Who knew running a successful bar and restaurant would require so much math?
It's unfortunate, but true. It's especially true when considering your bar program. Because alcohol sales can generate high profit margins, being able to analyze profit margins on bar sales will help your business become more successful.
One way to measure success here is to know your liquor or pour costs. But how do you know if your pour cost percentage is good? One way to measure it is to compare your numbers to the average liquor costs for bars and restaurants across the industry.
A Short Note about Industry Averages for Liquor Costs
Knowing the industry benchmarks for something like liquor costs, or other important restaurant operating costs like labor or food costs, is a great way to see if you're on the right track to success and longevity in the competitive hospitality industry.
If your numbers are way higher than the average, then the panic alarm should start ringing in your head.
But the average pour costs should only be used as a guideline. A lot of different factors affect costs.
For example, the type of restaurant you run may have an effect. Like if your venue sells a lot of wine and provides intimate service, your costs would likely be more expensive than a nightclub that relies on cheap mixed drinks sold at high volume.
So it's important to remember that the average might not work for you. It's also smart to look at individual components of your bar program–wine, beer, spirts, cocktails–to know what your liquor costs are for each type of alcohol you sell.
Overall Bar and Restaurant Liquor Costs
To start with the big picture, the industry average for total beverage programs pegs the average cost between 18 - 24%.
This accounts for all components of a beverage program.
Average Pour Cost for Liquor
For spirits, the average liquor cost is 15%. This puts it at the lower end of costs and higher end for profits.
For a bar program, a heavy focus on mixed drinks, bottle service and inexpensive cocktails can generate high profits.
Craft cocktail programs will generate higher pour costs due to the complexity of their drinks as well as higher costs associated for premium spirits. Considering the labor involved is also important, because this will put a cap on the number of drinks that can be made and sold per day.
Average Pour Cost For Wine
For wine, the average cost is between 30%-40%. This puts it at the higher end in terms of individual cost, but bottle sales are great way to drive total sales and increase check averages.
One great way to reduce wine costs is to have a prominent wine by-the-glass menu. With aggressive mark ups, a single glass pour can pay for the full cost of the bottle, allowing some bars and restaurants to make up to 4x profit on a glass pour.
In terms of price markups on bottles, it's important to check your state liquor laws to know how high of a markup can be added to wine. Some states restrict the percentage markup that can be added onto a bottle of wine for restaurants.
Average Draft Beer Pour Cost
Like spirits, draft beer is a cost effective way to serve your guests. Draft beers average pour cost is 20%. Putting it towards the low range of pour cost.
A draft beer program is also a great way to add flexibility to your beverage program, offering a rotating draft selection will give customers new beers to try consistently and can help build repeat business.
Average Pour Cost for Bottled Beer
Bottled beer clocks in at a slightly higher cost than draft beer. Bottled beer averages a pour cost of 25%.
