When you go to your favorite restaurant, you know that they want you to order alcoholic drinks and other beverages with your meal. Why? Because that’s where the restaurant is making the most profit. That lemon vodka cherry slushy mix costs very little to make, but it’s sold for a handsome markup. In many cases, the price per drink is 5 times the actual cost of the drink. So, if it costs $2 to make the drink, it costs $10 to the customer.
Why the markup?
You’re paying for the experience of being at the restaurant, the expertise of the person serving you, the cost of the materials, the costs for any mistakes that were made on other drinks, and generally the need for profit on the restaurant owner’s part (after all, that’s why they went into business, right?)
Bars have complex formulas for determining the prices of mixed drinks. Generally the price of each brand and type of alcohol is calculated into a price per ounce. This is then divided by a percentage called a pouring cost. The pouring cost is what percentage of the total price you want to have the cost of the alcohol cover. Different types of alcohol will have different percentages.
For example, a shot of Jack Daniels costs about a dollar an ounce in the bottle. If you have a 20% pouring cost, then $1.00 / 20% = $5.00. A 15% pouring cost would be $6.67. Normally these prices are rounded up to the nearest dollar, then another .25-.50 cents are added on top for extras like cherries, juices, and the like.
When you next go into your favorite restaurant, look at the liquor pourers on the tops of the bottles. You’re paying for those as well as for the experience of being in the place itself.
Special thanks go to Jimmy Benson on Flickr for the Creative Commons use of the picture.
