We went out for an early dinner New Years and the cheapest thing was the Halibut for $45. That is typical these days. Almost every restaurant I have gone to I snap my head in a double-take and look at the prices. I know (first hand) how much prices have gone up. At Colorado Boy we were using Caputo flour and paid about $19 per pound pre-pandemic, and now it’s more that twice that and we switched to another (great) product that only costs $25. Prices have gone up - I get it.
Still, all the money people had saved up from not being able to spend during the pandemic and the pent-up demand associated with it, is getting dangerously close to the end. Now people are starting to spend on their credit cards, which is very dangerous. Restaurants this past year have raised their prices twice what the national inflation average was. Customers are noticing.
What am I getting at? We really need to lower our prices.
Personally spending $8 for a 12 oz. beer or even a pint I think is too much. Even with grain and hop prices you should have a cost of goods sold around 9% at $6 a pint. I also understand that labor has increased quite a bit, as rents etc. But I think the restaurant and brewpub business is heading for a bear market. People want to go out, but they don’t necessarily want to feel pain when they do.
I believe taking steps now to start integrating less expensive items you offer will pay off. As less people go out, your brewery will be the place they do make the splurge. Here is how I would go about it.
Beer
I would change your menu pricing to reflect the gravity and hop profile of the beers. For example a Mexican Lager, or a Blonde Ale should be much less expansive than an IPA. Put different prices next to each style, just like you do with food items. That way you give your customers a choice.
Wine
This is radical (but I’ve done it). Use wine as a loss leader. Don’t try to hit a wine cost of 35%. Try for 60%. This will make buying a glass of wine cheaper than any other place you compete with. Especially for bottles. Make buying a bottle a whole lot less than buying 4 glass of wine. Typically you don’t sell that much anyway, but if there is a bottle on the table, the night out is now more of an event. It becomes special and more likely to bring repeat business.
Food
You should have a target food cost. If you serve steaks and seafood, it will be about 35%, if Italian or Mexican, more like 20 to 25% (by the way, when I say a %, it’s a percent cost of sale. So if you beer has a cost of sale of 9%, then .09 cents of every dollar you bring in covers the cost of the ingredients).
Anyway if these are your targets, cost out each menu item to see what the actual food cost is. You may have some that are higher than your target, and some a whole lot less. Place your best food cost items at the top, middle and bottom of your menu. That’s where the eyeballs go first, and also how people make their first decision.
Next look at how difficult it is to prep each item and how well it sells. Kill your dogs (the items that don’t sell and are hard to prep) and try new things. But cost those new things at below your target costs. One of our restaurants did a good business with specials; accounting for 20% of our food sales. At that restaurant our overall target food cost was 30%, but we priced out specials at 18%. That really helped to drive down our over all cost. In addition, eliminating the intensive prep items you can eliminate some labor. Speaking of which…
Labor
We need to pay really well to keep what help we have, and it’s the right thing to do. Here in Colorado the minimum wage is over $15. All our staff, including servers make this and more but also share in tips (it’s legal because servers also make minimum wage). So we have to really run a tight ship because our labor is so high.
We used to have a salad person on lunch and dinner. Since dinner rush was over by 8, we decided instead of two people we would replace 2 shifts with 1, working from 12 to 8 and doing prep in the slow afternoon.
This also gets back to the menu and how much prep needs to be done.
Examining your hours of operation will help on labor as well. We used to be open for lunch and dinner 7 days a week. When normal business came back from the pandemic we really looked at lunch. Some days it went gang busters, other days were just a bust. So we cut lunch out except for Friday and Saturday. Our labor dropped and it didn’t hurt our sales at all. It might have even helped our sales, because if people wanted to come in but it was only open at night, they would return for dinner and spend more money than they would have at lunch.
Obviously I could be wrong, but my intuition says there is going to be a backlash to high prices in restaurants and breweries. Make these changes now and you will be ready if that happens. At the very least you will be running a tighter operation, and that’s not a bad thing.
