One of the challenges to ensuring that your food and beverage cost are met is to make sure that you are charging the correct amount for all of the items on the menu. There is a balance that must be maintained so that the prices are fair to the customer as well as being fair to the restaurant. The managers should be held responsible for maintaining the proper cost percentages set by the restaurant, but that becomes a very difficult task if the pricing does not allow that to happen. A proper food percentage should be at around a 35% for a high end restaurant and 30% is a good percentage for mid level/fast, casual dining. For the beverage cost, the blended cost (liquor, beer and wine combined) should be around a 25%.
For beverage cost, it is much easier to set the cost percentage desired and achieve those percentages as there are less variables to work with. For example, if a case of beer costs the house $24.00 from the distributor, then each beer costs $1.00 to purchase. To run a 25% bottled beer cost the price that would need to be charged per beer is $4.00. This should be an easy process to follow as there is no spillage or waste when it applies to bottled beer. There is the chance of breakage occurring, but that needs to be built in to the cost percentage ratio.
In working with liquor, pricing should be affixed to the cost of a bottle of product as well as the size of the pour that is being done. For example, if a customer would like a single liquor drink, like a gin and tonic, the pricing needs to be centered around the cost of the bottle of gin. Let’s say that the bottle of gin is a $20 bottle. In making the drink, the amount of gin that is used is a 2 ounce pour. Keeping in a consistent mix, at a 3 to 1 ratio of tonic to gin there should be about 6 ounces of tonic water used. In a 750ml bottle of gin, you could get 12.5 two ounce pours in making drinks. That would mean that the liquor used in that drink would cost the house $1.60. If the house was working at a 20% liquor cost, then this drink should be priced at $8.00 at minimum to cover the cost of the liquor. There are the other costs involved in this drink (the tonic water and the lime garnish), so a reasonable price would be $8.50. This type of breakdown maintains for all liquor drinks as there is a recipe for all drinks and if everything is priced out to work with the established liquor cost percentage, the pricing of the drinks will adhere to the set beverage cost.
For wine costs, this works in the same manner as liquor, working on the platform that there are 6 glasses of wine per bottle. The cost percentage that should be a target for wine is 30% or lower. The main difference as it applies to wine sales is that the price of wine from the distributor will vary greatly based on type, availability, perceived value and transport expense, just to name a few factors. So, if a bottle of wine were to cost the distributor $10 per bottle, that would be sold to a restaurant for around $20. Keeping with the cost percentage that is desired, that bottle would be sold in the restaurant to the customer for around $60 - $65.
The final area of beverage expense is for draft beer. This has the largest margin for variance of all of the beverage categories. First off, a good percentage for draft beer cost should be around 22%. Some of the factors that come in to play with draft beer, as opposed to the other beverage categories, are spillage, waste (foamy beer, wrong temperature, dirty draft lines), size of the beverage and import versus domestic. A standard half barrel keg (15.5 gallon size) holds 1,984 ounces of beer. From that, if the standard pour is a 12 ounces beer, the keg holds 165 beers; if it is a 16 ounce pour, there are 124 beers per keg. Working with the 12 ounce pour standard, if a keg cost $100, then each drat beer would cost the house about $.61. The proper sales price for that beer should then be in the $2.75 to $3.00 range.
The issue that exists with draft beer cost versus the other beverage categories is the ability to monitor and count the product on hand and compare the inventory counts to the daily sales totals. Since there should be a direct correlation between the starting count number of an item and the ending count, the difference should be the number sold, and that would be reflected on a daily sales report to show the number of an item that was sold. For example, if you started a shift with 150 Bud Lights and end with 70, the end of day sales report should show 80 sold. If the number is less than that, this would indicate that there was some of the Bud Lights given away without being rung in. With keg beer, it is very difficult to know how many have been sold during a shift since there is not a specific count that can be done. This allows for the house to give away draft beer easier than any other product without the house being able to ‘prove’ what was actually sold.
By following these basic elements for control of menu pricing, your restaurant should be able to work within your set beverage percentages and you should be able to arrive at a profitable venture.