I read recently that movie theaters don’t get any of the money from the opening weeks of many of the big budget movies. So, those snacks and drinks are ridiculously expensive, but that’s the only thing generating profit during their largest selling showings.
It’s kind of a side point, but I think many people are completely unaware of the huge expenses involved in running a restaurant. I know that some charge what I even consider as too much, but if I can get a $30 retail bottle for about $60 in a good restaurant, I am happy. If I can get a more expensive bottle at less than 2x retail, I’m really happy (if I am planning on spending more than that on wine, which I don’t often do at a restaurant). I read a while back that Frasca in Boulder, CO started out with everything priced at something like retail + $10. They had to change that policy because it wasn’t financially sustainable. I understand that their pricing is still relatively very reasonable for a restaurant, but I think many people’s definition of reasonable is unreasonable. I can’t lay down all of the actual costs involved, but I believe that story, and I think it shows that a lot of people want restaurants to be okay with losing money on the wine programs. Legal Seafoods has great pricing (at least in MA), but they also own the entire supply chain for the seafood, so they have a lot more profit built into their menu items than most places do. Plus, they’re a large chain, and in MA, they’re able to use their enormous buying power very effectively to get great deals on wine. They also have locations that seat a ton of people, so they’re working on a model that focuses on volume in a way that many places can not. That’s a model that can’t work for smaller, single site places. I’m not in the restaurant business, but I understand and am fine with the pricing at most places. There will always be steakhouses and certain high end restaurants in big cities that do charge too much, but I don’t tend to go to places like that, and if I do, it’s a one-time celebration where I’m okay with spending a lot on wine. As for the other places that charge too much (significantly more than 2 or 2.5x retail), I drink beer and I’m fine with it. I save the expensive wines (whatever that means to me) for when I’m home cooking myself or at a place that allows BYO.
I understand that we know how much certain wines generally cost, but it does strike me as a little odd that so many wine nerds who will spend large amounts on single bottles for home consumption are upset about getting a very nice bottle for significantly less than they often spend at a restaurant because they know they can get it for half that at a store.
My borther-in-law is an executive chef, and has told me that $10 above the purchase price is what restaurants should charge for their wine. Any place that charges more than that- particularly more as the wine gets more expensive, is essentially ripping off their customers (my words, not his).
So you want to go to a restaurant, where the proprietor is paying rent on x thousand square feet, and:
post up for a couple of hours
are served a meal
are served beverages
clean up nothing
but somehow they are taking you for a sucker because they need to make a profit? Whether the markup is 100% or 500% is their business and you can decide whether or not you want to spend your time at their establishment. Trust me when I tell you though, they are not taking you for a sucker. They are just trying to make money.
What about that beer you ordered that cost $5 that they paid $1 for…is that equally as scandalous…???
The primary reason I go to a restaurant is for the food; it’s because (a) they can do a superior job of preparing the dish, or (b) I feel like relaxing and letting someone else cook for a change. In either case, I realize they are going to need to make a profit on the food to cover all their expenses and stay in business. With the right restaurant, their food pricing is such that I feel it’s easily worth it to pay the extra money that it costs to have them prepare and serve the food.
By contrast, when it comes to wine there tends to be a more significant disconnect between what they want to charge me for ordering a bottle of wine and the value I get out of drinking the wine in their restaurant. Since I already have plenty of wine, I don’t “need” to have the restaurant sell me one of their bottles. And when their sales price is 2-3+ times retail, then the value I get out of drinking their wine doesn’t equal the price I have to pay. And to be blunt, the wine list in MOST U.S. restaurants isn’t very good or interesting. So most of the time I’m better off bringing my own wine and paying the corkage fee. If the restaurant won’t allow BYOB, then it’s not likely to be a place I’ll patronize.
Over-head and operating costs. Its the easiest way for those establishments to generate revenue with a substantial profit margin…need to keep the lights on somehow.
The broken glasses, the real estate tax or the rent tax, the contribution to the local protection racket, the accountant who keeps track an files your sales tax returns, the points you pay to the bank to collect your credit card receipts and give free “miles” to the cardholder (Who do you think pays for those miles? The miles fairy?)), the cut that OpenTable takes for putting you on their reservation system, the percentage you have to pay to the bank to collect the credit card charges for waiter tips that you have to pass on at 100% but only collect 98%-ish, etc. etc. I am not ITB on any side of this and I have no horse in this race, but on this one I agree with Roberto. Restaurant ownership is a HUGE gamble and they charge what they charge to avoid going broke even faster.
Restaurant ownership is a HUGE gamble and they charge what they charge to avoid going broke even faster.
Quite the pessimist. So unlike you Jay! The assumption is that of course they’ll go broke, it’s just a matter of speed!
Most of the points are right on but I think Chris hit something that’s key to the irritation -
The percentage mark ups are not that much bigger but we notice them because we are wine geeks and know the cost of those bottles …
We don’t know exactly how much they paid for that fish or lamb chop or even how much it’s costing them to mix a martini, but a bottle of wine is a direct transfer of the product in its original package. Actually, that provides some indication of how much of the price is due to the “because they can” phenomenon - some places will have higher costs because they have larger staffs, higher rents, etc., but if the wine is a multiple of what it’s sold for in another establishment near by, the difference isn’t likely due to costs.
This post plus others above noting that the percentage markup on wine is more money because of the starting price really sums it up for me. If I go out, the food is usually something I can’t do at home or at least not without more fuss and effort than I might want to muster. That’s not true for the wine and a 300% markup on a $20 bottle is way more noticeable that on a $2 bottle. Paying an extra $4 per beer to have with a meal is pretty trivial. Paying an extra $40 isn’t.
As for the “But they have OVERHEAD…” argument… yes they do and they balance it mostly on the people who are drinking something (mixed drinks, beer and wine).
Why do we continue to pay it?
Lack of options. If you want to go out for food and you want to go to a certain level of restaurant it’s likely that the prices will be similar across them.
Desire to go out. Both just to get out and have fun, but also to eat at a killer restaurant, fave place, at the place witha great view because it’s really sunny out, etc.
We want wine with our food. Not beer, water, etc. So we mentally account for the price of the bottle.
This is why I like places that have really nice well chosen lists with things like Loires, Beaujolais, etc etc. A wine that retails for $25 might be $60 on the list but deliver fair value for that if it’s well-chosen. And, of course, this is why I don’t really care about paying a reasonable corkage fee. If I can pay $20 to help keep nice places open where they’ll let me drink my own wine and serve me good food, I’m happy to drop $20 on them.
I am presuming he means $10 over full retail mark up as opposed to cost. There are hardly any restaurants in the world that operate on that margin. Would be curious as to where he works and if they follow this mantra which would, on its face, seem to be very bankrupty.
A perfect example of pricing disconnect on wine in restaurants is seeing something like a recent-vintage Silver Oak Napa Cabernet on the list for $150-200+ in an upscale steakhouse. Let’s put aside for the moment whatever thoughts you have about pricing formulas/percentage markups. Just ask yourself–is the experience of drinking that wine in a restaurant “worth” the money they’re charging for it? I suspect that for vast majority of us, the answer is no. While I might choose to pay $35-40 for an incredible steak at a place like that, I really can’t justify to myself paying that kind of coin for that kind of wine. So even if the restaurant GM could show me a spreadsheet that shows why they “have” to price that wine in that fashion, it doesn’t make any difference to me.
Europeans have a solution: you charge a COVER just to sit down, typically €2-5. I see this in almost every restaurant in Brasil too (although it comes with some olives, nuts and bread). This helps to defray fixed costs.
Speaking of eggs, what do you think the markup is on a Cheese Omelette?
When I worked at Antoine’s in NOLA they had a few left of a pamphlet written early in the 20th century explaining how a 5 cent egg became a 75 cent omelette. They gave them out to tourists to explain the economics of a restaurant of that scale (1200 seats, 200 employees).
That’s what they want you to think. There is a restaurant in Pittsburgh, the Carlton, that is high end, has been in business forever, and is very famous for the $10 mark-ups on wine. Obviously, their philosophy has not been ‘bankrupty’ for them. And what about all of the restaurants that either don’t serve wine or booze at all, or only have basic low end stuff, and therefore by definition aren’t making huge sums of money from their wine. Somehow, they are all managing to stay in business no better or no worse than anyone else.
As has been pointed out before, food gets transformed. I’m not paying for the raw egg. I’m paying for someone to take several and make it into an omelette, probably with sides, etc. None of that, NONE of it, happens to wine. What happens with wine is the equivalent of someone bringing me several raw eggs and some cheese, cracking the eggs into a bowl and putting the cheese on a dish. I dare a restaurant to do that and charge the price of an omelette.
as has ALSO been pointed out, it’s one thing to pay $12 for a set of ingredients that cost $3. It’s a different scale when you are paying $60 for something that cost $15.