Corkage at a wine bar where bottles are sold retail?

Wine Pimps
21

Here in the area of Charlotte, NC this is a thorny issue as one can hold both an on and off-premise license in NC. Most of the wine stores in town have both a wine bar and retail area. This was never the case back in NYC. I manage a wine bar/retail store in Concord, a town near Charlotte but a town with nowhere near the wealth nor the sophistication [sic]. I have had this job for a year now and the owner and I have struggled to find an equitable solution.

The store is six years old, never charged a corkage fee. We have a selection of wines on the “wine list” sold both by the glass and the bottle. The wines on the list have the standard restaurant markup. The wines in the retail section have the standard retail markup. We have a fairly small clientele and they are repeat customers. They figured out awhile ago how to protect their wallet. We will always have customers who buy by the glass. But we rarely sell bottles off the wine list. If someone wants a bottle, they go to the retail section and bring it to the bar or their table to be opened. The majority of these bottles are under $20, of these the vast majority are under $15.

To me, we are basically getting hosed by the retail area. When we did an analysis our volume of sales is comparable to last year but our margin has tanked. People just don’t buy off the wine list. Our owner is a very nice, honest, respectable person who is always stressed but as non-confrontational as a person can be who isn’t basically a recluse. She is scared to death of losing what customers we do have. So corkage is not even an option.

In six years she has taken salary for one year (that in the very low three figures per week). The business teeters between black and red more than a roulette wheel. She works 60 hours a week easy. I work 30+ at $15/hour and, honestly, we can’t afford me. A major part of the problem, in my critical analysis, is the hybrid model. You simply don’t “go to market” with clarity of purpose and a clear definition to the customer. We have struggled for the past year trying to define “who we are” and still don’t know. But after trying to boost retail sales (quantity of mixed cases sold, etc.) we are abandoning focusing on retail and trying to refocus on being a bar.

Note that in our county you have to have like 30% of total receipts be food-related so the choice is not that hard. Think about it, the more retail sales you have, the harder it is to make that 30%. The situation here is just fooked. As a compromise, she decided that she could live with making $5 off a retail bottle consumed on premise. So, on the low end, we just make sure that all bottles have that minimum built into their retail pricing. Which, naturally, makes the pricing uncompetitive as a retail price per se. Hence, I am sure, lost sales to the Total Wines of the world, etc.

We not only have the costs of employees, rent, wine glasses, water and soap, etc. but have to deal with a lot of food spoilage and loss. The wine sales have to compensate for this. Selling a $14.99 bottle that you paid $9.99 for does not cover these expenses. But that’s what our regulars buy to consume on-premise.

Honestly, I don’t have an answer. Corkage would alienate our loyal customer base. Given the economy and the sort of populace Concord, NC has, we can’t depend on making up lost margin with volume sales, that is, we sold 50 $14.99 retail bottles today for on-premise consumption. We are fooked. You should see my boss’s face when payroll and rent fall in the same week. It’s hard.

Sooooo, my [long] answer is do what you have to do to THRIVE not just survive. If you can’t make a decent salary, cover health insurance (at least for management), put something away in an IRA, what’s the freaking point? Someone should be in business to make money, maybe not get rich, but live a decent, comfortable life. If corkage achieves that, go for it. If corkage “sacrifices loyalty” but you end up year-end barely in the black, what’s the point? People have to pay, if you don’t have something they want to pay for, go out of business (a general comment, not aimed at anyone in particular!). The customer needs to pay whatever amount creates sufficient income stream for the business to make sense per se. If that’s not possible, the decision is pretty clear.

Anyway, I am unconvinced about the viability of the hybrid model, especially when the clientele lacks true sophistication and there are plenty of box stores and grocery stores with better pricing for “everyday” wines. 'Nuff said.

22

This is the example that popped into my head when I started reading this thread. My memory (and it’s been quite a while since I’ve been there) is that all wines on the restaurant winelist are 10% more than in the wine store.

I looked at their website and only saw this “Wine service charge (corkage) is $15 per bottle. Please limit one bottle for each party of two, and two bottles (or one magnum) for all parties over two. Thank you for your cooperation.” but I assume this refers to bottles you bring from outside.

23

Chris,

That is true. Third Corner is another example of a restaurant with a wine shop attached. The charge nominal corkage ($5 IIRC) if you buy a bottle and drink it in the restaurant or bar area.

24

Hello Marc and thanks! Your reply has blown me away with it’s candor and thoughtfulness. I really appreciate your effort in putting it together.

Your take on things also point to the larger picture (and maybe I shouldn’t bring this up in this thread) of the struggle of small business. As you rightly point out, if you can’t make a living off of your business, why bother. I notice much more these days how difficult it is to make a small business happen in today’s society, not just in today’s economy. If you travel around the country all you see is “carbon copy” cities filled with box stores (Home Depot, WalMart, etc) and I think people see that as progress. While I don’t believe in stifling growth, I do think we need some kind of correction. My Sicilian grandfather was a cobbler. Those days are gone but there needs to be some happy middle ground that a small business can survive in. “Having said that” (sorry Larry David!) we have been able to keep it going by the support of our neighborhood. That takes time. And if you don’t have plenty of capital to manage through the tough waters, which could be several years, then most small business go under. And don’t get me started on restaurant failure. I have several friends in that world and that seems virtually impossible to make anything work long term.

Back to the hybrid issue. I don’t feel we have an identity crisis, I actually look at the bar as added value for my customers. Given that I promote mostly obscure wines from the old world people need to try those kinds of wines first. The tasting flights are essential. I was willing to pay for the extra licenses and jump through the extra govt hoops for that. It has helped a great deal. And if I can still make it work without corkage, like I have, that is the path I will continue on.

25

No problem. As my final sentence alluded to, the real issue may be “location, location, location.” A hybrid model may work in California, Chicago, Boston, let’s just call it “areas with more adventurous customers.” Handselling 24/7 to people who shop exclusively at BJ’s, Target or Wal-Mart is perhaps honorable but perhaps also not wise. You may have the luck of being in a location where the wine bar can “pay its rent” in part as a marketing tool for the wines you sell at retail. Others may not be so lucky. If I put a Rueda Blanco or a Verdicchio on BTG special, people here like it well enough. Once rotated off the BTG special it’s completely forgotten and dead in the water. This has happened with a whole host of wines we tried to popularize via BTG specials. So, now, I look at six bottles of Picpoul de Pinet that have been sitting on the shelf gathering dust since it was taken off the BTG special in July. And customers really liked it!

America is a crazy place.

26

Marc, thanks again for the post.

We still get things like what you speak happening. There are countless wines that once the weekend tasting of them goes away, they languish on the shelf. But that will be true anywhere. There will always be the wines that sell themselves and the ones that don’t.

To give you an example, in the almost 4 years we’ve been open my two most requested wines have been Rombauer Chardonnay and Jordan Cabernet Sauvignon. Nothing against those wines but if that is what I started this business for I would have shot myself in the head by now.

On the other hand, this weekend, for example, I am pouring Sicilian wines, grown in and around Mount Etna. Will anyone know these wines? No, probably not. Will I sell some? I hope so. But that is part of the curve that takes time.

These are the two extreme perspectives as it relates to wine and doing wine retail. I have learned that what it seems to come down to - is buying right. A majority of my purchases need to be in a certain price range for people to feel comfortable to try new things. I bring in certain things for my customers that I would never have thought of otherwise (see Rombauer) and the rest I indulge my discoveries, which is why I opened this shop in the first place.

27

I managed a restaurant for a long time and certainly had a good feel for our customers’ perceived values. So, for some items for a long time there was a sense that raising the price wouldn’t go over well. Then a new era would begin and that threshold would evaporate. It all comes from paying attention to the customers, their verbal and nonverbal feedback, what they say about competitors, etc.

Considering the value added, I can’t see how a $5 fee wouldn’t seem more than fair. (Even more would probably be fair, but making the jump from zero to $10 wouldn’t likely go over well.) Remember, you always have the option of waiving the fee. That, in combination to paying attention, can smooth over bumps. But, be careful about setting a precedent. They should get that you are making an exception and doing them a favor, this one time, because you value them. If they expect a waiver and then don’t get it, they can get upset and not come back.

28

a great way around this is a “frequent patron” sort of card … something like getting one free corkage for every 4 paid. this encourages repeate patronage. only thing with this is that i’m not sure this is the feel you are going for … still, it sounds like a good idea to me.

29

Instead of stupid bar games, have a computer where they can enter/track their notes in CT [dance-clap.gif]

30

That’s my reaction. I don’t think there’s much reason to not charge $5-7. Nothing’s free, especially here in L.A… There’s a cost attached to the space, glassware, furniture, cleaning, compliance. I don’t see how anyone wouldn’t be fine covering part of it. I don’t know of other places in the area that provide such value-added for nothing. This assumes that you sell the wine at a standard retail price and don’t build-in additional mark-up.

For your good-profit customers you could simply waive it. Or you could employ some sort of measure that bottles of over $40 (eg) purchased are free. I can see that there is the prospect of increased sales as a benefit. To me the potential good-will and increase in total retail sales doesn’t warrant free. Absent these factors I doubt $10 even makes sense.

On an enjoyment level, without knowing the food laws, I wonder if it’s possible to introduce some snacks. Not worth it if it triggers regulations, but personally I’m seldom into drinking without a little nosh. Even if it’s the packaged cheese, crackers, salami stuff that many winery tasting rooms have.

31

My wine bar is located in a state where corkage is not allowed and the hybrid restaurant/retail store is also not allowed (mainly - with small exceptions).

I saw this concept in MD and would loved to have done it at my place.

To answer the OP question, I think $10-$15 corkage is fine, IF the restaurant provides adequate stems and the wine is served at the proper temp. If not, less is appropriate.

32

Holy Deja Vu Jeff. You and I REALLY need to share some quality time, although I sold my store a year ago.

I went through exactly the same issue when I tried a $5 corkage fee and was roundly dissed by my winebar customers. I dropped it after just a few days. Somewhere, up thread, someone said that the retail customer thinks “Didn’t I just pay for this bottle?” That’s what I got as feedback. It seemed nearly impossible to separate the two models in the same space.

Marc’s post is really very spot on for the most part.

I think the hybrid model is a real challenge and have seen almost every new entry in this area go for the restaurant or bar model (the restaurant setup, as you know is a different license and requires a minimal kitchen set-up and a specific percentage of sales done in food. It’s SUPPOSED to also require two actual ‘meals’ served each day.) I know there is not an across-the-board set of rules on this stuff in CA, though it all is administered by the same state agency. It seems that local governments work out their preferences and concerns with the state ABC and that influences the ‘conditions’ placed on the basic on-premise and off-premise licenses. My hybrid shop had a cordoned off over-21 area and we were limited to only 2-ounce tasting pours. I could not legally pour more in a glass at one time. The store had a large cheese and charcuterie case and we offered cheese plates, cured meats, olives, and paninis all day from behind the cheese counter… but the ABC said that was not ‘meal service’. To be a restaurant we would have had to find a way to build an actual kitchen of some sort, and it was never explained to me how our food service would have had to change to be ‘meals’. To be a bar we would have had to restrict the entire space to over-21s (in a residential neighborhood where Moms and Dads bought wine and cheese with their kids in tow).

The same type of issue came up when my staff wanted me to find a way to encourage tipping for wine bar and food service. You’d think that would be a simple, common sense thing to be doing. If you go to a bar in a restaurant, or to a winebar, there’s a tip line on your guest check, right? Well… more than 50% of the guests wouldn’t tip, and the only explanation seemed to be that they saw the space as something different from how we saw it. Had to stop that too… which really made less sense than dropping the corkage. The new owners have a tip jar only. I have my own feelings on that.

Had I known all this before I started the process I would have done it differently. The people who bought my store, still operate pretty much the same way, but they have changed the ‘ambience’ to look like a more formal winebar and less like a retail store, though they still show as many facings as I did. They seem to be doing OK.

Bottom line… no corkage fee.

Anyway… I’m Deja Vu’ed out for now.

[swoon.gif]

33

marc’s post is very good… and sad. I’m not ITB and haven’t been, but when i first saw this thread I kind of knew what the replies would look like and Marc nails why - people will do the economically rational thing and go buy a retail bottle and drink it on premises vs buying the exact same wine for more off the list. That’s perfectly rational behavior… and will kill the shop. The owner of the shop needs to do the economically rational thing for her shop and kill one side of the business (whichever isn’t working financially).

The only other rational thing to do is to only sell wines on the wine list that you don’t sell at retail AND do not allow retail wines to be brought over the bar side but… good luck with that.

Corkage, hiking retail prices a bit to subsidize the bar, etc are all stopgaps. The real issue is that you’re trying to run two businesses with different needs under one roof. I can see some places where you physically separate them and really do run them as two businesses working… but the lack of clarity in running both under one roof is going to result in lower margins and gross profits than doing one or the other.

34

I would recommend a “stemware” fee. From what I’ve witnessed customers have difficulty paying corkage for opening a bottle they just purchased and feel the only service you offer for the money is pulling the cork and easily ignore/forget/don’t understand your laid in cost that is not reflected in the retail price. Stemware breaks, needs washing/polishing and requires labor and electricity to get them ready for customer use. By employing a stemware “rental” fee that is a one time charge ($2-5/stem) each visit, you might be able to shift the paradigm. Be prepared for people to bring in their own stemware and take it on the chin but at least you won’t need to wash or replace their glass. Good luck!

35

The fact that you can purchase a bottle you want to drink at retail, then sit at their bar, use their stems and take up their bar space…should warrant $5 / person minimum without paying restaurant mark-ups.

And if the corkage is waived, most folks I know tip very generously for that gracious service.

Plus…remember to share your bottle with everyone!!!

36

I really do appreciate everyone’s comments. But to clarify, we have no problems with our current system and as long as we can keep it going that way, we will. I like the bar to be casual.

Yes, I paid plenty of dough up front to be able to pour wine but I would rather have a great neighborhood vibe than a nickel and dime you on every thing approach. Again, not a great business model but the one that lets me really put my imprint on the shop.

We do not find any identity issues with our model either. We are an independent retail shop that offers tastings. The wine bar helps our bottom line (maybe it could be more) but people seem to see that as an added value to the retail component.

37

Jeff, if you can make your current model pencil out, I hope you’ll see increasing business and customer loyalty as a result. Speaking as a customer, I think your approach sounds great, and I would certainly support such a model in my own town.

38

Just don’t pop and pour my Rüncot, Jeff!

39

Too late!! neener

Actually Ken, I am looking into more of the '99 because since you bought it I’ve had 2 requests for that same Mag (not including myself!!)… sorry, thread drift. Oh yea, corkage smorkage.

40

I’m a trend-setter! [bow.gif] [dance2.gif] [dance.gif]