How to increase profit margins in your pub
To increase profits in your pub you have a number of options. You can try to increase the volume of sales by attracting more customers to your pub and retaining them for longer. You can look at offering something different such as by adding a restaurant to your wet-led pub, converting rooms to accommodation, or launching a sideline alongside the pub. Or you can consider ways to increase your profit margins.
Put simply that means taking your pub to the next level by offering more premium products with higher profit margins.
So what about taking your pub to the next level? Whether you want to increase profits in your existing pub or are considering taking on a pub with potential for improvement, changing from value to mainstream, mainstream to a premium offer can make a major difference.
Increasing Profit Margins By Taking Your Pub To The Next Level
Here’s how to get started:
Step 1: Be honest and realistic!
Stand back and take a really honest, critical look at your pub. If necessary, seek opinions from impartial customers or your Business Development Manager.
You need to benchmark where you pub is now so that you can identify the opportunities to take it to the next level. Start with your existing customers, will they pay for a more premium products such as premium spirits, craft beers, barista coffee or a different food offer? What about potential customers in your area, will you be able to attract new customers to your pub if you take it from value to mainstream, or mainstream to premium?
Next consider whether your pub is ready to go to the next level. Does it look like a mainstream or premium end pub? Will customers expect more from their surroundings if they’re going to pay more for drinks or food?
Appearance definitely counts when it comes to attracting higher paying customers; the pub needs to look the part. That doesn’t necessarily mean undertaking a big costly refurbishment (although some pubs may need it). It may be enough to simply update furnishings, glass and tableware, paint the interior or exterior in a more contemporary colour scheme and stock the toilets with higher quality soap.
2. Identify the right products to premiumise
Start by talking to your existing customers – many pub operators when they take on a new pub will spend the first 6 months to a year just trading and getting a feel for what existing customers want and will pay for. It’s important not to alienate existing customers by replacing their favourite drinks or food with a more expensive, premium product.
However, you may be surprised to find that they would welcome different products. Perhaps they order fish and chips every week because that’s the only thing on the menu they like – given the choice they may queue up to buy your house burger, even if it costs more than what they normally pay.
This is your opportunity to find out what changes they would like to see and what products they would like to remain the same.
As well as your existing customer base, also consider the new customers you can attract by taking your pub to the next level. What do they want? It’s a good idea to visit other pubs that are pitching their product and service at the market you want to get into. See what they stock and what they charge, and observe how busy they are and what customers are ordering.
Step 3: Learn to upsell
No doubt you will continue to offer some value or mainstream style products as well as your more premium products. While it’s important to offer choice and keep existing customers happy with familiar products, if you want to increase profits you need to learn to upsell.
Not just you either! Your staff will need training about the new products so they can speak confidently about them and get the skills needed to persuade customers to try something new. If staff can’t answer questions about your products, the customer experience will fall short.
Hosting events is a good way to get customers to try your new premium products – and to attract new customers to your pub. How about holding a gin or rum evening and invite a distillery along to give a tasting and talk? A new menu launch with tasters is also a great idea to showcase your new food offer.
Step 4: Customer service
As you take your pub to the next level it’s not just the drinks and food offer that needs to step up. Your customer service must also reflect the type of products you’re selling. That will include details like the way staff prepare drinks. For example, a value end gin might be measured from the optics into a standard straight glass, a slice lemon and couple of cubes of ice added, and topped up with tonic.
Whereas a premium gin requires a bit more effort, even theatre. Customers expect it to be served in a specific glass. Unless the customer says otherwise it should be poured over plenty of ice and customers should be offered a choice of premium mixers. Garnishes should be more adventurous than a slice of lemon; many premium pubs garnish gin with botanicals that match the flavour profile of the gin. And gin should always be stirred before being served.
Similarly staff should be trained to use your barista machine. Customers have lots of opportunities to buy excellent quality coffee served expertly on the high street, so make sure your staff understand that preparing barista coffee also requires some theatre and style.
Step 5: Ambiance
With the right products and customer service the only thing that might let your pub down is the interior decoration and ambiance. As well as ensuring your pub is well maintained, clean and welcoming, little touches convey quality and improve the ambience.
Replace standard supermarket soap brands in the toilets with a more upmarket version. Add a bottle of hand cream. Provide some slightly better quality hand towels. Oil based fragrance diffusers complete with reeds look much more classy than a cheap supermarket fragrance stick or plug in.
Introduce some greenery or floral arrangements into the pub. These could be sprays of flowers in vases, or some pot plants. A few cushions on sofas and window seats look instantly inviting. Updating furniture and glassware can also make an instant improvement.
Menus should be clearly written and printed on good quality paper – wipe clean laminated menus look cheap even though they are practical. Update your bar snacks too; premium crisps, nuts served in bowls and other popular snacks will reflect your new offer (you can still stock mainstream branded crisp for your regulars if that’s what they want).
Finally, make sure your drinks and food are properly priced! Know your margins and ensure there is minimal wastage using the Greene King profit margins calculator. Click here to download our drinks, coffee and food margin calculator templates.
For more advice on running a pub sign up for our email series below. If you would like support taking your pub to the next level, speak to your Business Development Manager about your plans. They will be able to offer advice and help you identify the opportunities.