Know your drinks profit margins - run a pub
If you were put on the spot, could you say exactly what your profit margins are for specific drinks or food? If you asked your staff would they know?
While you might not expect your staff to know the exact figures, you should have a reasonable idea. With this crucial information you will be able to drive profits and income from your pub and spot opportunities to increase revenue. So if whiskey with its attractive profit margins is touted as the ‘next big thing’, and your clientele are receptive to premium drinks, it makes sense to introduce a range of whiskeys and perhaps run some promotional events.
Premium products such as branded wines and spirits, or food offer the highest profit margins. Upselling and encouraging customers to choose the products that offer your highest profit margins will increase your ultimate profits. But you do need to know exactly what those profits are.
Here’s our crash course in profit margins for anyone thinking about running a pub! If you want to find out more about running a pub with Greene King click here.
Profit Margins: Business Planning Support For Pub Landlords
So what exactly is meant by profit margins? It is the difference between what you pay to buy in and prepare food or drink, and the price at which you sell it. Bear in mind that those costs also include items such as heating, lighting, staff and administration costs as well as the basic product costs. If your profit margins are good and you are achieving the right level of sales, then you are well on the way to running a profitable business.
Creating a business plan with the aid of your Business Development Manager is the first step in this process. This business plan will identify all the features that could make your pub a success, and what investment in time and money needs to be made to achieve that aim. Choosing the best brewery tie to suit your needs is essential as such ties can vary considerably when it comes to choosing drinks of any kind.
It is very important to have such a business plan in existence from the beginning. It will enable you to identify opportunities to innovate, extend the offer for example by selling premium wines and spirits, tapping into trends such as for cocktails and mocktails, or offering an extending dining facility. This may help you to spot an unfilled niche within the area that could be developed profitably, and offer higher profit margins at the same time.
Good examples of pub operators who have done this include James Morgan at the Antelope & Cider House in Surbiton. With Greene King’s support, the Antelope opened a microbrewery – the Big Smoke Brewery – adjacent to the pub. As a further profitable offshoot, sales of food rose alongside sales from the micro brewery.
In creating a business plan, you will be able to look at every aspect of the pub business and work out just what the real scope is for profits and the creation of a sustainable business before you actually commit yourself to your chosen pub. It is a great way to obtain an unbiased, objective view of a pub business while identifying clearly exactly where profits can be made.
Drinks Margin Template
Greene King is very proactive in providing support to landlords to ensure that they run a profitable business in every respect. Recognising how difficult it can be for many new landlords to know exactly where to start when it comes to analysing and identifying profit margins on food and drink, Greene King has set up a variety of support systems to provide landlords with all the help they need.
All they have to do is ask, and take advantage of the available help and advice. There are training courses available as well as business templates such as the Drinks Margins template.
The Drinks Margins template is very simple to use. It is a basic tool that allows you to set the profit margin for any product. Using it allows you to:
- Decide what margin will achieve a specific price
- Decide what price you should set to achieve a specific margin
- Decide what to charge if you want to make a certain amount of money.
All that a landlord needs to operate this Drinks Margins Template are Excel, Microsoft Office or Open Office and a little patience while you learn to use the template. Persevere and it will save you money, and ensure you get achieve good profit margins on each drink that you sell in your pub.
You can download our Drinks Margin template here, and also find other useful resources for developing your business plan.
Equally useful are training courses such as Go For Growth: Planning for Success. This workshop provides participants with simple, effective and proven methods to succeed: set yourself apart from the competition and project realistic targets. During the workshop, participants learn
- How to develop your business acumen and entrepreneurial focus
- Assess the current cost base of the business and conduct an analysis
- How to develop an active pricing policy
- Identifying products that can be upsold and how to get your team promoting those products.
- Assessing the marketplace and identifying competitors
- Benchmarking your business and conducting a competitor analysis.
It is important to keep a close watch on profit margins throughout each trading week. Always remember that profits can be affected by something as simple as over filling glasses or handing out too many free drinks. Those free drinks may be a courtesy, but do ultimately have to be paid for out of your profits.
Too much food wastage in the kitchen, and having food returned by customers due to quality or food temperature issues also eats into your profits. A new meal has to be provided and yet more food goes into the bin.
Paying attention to detail will benefit your pub’s profits.
While you may not want to let your staff know the exact margins on food and drinks, you should be encouraging them to upsell those products with healthy profit margins. Provide them with training on how to sell to customers if you haven’t already, for example by suggesting premium drinks if a customer is indecisive, wine with a meal, dessert and coffee, or even just a packet of crisps with a pint.