How Restaurants Can Increase their Profit Margin with Beverage Sales

Arthur Miller, Analysis Manager, Constellation Brands

The restaurants need to know food and beverage expenses so that they can retain profit margins. 

Knowing food and beverage expenses will make a difference in the restaurant between high and low profitability. In retaining healthy profit margins, drink prices play a crucial role.

Every restaurant has unique needs, but some basic rules can create a starting point.

Increase Revenue by Understanding Beverage Costs

Beverage costs can be viewed as the price customers pay on the bulk beer, wine, liquor, and non-alcoholic drinks in the simplest terms. To see how much of the income companies, spend on these things, it is essential to regularly calculate the expenses.

The companies should also analyze the beverage sales about their prices, along with the cost of drinks. Doing so will show the amount of profit that the organization is making. There is a very complex measurement of beverage prices, income, and mark-up margins. There are specific ways of calculating various types of expenditures, and each has a unique formula.

A perfect way to get started is to familiarize the business with the concepts and best practices of the restaurant industry:

• Beverage cost formulas

• Bar mark-ups

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• Beverage cost percentages

• Liquor cost calculations

What is the Meaning of Pour Cost?

Theft, spillage, over-pours, and breakage are often dealt with by every restaurant and bar. When pricing out the drinks, it is crucial to keep this in mind. This is where the cost of calculating the reward comes into play.

One way to think about the cost of pouring is how much the business pay per beverage (including breakage and spillage). Loss arises, and it affects the net earnings directly, so it is necessary to predict it and take it into account in the pricing. If the company goes by industry averages, intend to expect a shrinkage in bar drinks of around 20 percent.

Beverage prices must be managed at the end of the day to achieve the full potential for bar and beverage profits. The cost of drinking alcohol above-average industry levels may have a detrimental effect on profitability. Typically, a highly efficient bar produces a 20 percent or lower price of liquor.