Industry Standards for Costs

[Mixxxer]

What are the industry standard/optimum pour costs on draft beer, bottle beer, and wine (8oz gls)?

I have my liquor at about 22%, trying to get it at 20%.

Also, I have a room that is being used as a temporary lodge for our local Elks Chapter whose building burned down. The problem is that they are getting their drinks at the same cost as when their place burned, and the drink prices are much less than what I have priced for the rest of the establishment.

Any suggestions on how to isolate the costs for that room independant of the rest of the building?

Thanks

[David]

Why are matching their pricing?

I wouldn't.

[owneroper]

cant you set up a temp bar in the elks room, they sell those moveable bars. Why wouldnt I as a regular customer get a drink from the elks side? How does that work

[Mixxxer]

David - good will by the owner is the answer to your question. I told the owner he simply can't match their prices. We tried to stay somewhat close to their prices - as much as I could stomach, but they are still throwing off my averages.

Owner - I have a seperate (portable) bar set up for them. The room is locked when the Elks aren't in it, and when they are, there is no outside patrons at all in the room. The issue is my cost(s.)

That is why I was wondering if someone had an idea about how to get an average total for the 2 rooms. Maybe someone has had to average out the costs between two rooms before...

As well...any input on the industry standards for percentages on draft, bottles, and wine?

[DavidTownsend]

The only two ways I can think of to separate the cost would be to have a completely separate stock of LBW for the Elks and inventory it separately, which is probably not feasible, or...

Do a complete inventory of that bar before you open it and after you close it. Make sure that if anything is added to the stock while the bar is open, it is added to the opening inventory. Then cost-out that bar against its' sales for that one night just like you would the entire place (at least once a week I hope).

If 15% of your total liquor (at cost, not at the sell price) is being used by that bar, then weight the two inventories to see how much the Elk's bar is effecting your overall liquor cost.

The reason that people are reluctant to give you "industry averages" is because there is no such thing. It depends greatly on several things like...

1) The cost of liquor in your area. Some areas are much more than others. Plus, if you are doing high volume you'll get volume discounts that you won't if you are a small bar.
2) Your volume. If you are doing $10,000 a week and bartenders are stealing $500 a week - that will have a huge impact on your cost. But if you are doing $100,000.00 a week - not so much.
3) Your liquor tax structure. Some states charge the tax when the liquor is delivered, others when it is sold, and still others based on your inventory. If you are including the tax in your cost-of-goods-sold it will be way different than if you aren't.
4) Your sales mix. If you are selling a lot of wine, your cost will be much higher than if you are selling a lot of draft beer.
5) Your products. A small wine bar selling mostly premium bottled wines will have a higher wine cost than a high-volume nightclub that sells house wine that comes in a box.

There are more variables, but this gives you an idea.

It comes down to what is the right cost for you. If you are vigialnt with your purchasing and inventories, you should be able to determine what your actual cost is - and then work toward lowering it.

Another tool you could use is a "theoretical cost". You do this by comparing your sales to what you purchase over at least 6 weeks. The longer you do it, the more accurate it will be. I have a form for this that tells you your cost BEFORE you order every week, not after-the-fact, which is when most people figure out their liquor cost. If you want the form, e-mail me.

Once you have the theoretical cost, your actual cost should be within 2 points of the theoretical. If it isn't, you have a problem - probably a theft problem.

If you want more help, call me. The number is on my website below. I'm tired of typing. :-)

I hope this helps.

David

[DuctTape]

Mix...couple things. First I think a 22% cost is pretty respectable. As David stated there are a lot of variables and costs will vary by venue and region...however having said that I've seen very few establishments maintain a cost below 20%...based on my experience the goal should be in the 20-24% range. As for your discount sales....if it were my place I would set it up as follows. First determine the exact discount the Elks are getting across the board. Second ring up the sales at regular full price, but charge them their discounted amount...ie if they get half off they would pay $8 for a $16 tabe. This discount amount would be charged as a promotional expense on your books. Now you will still have accurate sales and inventory figures and an expense item that you can look at and determine what your giving these guys. Also, depending on how my books are set up, it may be more beneficial to use this expense as a charitable donation for tax purposes. Discuss with your cpa. Just a thought and hats off to the owner for taking care of these people....good long term investment in my eyes.

[Mixxxer]

Thank you all for the input - outstanding - as I knew it would be!