Rules Of Thumb For Beverage Costs: How’s Your Restaurant Doing?

We found this little gem online last week. I wanted to share with you come known good beverage management practices.

Although every restaurant is unique, industry rules of thumb can provide a valuable starting point for evaluating and understanding how your restaurant is performing.

While there will always be exceptions, here are a few beverage cost rules of thumb that we’ve found to be quite reliable over the years when working with operators who have collectively managed thousands of diverse restaurant operations.

Alcoholic beverage costs: Liquor, beer and wine costs will vary among restaurants due to a number of factors but here are typical costs in percentages:

  • Liquor – 18 percent to 20 percent.
  • Bar consumables – 4 percent to 5 percent as a percent of liquor sales (includes mixes, olives, cherries and other food products that are used or consumed exclusively at the bar).
  • Bottled beer – 24 percent to 28 percent (assumes mainstream domestic beer, cost percent of specialty and imported bottled beer will generally be higher).
  • Draft beer – 15 percent to 18 percent (assumes mainstream domestic beer, cost percent of specialty and imported draft beer will generally be higher).
  • Wine – 35 percent to 45 percent (the cost percentages of wine can vary dramatically from restaurant to restaurant depending primarily on the type of wines served. Generally, the higher the price per bottle, the higher the cost percentage).

NOTE – All percentages above are the ratio of each item’s cost divided by its sales, not total sales or total beverage sales.

For example, liquor cost percentages above are based on liquor costs divided by liquor sales. This applies to the non-alcoholic beverage costs discussed below as well.

Non-alcoholic beverage costs: Historically it has been standard industry practice to record non-alcoholic beverage sales and costs in Food Sales and Food Cost accounts. However, we’ve found that many operators are now breaking out non-alcoholic beverage sales and costs and report on them separately as “Soft Beverages.”

  • Soft drinks (post-mix) – 10 percent to 15 percent (another rule of thumb for soft drinks is to expect post-mix soda to cost a little more than a penny an ounce for the syrup and CO2).
  • Regular coffee – 15 percent to 20 percent (assumes 8-ounce cup, some cream, sugar and about one free refill).
  • Specialty coffee – 12 percent to 18 percent (assumes no free refills)
  • Iced tea – 5 percent to 10 percent iced tea is the low food cost champ of all time. Cost of the tea can be less than a penny per glass. Biggest cost component in iced tea is usually the lemon slice.

FINAL POINT: While every restaurant is different, if your costs are running significantly higher than the averages above, it might be smart to investigate your pricing, beverage controls and the possibility of theft. We can help with any questions should you have them regarding your costing of items. A Point of Sale system that can effectively track a perpetual inventory system is a MUST now days to maintain profitability. There may be other issues going on in your business to decrease your profit margins. That’s what we are here for. Let us find out where your losing money and maximize your business’s profits.