

You pay for the overall experience Per Se offers.

So too a local place may have a decent French country red that sells for six bucks in a wine shop on their list for twenty five dollars--twenty five is the low end for wine in most restaurants a place can't make much money if the low end of their list is ten dollars--if you are concerned about that markup on a twenty dollar bottle then spend more--say forty or fifty and most places offer more choices and lower markups there.

The trend is for restaurants to offer interesting wines and to price them so that people want to order a bottle of wine and thus have a better experience. and yes--make money. if a waitperson or sommelier helps you choose and discover a new wine you never heard of--and have no idea what it sells for in a wine shop--or helps you select a wine that goes perfectly with your food--is the restaurant's profit really that big a deal?

BYO's are fine--they can be fun.

However, let's be honest, the people bringing rare or really interesting fine wines to them are a relatively small group--most people are schlepping a Kendall Jackson or Beringer wine or their favorite Beaujolais and then congratulating themselves on how much money they saved (that's perfectly fine). they are not benefitting from a restaurant that offers a range of interesting wines at different price points that are selected by a professional to complement that restaurants food.

They can't have an aperitif or a cocktail or an after dinner drink--or maybe just a glass of wine.

They have to hope for the best in paring the wine they bring with the food. They have less choice!

Most people want choices when they dine out--people on business or travelers with money looking for a complete dining experience simply do not want to be bothered with buying their own wine in a strange city--restaurants that can not offer beverage service have no chance to serve this lucrative market.

And let's be honest here--most people --the vast majority of people who dine out have no idea what wine costs at wholesale or retail or what the markup is--they want some wine with dinner or they don't and if the restaurant offers a selection of wines at different price points then chances are that person will order some wine. Even wine geeks when confronted with an interesting list will not be able to provide retail prices for most of the wines.

So , in most cases--if all I can spend on a bottle of wine is twenty bucks then I can probably get a decent wine that has been marked up a lot or I can have something else to drink with dinner or I can go to a restaurant that serves wines by the glass or I can go to a place that serves wine but also allows one to BYO or I can go to a strict BYO only place or...

I have choices! That is what it is all about.

Edited March 13, 2006 by JohnL (log)

[MarketStEl]

The article wasnt on the front page of MY Inky!!!!

←

Where in the area do you live, Rich?

Like most big-city dailies, the Inquirer prints earlier editions for home delivery in further-out suburbs and later ones for delivery and street sale in the city. I get the next-to-last edition printed (weekdays)/last edition printed (Sundays) delivered to my Center City apartment building. Earlier editions may have stories that are dropped for breaking stories in later ones--but since this story is a feature and not "breaking news," it is a bit puzzling that it would be Page One in a later but not an earlier edition.

Unless: a) I've got the geographical hierarchy mixed up, b) you purchase an Early Sunday Edition (published on Saturday for street sale during the day and now distinguished from the regular editions by a different front-page flag with "Sunday" in Franklin Gothic where "Philadelphia" otherwise appears and a full-color above-the-fold photo on the front page), or c) the story had been slotted for all regular Sunday editions but missed the early-edition deadline.

The interesting thing here is that if I'm still right about the geographical hierarchy, it hasn't changed a bit even though the printing plant is now in Conshohocken.

[MarketStEl]

It is very fair to ask why people are willing to focus on on aspect of dining--wine pricing and not other areas where goods and services are "marked up."

Where folks like to immerse themselves in hypothetical situations costing out every step of wine production etc to arrive at a "fair markup"--they seem reluctant to do the same for that plate of simple pasta or their clothing items etc.

I suspect that much of this is due to the fact that wine list prices are often obvious and there is a history of restaurants charging a hefty markup for wine. Especially lower end wines that are readily available in local shops--everybody knows the cost of say a Kendal Jackson whatever.

Restaurants often price items they offer at what their market will bear--that is restaurants with high overhead operating in "mid town" with a clientel of business accounts and wealthy patrons and travelers will often be --is everyone ready?---Expensive!

Big name in demand wines at high prices.

So yes the food and wine at per Se are costly--the patrons are not there for a "bargain" in dining.

You pay for the overall experience Per Se offers.

So too a local place may have a decent French country red that sells for six bucks in a wine shop on their list for twenty five dollars--twenty five is the low end for wine in most restaurants a place can't make much money if the low end of their list is ten dollars--if you are concerned about that markup on a twenty dollar bottle then spend more--say forty or fifty and most places offer more choices and lower markups there.

[...]

So , in most cases--if all I can spend on a bottle of wine is twenty bucks then I can probably get a decent wine that has been marked up a lot or I can have something else to drink with dinner or I can go to a restaurant that serves wines by the glass or I can go to a place that serves wine but also allows one to BYO or I can go to a strict BYO only place or...

I have choices! That is what it is all about.

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I understand your point about choices and agree. But I think you inadvertently hit on the reason why so many restaurant patrons cavil about wine markups and ignore all the other markups in the two sentences I italicized above in your quote.

Now, if you're eating in a fancy restaurant, it won't--or shouldn't--be such a big deal that you will also spend $50 or more on a bottle of wine to go with the two $50 entrees you ordered. But if you are someone of more modest means--a group that in this case includes the merely affluent as well--you may feel it when you can't find a good wine value on the list to go with the two $20 entrees you ordered. If the only choices are a $25 (based on your statement above) wine that you saw in the regular section of the State Store for $9, a more interesting wine that will cost more than you spent on both entrees put together, or a generic house wine at $5 the glass, you may well feel more pain over the cost--or the Hobson's choice you've been presented with--when you contemplate the wine portion of your tab.

And what if you're not in the mood for the food served at that wine-by-the-glass place? What if you want pan-Asian rather than Italian?

"Just spend a little more" is precisely what the diners who fall into this category don't want to do. Even though the markup may be lower, the total cost remains higher, and it's that that the diner is focusing on.

Shifting gears just a little bit: Yes, we are all agreed on the anticompetitive nature of the Liquor Control Board regime (emphasis added). But we still have it not only because the employees' union has some clout in Harrisburg, but also because many of the residents in Pennsylvania's 62 other counties aren't as concerned about the issue--and some of them even prefer things as they are now.

[JohnL]

It is very fair to ask why people are willing to focus on on aspect of dining--wine pricing and not other areas where goods and services are "marked up."

Where folks like to immerse themselves in hypothetical situations costing out every step of wine production etc to arrive at a "fair markup"--they seem reluctant to do the same for that plate of simple pasta or their clothing items etc.

I suspect that much of this is due to the fact that wine list prices are often obvious and there is a history of restaurants charging a hefty markup for wine. Especially lower end wines that are readily available in local shops--everybody knows the cost of say a Kendal Jackson whatever.

Restaurants often price items they offer at what their market will bear--that is restaurants with high overhead operating in "mid town" with a clientel of business accounts and wealthy patrons and travelers will often be --is everyone ready?---Expensive!

Big name in demand wines at high prices.

So yes the food and wine at per Se are costly--the patrons are not there for a "bargain" in dining.

You pay for the overall experience Per Se offers.

So too a local place may have a decent French country red that sells for six bucks in a wine shop on their list for twenty five dollars--twenty five is the low end for wine in most restaurants a place can't make much money if the low end of their list is ten dollars--if you are concerned about that markup on a twenty dollar bottle then spend more--say forty or fifty and most places offer more choices and lower markups there.

[...]

So , in most cases--if all I can spend on a bottle of wine is twenty bucks then I can probably get a decent wine that has been marked up a lot or I can have something else to drink with dinner or I can go to a restaurant that serves wines by the glass or I can go to a place that serves wine but also allows one to BYO or I can go to a strict BYO only place or...

I have choices! That is what it is all about.

←

I understand your point about choices and agree. But I think you inadvertently hit on the reason why so many restaurant patrons cavil about wine markups and ignore all the other markups in the two sentences I italicized above in your quote.

Now, if you're eating in a fancy restaurant, it won't--or shouldn't--be such a big deal that you will also spend $50 or more on a bottle of wine to go with the two $50 entrees you ordered. But if you are someone of more modest means--a group that in this case includes the merely affluent as well--you may feel it when you can't find a good wine value on the list to go with the two $20 entrees you ordered. If the only choices are a $25 (based on your statement above) wine that you saw in the regular section of the State Store for $9, a more interesting wine that will cost more than you spent on both entrees put together, or a generic house wine at $5 the glass, you may well feel more pain over the cost--or the Hobson's choice you've been presented with--when you contemplate the wine portion of your tab.

And what if you're not in the mood for the food served at that wine-by-the-glass place? What if you want pan-Asian rather than Italian?

"Just spend a little more" is precisely what the diners who fall into this category don't want to do. Even though the markup may be lower, the total cost remains higher, and it's that that the diner is focusing on.

Shifting gears just a little bit: Yes, we are all agreed on the anticompetitive nature of the Liquor Control Board regime (emphasis added). But we still have it not only because the employees' union has some clout in Harrisburg, but also because many of the residents in Pennsylvania's 62 other counties aren't as concerned about the issue--and some of them even prefer things as they are now.

←

I think we are getting somewhere!

My point was and is--restaurants should offer a wide range of wine options at differing price points.

The over riding concern of the patron/diner should be to find a bottle of wine they can afford that will enhance their dining experience--that works well with the food.

What the restaurant is making in terms of profit on either the wine or the food or anything is not important.

At the low end of the wine list spectrum it is IMOP most important that the restaurant offer good quality wines to go with the food and encourage people who would not normally order wine to try a bottle and to offer a good choice to those who just do not have a lot to spend.

The fact is--few people really care about the restaurant's profits--they want to have a good time and they know what they have to spend.

Even fewer people will know what most bottles of wine on a list cost the restaurant.

The real issue here is not markups!

It is restaurants offering consumers more interesting choices at the low end of the wine of the wine list price spectrum.

If a diner can order a bottle of twenty five dollar wine that provides pleasure and enhances their experience it should be of no (or very little) consequence how much the restaurant paid for the wine.

Another salient point--and one that I believe Ms Green was making in her Phil Magazine piece we discussed here in an earlier thread--is most other major cities are seeing a rapid growth in a wide variety of full service restaurants that are offering interesting wine selections at all price levels. Philadelphia is not. BYO's are fine but they are not a positive direction for a major city like Philadelphia.

I believe that the wine lists in Philadelphia should be more varied and less expensive--the system works against this.

I also believe that the many fine chef's emerging in the area should be able to open restaurants that enable them to offer beverages that complement their food.

Must be a great feeling for a creative chef to see his or her efforts accompanied by a mundane sauvignon blanc or a banal cabernet someone "saved" money on rather than a wonderful interesting good value wine they know would work perfectly with their cuisine.

It is the "experience" not the deal you are missing.

[Capaneus]

Another salient point--and one that I believe Ms Green was making in her Phil Magazine piece we discussed here in an earlier thread--is most other major cities are seeing a rapid growth in a wide variety of full service restaurants that are offering interesting wine selections at all price levels. Philadelphia is not. BYO's are fine but they are not a positive direction for a major city like Philadelphia.

I believe that the wine lists in Philadelphia should be more varied and less expensive--the system works against this.

I also believe that the many fine chef's emerging in the area should be able to open restaurants that enable them to offer beverages that complement their food.

Must be a great feeling for a creative chef to see his or her efforts accompanied by a mundane sauvignon blanc or a banal cabernet someone "saved" money on rather than a wonderful interesting good value wine they know would work perfectly with their cuisine.

It is the "experience" not the deal you are missing.

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Good wine lists are in fact cropping up: Amada, Gayle, Ansill, to join Fork and a few others, current and past. In my opinion, they are cropping up because they need to compete with BYOs, and because of the price constraints they have to offer value through interesting choices. In the days before BYOs, I saw no great rush by local restaurants to offer great lists.

Let's face it: you live in a world where restaurateurs are kind avuncular artisans whose overriding interest is in maximizing their patrons' happiness; and where the State is an Ogre that treads innocents underfoot for... well, no apparent reason but its inherently malicious nature.

Whereas I feel restaurants - while staffed by wonderful, warm, creative people in many cases - are primarily in the business of separating me from my paycheck. If in this case the State makes it a little harder for them to do so, it's okay by me, especially if it seems to cause relatively little pain at the other end.

[JohnL]

Good wine lists are in fact cropping up: Amada, Gayle, Ansill, to join Fork and a few others, current and past. In my opinion, they are cropping up because they need to compete with BYOs, and because of the price constraints they have to offer value through interesting choices. In the days before BYOs, I saw no great rush by local restaurants to offer great lists.

Let's face it: you live in a world where restaurateurs are kind avuncular artisans whose overriding interest is in maximizing their patrons' happiness; and where the State is an Ogre that treads innocents underfoot for... well, no apparent reason but its inherently malicious nature.

Whereas I feel restaurants - while staffed by wonderful, warm, creative people in many cases - are primarily in the business of separating me from my paycheck. If in this case the State makes it a little harder for them to do so, it's okay by me, especially if it seems to cause relatively little pain at the other end.

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I agree things in Philly are improving wine list wise.

Not so much because they are competing with BYO's though this is a factor--rather--people in general are becoming more interested in wine and food. The trend is seen in cities with few BYO's. The problem IMOP--you see the restaurant scene in Philadelphia as before BYO's and after BYO's --the "rush to offer great lists" is happening where there are few BYO's as well.

As a fact, I live in a more realistic (or at least representative world) when it comes to restaurants and alcohol and liquor sales. You are living in the exception.

As for your jaded and very cynical view of restaurants.

I am realistic--they are businesses and they compete as such for my business--that's what helps motivate them to provide good food and beverages and service and atmosphere and yes--value.

Asa for your warm fuzzy feelings about your state government and their protecting you from the evil restaurateurs who want to gouge you--I have three words: Johnstown Flood Tax!

Edited March 14, 2006 by KatieLoeb (log)

[Rich Pawlak]

The article wasnt on the front page of MY Inky!!!!

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Where in the area do you live, Rich?

Like most big-city dailies, the Inquirer prints earlier editions for home delivery in further-out suburbs and later ones for delivery and street sale in the city. I get the next-to-last edition printed (weekdays)/last edition printed (Sundays) delivered to my Center City apartment building. Earlier editions may have stories that are dropped for breaking stories in later ones--but since this story is a feature and not "breaking news," it is a bit puzzling that it would be Page One in a later but not an earlier edition.

Unless: a) I've got the geographical hierarchy mixed up, b) you purchase an Early Sunday Edition (published on Saturday for street sale during the day and now distinguished from the regular editions by a different front-page flag with "Sunday" in Franklin Gothic where "Philadelphia" otherwise appears and a full-color above-the-fold photo on the front page), or c) the story had been slotted for all regular Sunday editions but missed the early-edition deadline.

The interesting thing here is that if I'm still right about the geographical hierarchy, it hasn't changed a bit even though the printing plant is now in Conshohocken.

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Nope, didnt get the Earluy Edition wioth the giant photo display. Got a Sunday edition. Go figger.

[KatieLoeb]

The Article in Question

I thought I'd post that for starters, since we all need to see what it is we're talking about here. No sense (mis)quoting something we can't all compare in its original form.

I'm thrilled and flattered that Amada's beverage program is being touted as one of the better ones in the city. We're in good company with Ansill and Gayle. But there's a lot of misunderstandings I'd like to clear up, if I may. I'll try and do that one at a time.

First and foremost, restaurants are operating as businesses, not charities, regardless of whether they choose to possess a liquor license or not. The costs inherent in operating a restaurant are very high, and profits are often slim once all the monthly fixed and variable expenses are paid. The extra expenses for liability insurance, stemware breakage, extra payroll to have a beverage manager/bar manager on staff, etc. just make operating a licensed establishment that much more so.

Markups on wine and alcohol can range from 200% to over 1500% depending on what you're talking about. At the "low end" of the wine list the markups will be higher - less so at the high end. It's a lot harder to get someone to pay $250 for a bottle that costs the restaurant $100 than it is to get someone to pay $30 for a bottle that cost the restaurant $8. Yet the percentage markup is much higher on the less expensive bottle. It's even more egregious with "well" liquor. The cheap booze that dive corner bar is dishing out is a license to print their own money. That whole 1L bottle of Wolfschmidt vodka cost them all of $7. There's approximately 16 2 oz. shots of liquor in that bottle. Even if they charge you $5 for a vodka and tonic at happy hour they're making $80 on that $7 bottle of booze. That's an 8% cost of goods. Makes that $14 Grey Goose martini start looking like a bargain...

Everyone always asks me how can a restaurant like Friday,Saturday, Sunday afford to have a winelist that charges exactly $10 over cost for each and every bottle. I'll tell you how. THEY OWN THEIR BUILDING and have since the late 1970's when the original seven partners all tossed $2000 apiece into a hat to start the business. As one can imagine that nice piece of Rittenhouse Square real estate was a tidy investment. The equity alone can carry that business a long way. Most everyone else doesn't have that luxury. Rents for space on Rittenhouse Square are in the $6000-8000/month range. And that's just the rent. Not payroll, liquor, food, sales taxes, liquor taxes, insurances, linens, china, glassware, office supplies, or anything else. Liquor and wine sales are a revenue stream that don't just justify the "high initial investment" in a liquor license.

Thats based on 10% off Pennsylvania retail pricing plus a delivery charge of 1.50 a bottle or so - Katie can verify if this is correct, but that is my understanding from people I work with.

Actually, there's a 6% "discount" to Licensees that is completely obliterated by the 7% state + city tax. The $1.50/bottle cost is "shipping" costs for any SLO items that aren't "listed" or part of the state's inventory. So basically in PA, the restaurant is paying the same retail and sometimes more than the regular consumer. There is no price incentive whatsoever for large "wholesale-to-retail" purchasers such as restaurants and bars.

Maybe I haven't looked hard enough but are total prices here really any different than prices in NY or SF or Chicago? I suspect not but that is a guess. Would wine really be much cheaper without the 3 tier state system?

Um - yeah! Otherwise there'd be no incentive to drive over the bridge. It isn't just the selection. It's price too. No question where there's free enterprise and genuine competition (and no stinking Johnstown Flood Tax!!!) that prices are lower. Having purchased wine and liquor in NJ for restaurants I can also tell you that there are far greater price incentives in place for resellers of products. Case savings on wine and rebates from the vendors for larger purchases that make restaurant prices for alcohol much more reasonable.

Maybe people in this city pay more attention to wine prices because the presence of the BYO on every corner has bred a knowledgable wine consumer – myself included – that perhaps are more in the know about how much someone is charging over retail market prices for a bottle of Frog’s Leap merlot. It doesn’t make it more wrong or right. There is still a great number of people who don’t know, don’t care both or neither

Not sure if the presence of the BYO or the presence of great wine shops that encourage going to BYOs is the issue here. Sort of a chicken and egg question. Would the BYOs of Philadelphia and South Jersey be as busy if there weren't Moore Brothers and Corkscrewed or Total Wine and Canals? If Chairman Newman hadn't created the Chairman's Selections program to compete on a level playing field with the "over-the-bridge" wine shops? I don't think I can answer that question, but I think Greg Moore answered it for us in the article. It's no surprise that the owner of one of the most successful wine shops in the area is quoted as saying "increasingly sophisticated wine consumers often prefer their own wines to those at a restaurant.". He (and the staff at Moore Brothers) can take a lot of credit for helping educate those very consumers.

For those griping about corkage fees, let me just remind you that just because there's no "law" preventing you from bringing your own, doesn't make it defensable. If you were a doctor, let's say, you'd be incredibly insulted if someone brought their own tongue depressors and thermometer to their check-up and expected a discount on the cost of their appointment fee. Likewise if you were an attorney and a client brought their wife (a paralegal at a competing firm) with them to do some of the research legwork on the case and expected a lesser fee. If it's a very special occasion and you want to break out that bottle of Bordeaux you bought on your honeymoon in France for your 20th anniversary, then by all means ask. I've never worked anywhere that wouldn't be reasonable about a request like that. A restaurant with a liquor license is providing a service that presumably they've made an investment of time, money, space and personnel into. Bringing your own wine to a restaurant that has a well thought out beverage program is like bringing your own food into the restaurant. How is it any different?? It's insulting and presumes the restaurant can't provide the services they're in business for. It's like salting your food before tasting it. If a consumer finds that incredibly limiting then they are free to take their business elsewhere or pay a corkage fee.

[herbacidal]

For those griping about corkage fees, let me just remind you that just because there's no "law" preventing you from bringing your own, doesn't make it defensable.  If you were a doctor, let's say, you'd be incredibly insulted if someone brought their own tongue depressors and thermometer to their check-up and expected a discount on the cost of their appointment fee.  Likewise if you were an attorney and a client brought their wife (a paralegal at a competing firm) with them to do some of the research legwork on the case and expected a lesser fee.  If it's a very special occasion and you want to break out that bottle of Bordeaux you bought on your honeymoon in France for your 20th anniversary, then by all means ask.  I've never worked anywhere that wouldn't be reasonable about a request like that.  A restaurant with a liquor license is providing a service that presumably they've made an investment of time, money, space and personnel into. Bringing your own wine to a restaurant that has a well thought out beverage program is like bringing your own food into the restaurant.  How is it any different??  It's insulting and presumes the restaurant can't provide the services they're in business for.  It's like salting your food before tasting it.  If a consumer finds that incredibly limiting then they are free to take their business elsewhere or pay a corkage fee.

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Everything KL said was accurate, but this was especially insightful.