Terrible article on why wine cost so much in restaurants

http://bit.ly/lEOrM" onclick="window.open(this.href);return false;

Some classic lines…

“Retail stores don’t have to be in the heart of a downtown … and pay outrageous rents. They get much better deals than restaurants. They don’t have to spend thousands of dollars on decor.”

“I have 50 wines opened at a time and those that don’t sell quickly have to be poured out.”

Wow…gimme a break.

explain / elaborate pls?

isn’t it true? overhead?

i’m obviously not the itb, but curious customer that’s all

Just reading the two lines you quoted makes me want to kick any restaurateur that would agree with that square in the nuts.

Exactly, Rob, those were just 2 of the quotes. The article is horrendous.

Mark,

Granted, that is blog entry, but it is some awful interviewing and research there.

They interview one restauranteur in Ann Arbor, MI and make like it is the bible.

That person has probably never left Ann Arbor!

Another take on restaurant wine pricing. Wine articles and guides | Learn about wine | JancisRobinson.com" onclick="window.open(this.href);return false;

Thanks for posting this.
One wonders what this restauranteur would say now, some 2 years later.

Indeed.

It’s quite amazing to see how those businesses (in any industry) who had said for many years ‘we simply CAN’T reduce our prices! There’s no way!’ now have suddenly found a way…

Posted by The Todd French:

It’s quite amazing to see how those businesses (in any industry) who had said for many years ‘we simply CAN’T reduce our prices! There’s no way!’ now have suddenly found a way…

I read over the weekend that about 500 restaurants have closed in NYC this year; out of about 20,000 there, that’s roughly 2.5%…

Cute ‘The Todd French’ part, btw…

I think that after the holiday season this year, we’ll see another slug of closed businesses in all industries. The recession has been roughly 2-3 years now (on most businesses, that is), and they are at their tail end of how long they can hold up, so if this holiday season indeed is helpful to get some black on a sea of red, the owners will feel they can stay in business. If not, I expect a bunch to go away - at least doubling a number like the one above.

Not only do I think you are right, Todd, but there are also some businesses that will likely use the holiday season just to try and recoup as much loss as they can and then shutter in Jan/Feb.

You gotta have deep pockets and/or be a lean machine these days. And even then, that doesn’t always sinch it.

If anything, the fundamentals are now worse in terms of covering your food costs because those have sky-rocketed. Can’t really raise those prices in this environment, obviously have to be very careful about wine and alcohol pricing, so it’s a really rough situation. Even more important for your wine program to be a profit center. Thus so many places closing. I think people sometimes make this stuff out to be more devious than it really is, that restaurateur’s take is about what you hear from most people who work in restaurants. Even if they are going for more aggressive retail style pricing, they will tell you that it’s a volume play and that without much more volume than traditional pricing, it’s tough to make it work. There’s a reason it’s a tough business, particularly now, and it’s because the fixed costs are high, and the food profit margin isn’t good (for high-end places).

And expectations continue to rise in terms of what you offer, just look at that owner who’s getting crap for wasted BTG bottles. If true, she’s doing the right thing by not pouring wine that’s been open (and how many complaints do we hear, justifiably, about pouring wines that have been open for awhile BTG?) but that is wasted inventory. So she could either not have a big BTG program (another source of complaints) or have one but run it for the best bottom line (thus ensuring that you probably wouldn’t want to order any of the bottles) or she can do what she is doing and waste inventory or she can invest in an expensive machine like an Enomatic. Having a big BTG program also means she must need a lot of temperature controlled units for those wines so they’re ready to go right away, or of course she can pour the wines at the wrong temperatures, saving money but pissing off guests. Then you’re also going to need more glassware because of the greater volume, which also means you’re going to have more breakage. And I’m sure there’s more.

We have a very well-known and popular restaurant in Boulder, Frasca, which tried retail+20 when they opened and say that they would have been out of business if they had continued with it. The owner’s quote, which I think is probably the way a lot of people think about their own businesses was “Are there some places that overcharge? You bet, and if you overcharge, you’re going to lose some wine-savvy people. But if you undercharge and you don’t have a way to take care of that, are you going to be around?”

I always try to look at these things from the perspective of the owner who, yes, wants to not just break even but make money. If you own a restaurant, you have to make your profit somewhere: you can try to go bare-bones on location and decor and glassware, etc. to lower your fixed costs, you can try to have really high churn rates to make a general volume play, you can try to have much higher food profits than most places (either by charging more or using lower quality ingredients or both), or you can try to make your alcohol sales your profit center. Obviously you can do more than one of these, but what you can’t do is have is Riedel stemware all around, only 2 covers per table per night, slight profit margins on the food, and slight profit margins on alcohol.

The great thing, in my opinion, about most businesses in our economic system, and certainly I think restaurants fall into this category, is that the consumers have the final say. If that place is terribly overpriced, then it isn’t going to succeed. If a place is succeeding (financially, not just getting people in the door), then it might not be overpriced, but maybe it could do better by lowering prices or by raising them. And if a place isn’t succeeding financially but is getting people in the door, then it probably is underpriced. Any way the ultimate judge is if people are spending their money there. Hard to have a more fair system.

Great post, Phil.

I, for one, believe that there is an in between between “cost plus 20” and 350%.

Nevertheless, tightening the belt has been the key for the past year.

I know the restaurant in Ann Arbor, Vinology. Very good wine program with a very dedicated person in charge of it. They hosted an event for me and did a great job as well as minimally charging us. Their wine prices are not outrageous.

They did have a beautiful space for us with one of the coolest things I’ve seen in a wine-themed restaurant. On the wall were glass-faced display boxes with terroir-y things. For example, one was a box of galets. No idea if they were really from CdP, but they were ringers and had a little note. Other boxes were a loamy-mix of soil and I don’t remember what else. Really, really cool.

Some of the quotes come off as whiny, but it is true that retail space is a lot more fungible and restaurant space often gets charged more. If I compare the effort spent on decor between the restaurant and a wine shop (pretty good one) across the street … let’s just say that I would not want to eat in the latter.

A.

This is a nice article that touches on this issue:

Restaurants Dangle Cheaper Drinks but Risk Watering Down Their Profits - WSJ" onclick="window.open(this.href);return false;

Not sure if he will answer, but you can ask him on wine-pages.

FWIW, I’ve ordered wines in his restaurants at or below retail (retail prices of some wines do move significantly) and have also done BYO’s.

We have been using this pricing model since we opened 11/05.

We take the wholesale price, add 40% to convert to retail, and then add $20 ($15 if the retail price is < $20). Using this pricing model, our beverage cost as a percent of beverage sales averages 40%. We’re not getting rich doing this but we continue to pay our bills.

IMO, $20 is equivalent to a corkage fee, which we are not allowed to offer in my state.

And Tom is in the booming metropolis of Wilmington…proof that anything is possible,

Damn! I find myself agreeing with Posner again. I hate that!

Drew,

A new bulletin board, and we are best friends!

booming is properly with stated with a lower case b.

My banker can confirm that an upper case B for booming is not appropriate at this time.