Managing a wine program often seems romantic to people who've never done the job. "It must be so hard to taste wine!" they joke.
It ishard, as any wine director knows. Beyond the allure of selecting wine, it calls upon a wide range of skills including defining the philosophy, designing the list, pricing, managing profit and cash flow, operating the cellar, training the staff, and of course delivering an outstanding customer experience day in and day out.
All of this is vital. Wine programs are a significant source of profitability for many restaurants. Especially the with high cost pressures in California, having a solid wine program can make the difference to restaurant health.
As I worked my way up from server at Spago to wine director at The London Gordon Ramsey, I learned some fantastic tips about how to find more profitability in a wine program. In this series of emails, I wanted to share a few of my favorite tips--in case they can help accelerate your success.
Today we'll focus on margin.
When it comes to margin, it's useful to start with a formula for list and BTG selections. Then, prices should be reviewed and possibly adjusted on each wine, to ensure they communicate and deliver value for the guest as well as profit for the restaurant.
One effective adjustment is marking up your well-known wines a little less than your average. Why? If people recognize some of these well-known wines and realize they are relatively affordable, they will feel more comfortable selecting from your list. On the flip side, you can make more on "discovery" wines that offer fantastic quality for a fraction of the cost.
For example, at Gary Danko, we wanted guests to see Veuve Cliquot yellow label at a great price, so we marked it up less than usual. On the list for a few dollars less than Veuve, we had a fantastic grower Champagne. This grower Champagne was better quality, from a better appellation, and cost us a fraction of the Veuve. It was easy for us to recommend the grower Champagne over the Veuve because it was a win-win-win: the guest would get a better wine, they would save money, and we would get an incredible margin.
Another tip about margin: you can build in a buffer to your margin by assuming that the cost of a case of wine is spread over 11 bottles instead of 12. Why? Because every so often, you'll need to give a bottle to a VIP, such as a reporter or friend of the owner's. Or maybe you need to open a bottle for a staff training every now and again.
This was a huge advantage for us at The Wynn Las Vegas, where VIP comps happened quite frequently, and staff trainings were a huge priority. If you don't want it to eat into the cost, using 11 bottles instead of 12 as your cost basis is a good buffer.
And if you end up not needing to comp any bottles, voila, you have 8% extra cost savings. As any Cornell graduate will attest, it's smart to keep your savings to make your program stronger. This simple change will increase the health of your program overnight.
These are just a few tips in hopes of saving you a little time in reaching your goals. And may you have a little extra time for fun during an incredibly busy summer season. Cheers to finding your balance!
Sincerely and with respect,
Alternately, you can just track what you give away. I think it is super easy for a staff to get carried away with the idea that it is okay to pour a free glass for a VIP or regular with no way to track it and therefore no way to hold anyone accountable.
I apologize for my delay to your comment. Yes, you can track what you give away, though that is NOT alternately increasing your profit. Full stop.
You think it is super easy for staff to get carried away with the idea that it is okay to pour a free glass for a VIP or regular, that is a whole other subject in itself that relates to staff management and how much trust exists. Higher end establishments have high trust in their staff...lower end, not so much. So just to be clear this is a management practice. Holding anyone accountable is not related to increasing profitability. Just tracks it. And after you track it, how do you pay for it.
Any owner or restaurant owner worth their weight is well aware of accounting measures, though methods to increase the bottom line are always welcome.
This is about increasing profitability. Full stop.
Super interesting post and responses. So in order to not sacrifice your margins to give VIPs an an occassional comp, you charge the common folks a higher price? I guess someone has to pay, but I had assumed the philosophy was that those things were done to build customer loyalty as a marketing cost, which leads to higher profitability because overall spending will increase with time. Kinda makes me feel dirty to think about charging everyone an extra buck so I can give something they paid for to a richer person than them.
this is not about giving VIP's or anyone anything first of all. That is what you do when...the customer doesn't like the wine you sold them and look for alternative methods to move the wine. Sometimes you offer a taste to guests, right? What else are you going to do, pour it down the drain??? You have to sell it still. This is not about giving product away, its about building insurance, and barriers to protect the business in times of need. Having it cost the business less, is an existential pursuit.
THIS IS NOT ABOUT GIVING WINE AWAY. IT IS ABOUT INCREASING PROFITABILITY. Lets pretend you give nothing away to no one. You have costs that always are coming at you. How do you build the profits? Read article.
Yes Jeremy, someone does have to pay, usually its the business which is a leading reason why so many close every year. At the Cornell school of hospitality management they teach you to keep the profits, and never pass it on to the guests. That is why so many close. You assumed incorrectly. You build customer loyalty with great food, service, beverage. Thats why great establishments have a long wait list to get in. Not because of the freebies. That's a fallacy. Why would you give product away in the first place to anyone. Giving product away does not ever lead to higher profitability. Never has, never will.
Read the article. Thank you.
I get it.
I never insinuated giving away the house was a way to build a successful business, but was addressing an example from your article that mentioned frequent comps at a casino restaurant. I'm not even suggesting using them EVER, but you worked at a place that apparently felt there was value in doing so. Which is it? Is there a marketing value in comps in a casino restaurant situation, or are the frequent comps you mentioned simply a way to smooth over screw-ups? If it's the latter, wouldn't it be better to improve the issues that are causing the need instead of raising prices (the buffer you mentioned), so that your other guests aren't losing the inherent value? At the end of the day, the market should set price, so this whole conversation becomes moot. I'm just curious about the more abstract philophical motivation behind it.
All good Jeremy.
I also worked in 3 star Michelin in London, 2 star in NYC, and 1 star in SF. They weren't casino's. One uses what one learns in life to apply to other situations. Casinos comp lots of things and would take a much lengthier reply to address. The answer in a casino situation is both. The answer in a free standing restaurant is neither.
In a free standing restaurant which to where this is best attended to, is to create a buffer, insurance if you will and a great way to help subsidize your staff education costs. You can ask wineries for free education samples, though if your working with inventory that is imports, or that you have no idea whom sold it to the restaurant in the first place it would be hard to ask or request free goods for education. Having the cost of the wine divided by 11 instead of 12 increases the per bottle cost, that you pass on to the guest. Yes, you pass the cost on to the guest. This is how to help with the education of the staff. It's one of the best ways to subsidize staff education. The motivation is to inspire staff and educate them.
I'm not sure that the level of trust runs so cleanly and correspondingly with the level of expense of a restaurant. I've seen plenty of untrustworthy behavior in high end restaurants from management and staff alike, and I've seen incredibly dedicated, professional, and trustworthy behavior by staff and management in more casual places. All the same, your point about trust being the major factor in allowing who gets to make these comp decisions hits the mark. Ideally it is someone with an understanding of the restaurant finances on some level and who can connect the dots between the numbers at the end of the month and their actions on the floor during the month.
If you think about your proposal to spread the cost of your case of wine over 11 instead of 12 bottles per case, doesn't that just mean that in the end you are marking everything up a little bit more with this formula? Raising prices would definitely mean more profitability, and it kind of seems like a no-brainer when I think of it that way. My point above was that if word gets out that one bottle out of every case that gets delivered is "up for grabs," then there could be trouble.
Where I currently work, they want to know exactly where the comps are going. They allocate these comps to different budget segments (marketing, waste, guest recovery) so that they can keep an eye on where the problems may be. Also, sometimes the expense is picked up by the hotel and sometimes by the restaurant, even though at the end of the day (or the spreadsheet) we are one entity. If your restaurant is part of a larger operation (hotel, casino, resort) the ownership may want to keep account of different components separately. I've never worked in a casino before, but it seems pretty obvious that their main revenue source is gambling, which will easily make up for the cost of that twelfth bottle in the case.
I think this depends on your boss. Where I've worked if you were able to account for exactly where your money was going that would be better than a blanket accounting for an 11 bottle cost. My boss was actually annoyed with me when he found that my cost was significantly lower than the other restaurants in our group. His reasoning was that he set the cost goal for a reason, he knew the local market well and knew what our guests wanted. If my cost was a little higher because of comps or a run on expensive bottles with lower margins he was fine, alternatively he was happy when I had a lower cost because I took advantage of great deals on high margin glass pours, as long as I could show him where every dollar went. I think the 11 btl strategy might be great for some markets or situations though.