Before joining BevSpot, Trevor Bernatchez spent over 15 years in the world of restaurants and wine retail. After becoming a Certified Sommelier in 2015, Trevor was looking for new challenges for his career in the beverage industry. As BevSpot’s Sr. Manager of Customer Education, Trevor uses his years of experience and education to help others become more successful with their bars and restaurants.
‘$15 for a martini?! That’s crazy, the owner must be making a ton of money by gouging people with these prices.’
Ah yes...if that were only true! If it were that easy to strike it rich in restaurants I’m pretty sure we would all have one of our own.
There’s a pretty solid reason why they call opening a restaurant a ‘lifestyle investment.’ Truth of the matter is that the odds are stacked against most people opening a bar or restaurant. Almost 60% of all bars and restaurants fail as a business within their first 3 years of being open. That’s a very scary number.
(8 out of 10 restaurants will close in their first 5 years of business)
Now, what’s the main reason for this? A lot of people see all the reality shows out there, read books by famous chefs and restaurateurs, and they see it as a glory-filled industry with a lot of idol worship. They start to get into this industry without having any experience and for all the wrong reasons. Fame and fortune are two of the worst reasons to open a restaurant.
That being said, if you aren’t already a zillionaire when you get into this industry, it is definitely possible to strike it rich. Those cases are few and far between and you might have just as much of a chance of becoming a professional athlete in your lifetime.
Truth of the matter is that the average profit margin for most restaurants is 5-6%. Now if you’re running a restaurant that is taking in $1 million in sales every year that $60,000 paycheck doesn’t sound too bad. Definitely a respectable living, but hard to become filthy rich off of that paycheck.
Now, what if you’re not the only owner? What if you need to pay off your investors? That $60,000 dries up almost immediately, and suddenly you’re not getting paid just to keep your dream alive. That’s hard for a lot of people to deal with, especially if you’ve got a family to support.
Also, think of the other side of that equation...95% of your annual sales need to go back into the restaurant in order to keep the doors open. That’s outrageous! No other industry that I can think of off the top of my head requires that kind of capital just to stay open...not even necessarily be successful.
(restaurateurs rely heavily on their bar menu to help balance out profits)
When 95% of your revenue has to go back into feeding the machine, you’re going to have to charge a certain amount for drinks just to make sure you’re bringing in enough money to stay afloat. With a lot of businesses taking a loss on their food programs through over-ordering and spoilage of perishables, they need to rely on their bar program to keep them successful.
I’ve seen that an average pour cost of 20% can really make up that difference. So, if you really love a bar or restaurant that you go to a lot, by all means have another drink. Not only is it gonna make you a bit happier, but you’ll be doing your small part in keeping your favorite spot up and running at least a little bit longer.
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