Restaurant Owners Just Took Another Hit

An Atlanta restaurant says alcoholic drinks have traditionally represented 30 percent of revenue and a whopping 80 percent of profit—and then came the Surgeon General's warning.

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Here are today’s highlights:

• Gene Marks makes the case for unlimited paid time off.

• For many merchants, swipe fees now rank as their third-largest monthly expense.

• Donald Trump’s pick to run the Small Business Administration hasn’t really had a typical small business experience.

• Thirty-six hours after a devastating fire, a family-owned linen service was back in business.

BUSINESS MODELS

The Surgeon General’s warning about alcohol is yet another challenge for restaurant owners: “Ryan Schmied, director of food and beverage at the Amway Grand Plaza Hotel in Grand Rapids, Mich., took action a year ago, after noticing a dip in sales of alcoholic beverages, especially beer and wine. Some changes were easy, like adding no- and low-alcoholic beer and wine, and expanding bottled-water offerings at six of the hotel’s eight bars and restaurants. He capitalized on customers’ growing preference for quality over quantity. For years, inexpensive wines by the glass were top sellers. ‘Now we are selling more and more $20 and $30 glasses,’ he said, ‘and mind you, we are in Grand Rapids.’ But cocktails without liquor have made the biggest difference in bolstering his bottom line. The copa verde, with nonalcoholic spirits, a honeydew-almond cordial, pandan, and Sanbitter, sells for $15 at the hotel’s Spanish restaurant MDRD — the same price as most of the other specialty cocktails on the menu.”

• “Costs of food and labor have risen, and some inflation-weary Americans continue to cut back on eating out. Sales dipped 1.7 percent between November 2023 and November 2024, according to the National Restaurant Association. When people do go out to eat, some aren’t drinking as much. Members of Generation Z in particular are moderating how much they consume and have helped popularize terms like ‘sober curious’ and ‘California sober,’ in which cannabis replaces alcohol.”

• “Although alcohol generates far less revenue for restaurants than food, profit margins on drinks are much larger, and the financial risks for owners are fewer. Unlike a walk-in refrigerator filled with perishable food, the bar is stocked with inventory that doesn’t go bad. Labor costs at the bar are easier to manage, too. At the Atlanta restaurant Gunshow, sales of alcoholic drinks account for about 30 percent of all revenue, but they provide about 80 percent of the profit.”

• “It’s easier to plug holes in the budget by charging more for drinks. Customers have fixed ideas about what menu items should cost, but there’s more flexibility in what they’ll spend on cocktails, beer and wine. ‘They’ll say, I’m paying this much for a piece of chicken?’ [Chase Sinzer, owner of two restaurants in New York City] said. ‘When chicken costs 75 percent more than it used to and we can only raise the price 25 percent, you’d better sell some booze. No one spends more on chicken than the next table, but people make different choices about alcohol.’” READ MORE