Restaurants: waste, costs, and woes

Illustrating waste, costs, and woes of restaurants in the current recession, especially as it concerns beer ....

From the London Free Press, 6 April 2009: School of Labatt suds (as linked to by A Good Beer Blog):

"The biggest goal, from my customers' standpoint, is to reduce wastage and preserve profit," says Steve MacGillivary [territory manager for Labatt in London]. <...>

"In a typical bar, five to 10 pitchers of beer are spilled during each (bar server's) shift because of poor pouring practice. <...> He explains that pressure within the draft-beer line and the new keg have to be properly balanced "or beer spews out," not only making a mess, but subtracting from profit. "Between $50 and $100 a shift can be going down the drain," he says.

At how many bars have you seen bartenders pour beer after beer through foam, sending beer literally down the drain? I'd wager the loss is greater than $100 per shift on a busy night.

Training of staff on how a draft system works and 'balancing' that system properly will quickly pay for itself. A restaurant or bar that does not would serve itself better by ripping out that system and switching to bottles only.

Reducing losses would be important at any time, but crucial in a recessionary environment. From the Wall Street Journal Online, 3 April 2009 : Bar Wars as linked to by Brookston Beer Bulletin):

Technomic, a Chicago restaurant consultant, predicts that this year fine dining sales will plunge at least 12%, after falling 4% last year.

Meanwhile, analysts are predicting a less painful contraction in alcohol sales: Technomic predicts a 1.6% decline in sales of alcohol consumed where it is sold.

And why? This breakdown of costs vs. prices in a restaurant, fairly accurate, might explain:

Selling alcohol, and cocktails in particular, is typically a better business than selling restaurant food because the margins are higher. While ingredient costs may account for as much as 35% of the price of an entrée in a high-end restaurant, they typically only account for about 14% of the price of a cocktail or 25% of the price of a glass of wine. [Beer has even a lower cost, the exact percentage depending on draft (more) vs. bottles, craft/import vs. mainstream.]

Bar snacks, which often include inexpensive items like pizzas, can also have better margins than fine-dining dishes.

From the New York Times, 3 April 2009: Empty Tables Threaten Some Restaurant Chains

Since 1990, the number of restaurants and bars has grown to 537,000 from 361,000, a 49 percent increase, according to the National Restaurant Association. Population in the United States grew 23 percent in that period. <...>

Now consumers are cutting back, and dining out is among the casualties. Finer restaurant chains have been hit hard, and so have the casual sit-down places that flooded suburban shopping center <...>

After 16 years of sales growth, inflation-adjusted sales declined 1.2 percent last year, an already tough year for restaurateurs as ingredient costs hit record highs. Sales are expected to decrease another 1 percent in 2009, according to the National Restaurant Association. <...>

Many of the companies going out of business are small enterprises with one to three locations; they are struggling because of slower sales and limited access to credit <...> But larger chains have struggled too, particularly those with a more expensive menu than competitors, or onerous levels of debt.

So, to recapitulate:

1. Know how to serve your beer.
2. Know how much your beer costs; price it accordingly.
3. Serve good beer.