How Alcohol Orders Drive Restaurants’ Margins

The economics of the restaurant business have long depended on booze. “Without alcohol sales, it is extremely extremely difficult to be profitable,” says Justin Abad. The D.C.-based restaurant consultant and former restaurateur (Cashion’s Eat Place) provides an example. “Pretend there’s a $10 appetizer,” he says. “If you’re a good operator, you’re running at 30 percent food cost, meaning you will make $7 on that item.” He compares that to a cocktail. The restaurant might make $7.50 on a $10 cocktail once it aggregates all of its beverage costs.

Fifty cents might not seem like much, but Abad says it comes down to “soft costs.” Serving that $10 drink may only require cracking something open and pouring it, while with food you have to think about labor and waste.

This is not news. But several fresh factors compound the need for restaurants to push liquor sales on guests. Chefs are aching to get their hands on the latest and greatest and ingredients to keep up with competition, whether that means answering the call of the farm-to-table movement and sourcing locally or going the extra mile to score something special from overseas.

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