Basic math

Dear media:

You continue to commission, or write uncommissioned, stories about the mark-up in restaurants. These are poorly researched, damaging, and infuriating to those of us who understand how the business works.

So I am not going to rant and rail against these hatchet jobs. I am going to show you why and how these articles are incorrect and damaging. With any luck, some consumers might read this and learn a thing or two.

1. Comparing retail price points with on-premise (that is restaurants, cafes, bars, pubs etc) is a fundamentally flawed argument.

Retailers – particularly the oft-mentioned chain liquor outlets – buy at a very different price from restaurants. Why? Because restaurants do not have the space to store, or the seats to which to serve the copious volumes required by retailers. Especially the chains. Many of the chains have ‘preferred pricing’ from their suppliers (who are more often than not the producer) – which basically means that they get a cheaper price for the same product, but have it available at most stores. Which equals volume. Like when you, dear consumer, go to a warehouse retailer, or Costco, or wherever it is, and buy loo paper at apocalyptic volumes, super cheap. Same deal.

Restaurants? Restaurants are kinda like the corner store. Or the servo. They buy small volumes, usually from a middle man, the distributor. Who takes a cut, obviously. The wines go from producer, to distributor warehouse to restaurant. Extra transport costs here. Might not seem like much, but this adds up. It cannot be absorbed, and continually increases. This cost, naturally, is added to the product: the wine. So, purchased at a higher price = sold at a higher price.

This is not rocket science.

2. A restaurant is not your living room.

A restaurant is a place selling an experience: food, wine, service, the opportunity to not have to cook, serve and clean up yourself. They have expenses, which make this happen: staff costs; training costs; rent; cutlery; glassware; fitout; cleaners; insurance; security; rates; licence fees; fees to play music; possibly storage costs; countless other fees which you fail to notice in your nice bar, with attentive, knowledgeable staff and food you like to eat with wine/beer/softies/cocktails you like to drink.
They are not doing this for your benefit. A restaurant – at risk of stating the obvious – is a business. It exists to make a profit. That is not the easiest thing to do, but there are a number of people making a great go of it. A part of the profit in a restaurant is acquired through drinks sales. Which essentially means that if you wish to pay the same price for Bottle X as you paid at retailer Y last week, go to that retailer, pick up a bottle, and drink it at home.

Wash up your own glasses, prepare your own food. Clean up after yourself, and then factor everything that went into drinking that bottle over and above the purchase price. How much was your glassware? Did you break one? Double that cost. How about the dining room in which you ate? How much did that cost to be there, available for you to use, and decked out appropriately? How about the cleaning products you used, the petrol or bus ticket to get you to the shop and back? What about the food you bought and served, and the plates on which you served it? What about the table, the seats? What about your time making everything ready for your dinner? Add up the cost. Or don’t. Because you never do. But a restaurant does. Because it is a business.

3. Restaurant pricing is not some massive trick designed to gouge and defraud the poor customers

Mostly because restaurants rely on return business – that is you – actually returning. Funny that.
Restaurant pricing involves a whole host of cost inputs.
Retail pricing involves a whole host of cost inputs. Different ones.

Like tax. On wine, the venue pays WET and GST. And then they sell it on, and collect the GST for the government on that sale, and hand it over. They have payroll tax, and rates and it might just send you mad just considering all the taxation implications in a glass of wine if you were to consider every layer added on.

Do you know what each restaurant you visit might cost to run? And how it costs money even when there is no-one there? Because every little cost associated with having a glass of wine in your house is amplified. Because it is not a glass of wine on the couch. It is a glass of wine, often carefully researched by the sommelier, or the owner, or the manager. This research takes time – and it is not just drinking. They look at the wines which best fit their business, which suit their clientele, which work with the food. They work with their chefs and their suppliers to make the best list, and then try to make a small profit. The time putting wine lists together? Immense. And the hours spent doing this cost money. There are people who do this for a living. That should show you the time, and the investment it requires.

Simply put, a restaurant is not a glass of wine on your couch. If you insist on comparing retail prices with restaurant prices you are continuing to do the industry a disservice. The articles are merely click-bait, and pander to the self-righteous who claim that their Corona at a bar – a clean, prepared, leased, serviced bar – served by a person – trained, paid, uniformed – should be the same price as the Corona they buy (by the case – ie: in volume) at the bottleshop.

There have been countless of these articles over the last few years. Each recycling the same figures. And often followed by an article about failing restaurants a few months later. Funny that. Attacking the hospitality industry – which is one of the biggest employers in the country – is irresponsible. And given the lack of adequate research, contemptible on the part of the writer and the editor/publisher.

If you are going to talk mark-ups, talk about all the costs that enter the equation. Not just the cost of the actual product, but the cost that goes into the location and the service of that product.

It is basic math.