Restaurant markups: What's reasonable?

You guys are confused. Using your own example, a wine with a 100% markup (based on retail price) would sell for the _same_ as retail! Drawing that a little farther, a wine with a 50% markup would (according to your math) sell for _half_ of retail. That is to say, a 50% markup would be the same as a

A 300% markup means taking the price and adding another 300% of that price to it. IOW, a 300% markup = 400% of whatever the base price was.

Tom S

in article lKZnc.47165$ snipped-for-privacy@newssvr29.news.prodigy.com, Tom S at snipped-for-privacy@spamlesspacbell.net wrote on 5/10/04 10:43 PM:

FWIW: My 20 years in retail taught me two things: 1) that I didn't want to be in retail any more, and 2) that markup is the calculation of the % of profit in the selling price. In the examples that have been used here the cost is the retail shelf price and the selling price is the menu price of the wine. So.......... $60 menu price minus $20 shelf retail = $40 profit; and $40 divided by $60 = 66.67% MARKUP. I spent all those years having to live or die by the result of that calculation, so I will stand by that definition.

What's been used in most of these posts is a calculation of the relationship between the selling price and the shelf retail in terms of the higher being X-times the lower. It would seem natural to say that $60 is 3 times $20 dollars , or 300% marked up ...... but in retail math you focus on the relation of the profit to the cost. So.... The $40 dollar difference between $60 and $20 is the "markup" and $40 is 200% of $20, not 300%.

All that said...... it still wonder when I see $28 on a menu for a bottle of wine I know I can buy for US$5.99 at Cost Plus. And worse, to be asked $7.50 for a glass of it. Especially when it is likely that the restaurant may be paying $4 or less for that bottle.

Does anyone here know that restaurants generally pay for their wine as a % of the normal shelf retail..... and how their overall "markups" (menu price vs. their actual cost) compare with food markups in restaurants??? If they're the same or less, that would certainly explain why they feel justified.

Midlife wrote in news:BCC5C4F2.42AB% snipped-for-privacy@cox.net:

Assuming they pay wholesale they get it for 2/3 the retail price. 9.99 bottle would have cost 6.66

=>8^O That must be Casillero del Diablo in that example...

Tom S

Which is: paying the restaurant 25 for a wine I could pay 10 in a wineshop. More than this is not my way. Expecially if I find another restaurant selling the same bottle at 15, as has recently happened with a Nobile di Montepulciano by Ruffino: the

Vilco

As someone working in the service industry & the holder of the wine list key....Both choosing wines & pricing them, I can give you a ggod heads up on what is generally the norm (at least here in B.C., Canada). Standard Markup is 100%... In the past, I have worked with a sliding scale... the more expensive bottles were 60 to 70% & the cheap plonk was up to 120%. The owner I currently work for is fixated on the 100% thing, regardless of my lobbying for the sliding scale. As to Kent's comments "what has the restaurant done for me lately"..... First & foremost they invest money in the standing inventory....That expensive wine exists on that list because the buisness is willing to carry the overhead of buying the bottle, storing it ect.... From a personal perspective, often, getting higher end wines is quite the dog & pony show. I have spent countless hours with wine reps, @ tastings & on the phone with distributors sourcing out hard to find wines.... Then waited & waited & waited for them to arrive.... In BC, you more often than not, must buy a minimum of a case of these type of products... so that $50 wine that you're paying $100 for, cost me $600 plus tax to make available to you. Tom's comment about 50%..... I'd LOVE to see it Tom, but it's not a fiscal reality.... I'd sell WAY more wine....but put my establishment out of biz on the way. I can't speak for the rest of the world, but here in Canada.... The average profit margin, for a PERFECTLY run restaurant is 5 to

that's my rant

En Vino Veritas Mathew

in article 4V8oc.23385$F04.18265@clgrps13, Mathew Kagis at snipped-for-privacy@telus.net wrote on 5/11/04 11:26 AM:

This input was very helpful and much appreciated, but could you bring the markup % issue into more clarity for me as you are expressing it? I would just like to be sure that (in your example) 100% markup means that the menu price is double the retail shelf price....[and a 60% markup of a $10 shelf retail would have the wine at $16 on the menu]?

From the profit statement perspective, then..... a 100% markup would be a

Midlife: you got it.... although, our 'licencee discount' is'nt as high as all that, I probably pay about $8.50 for a $10 bottle.... We tend to base our markups on the retail price, however (Don't tell my owner) I tend to hedge it down a little & base it closer to my discount price. In the case of specialty products, ones I know can't be got elsewhere in town, I tend to hedge the margin up a little to compensate for the greif I went through to get it....

Cheers Mathew

Hey!

Casillero del Diablo is a great wine for the money! :-)

-Indirecto

Well, that is a good explanation, in my opinion, to expensive, low-rotation wines.

But what about those wines that you have a good history of high-rotation. Do those really justify 100% markups?

-Indirecto

I suspect you've figured this out, but you have "markup" confused with "margin". Mathematically, markup can be expressed as the ratio:

(selling price - cost) / cost

Markup is often also expressed as the numeric value

(selling price - cost)

rather than as a ratio.

Not correct. That is not how retail markup is calculated. What you are describing a gross profit margin %.

Markup is far more simple. Cost plus %. Example given a $20.00 cost plus

Profit Margin is Selling Price minus Cost all divided by Selling Price.

Sorry.

relationship

Assuming the food is equivalent, I'm dining at mister 15's.

Tom S

That's what I'm doing!

Vilco

in article cOfoc.2655$ snipped-for-privacy@newsread2.news.atl.earthlink.net, dick at snipped-for-privacy@earthlink.net wrote on 5/11/04 7:16 PM:

This is all quite interesting. 20 years with two of the largest apparel retailers in America, then 15 years selling to dozens of major apparel retailers. Gross margin and mark-up were always the same calculation (what you're calling Profit Margin). There must be more than one definition in industry.

With all due respect, here are some definitions from the website of The American Marketing Association:

price placed on the goods; expressed as a percentage of the retail value.

percentage of cost or, commonly, as a percentage of retail.

This is also known as "Mark-on", AND it fits the definition we both agree to for Gross Margin or Margin %, and that I've always known also as "markup".

The site also gives the following definitions:

But.... here it is.... the site also shows the following:

You are quoting the "pricing definition", I think, as opposed to what they and I call the "retailing definition". I have no idea what to make of this, except that there must be differences in different areas of industry. I couldn't find a reference for "pricing definition" on the site, but I believe I know what "retailing definition" means. I'd be curious as to what area yours comes from.

Not much voting activity on the markup poll, below are the results so far. 100% markup (double the retail price) is winning, but the number of votes is so small as to make it meaningless.

Please consider voting so we can get a quantitative feel for folk's perspective. Here is the link

What is the *maximum* restaurant wine bottle mark-up from retail prices that you consider to be reasonable or fair? [5 votes total]

-- ================================================Do you like wine? Do you live in South Florida? Visit the MIAMI WINE TASTERS group at

The liquor method quoted below is the standard used in the DC metro area, and is spelled out in the monthly liquor price digest.

Your department USA store system is unique to USA department stores, and not the universal truth in pricing.

Me too, though I'd ask him to stick them bottle in an ice bucket for a few minutes. 22° is about 72°F , I wouldn't worry about that for a young red. I'd be REAL hesitant to order a wine released a few years ago at Mr. 15, though- my experience is that if when you visit the room is 72, what is it like in August?

Dale

Dale Williams Drop "damnspam" to reply

Mine is an accounting perspective. My company sells food products to grocery stores and is carried by 97% of all supermarkets nationally.

I can tell you without any doubt that Kroger's, Safeway, Albertsons, Wal-mart, Publix, ....they know there is a difference in a markup and a gross margin.