Know your drinks profit margins - run a pub
Understanding the profit margins for your business may seem like yet another thing you need to think about, but doing so is essential to long-term success and financial health.
Knowing the profit margins for the drink and food you sell can positively impact your pub businesses' bottom line, as it allows you to understand the most profitable elements of your business.
What Is A Profit Margin?
Put simply, a profit margin is the difference between what you pay to buy in and prepare food or drink, and the net price (excluding VAT) at which you sell it. The greater the margin - or difference - the greater the profit on that product.
If your profit margins are healthy and you are achieving the right level of sales, then you are well on the way to running a profitable business.
How Do I Maximise My Profit Margins?
Up selling and encouraging your customers to choose products that represent the highest profit margins will increase your profits. So, if a craft ale 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 it to your bar to capitalise on this.
Knowing your profit margins will also give you a competitive advantage as it enables you to evaluate your pricing position in the market, analyse competitor’s offerings and find opportunities for differentiation.
By optimising your profit margins, you can position your products competitively while ensuring sustainable profitability. Stock takes can help to prove the actual gross profit margins being achieved in the pub on a product-by-product basis and are as important as the regular management of accounts.
It is also essential to make staff aware of the items with the greatest margins so they can upsell these too. Even though you might not want to disclose the precise profit margins on food and beverages, you should encourage staff to upsell items that generate the highest cash margin.
If you haven't previously, give them training on how to market to customers. For instance, if a customer is unsure what to drink, propose a premium drink, offer wine with a meal, suggest dessert and coffee, or even just suggest a packet of crisps with a pint. Our training team can assist by arranging in-pub training that can address topics such as this.
Over the course of each business week, it is important to maintain a careful watch on your profit margins. Profits can be affected by something as simple as over filling glasses or serving measures greater than those costed. Kitchen food wastage and customer returns should also be monitored, as this will also impact on your profits.
What About A Business Plan?
Before you commit to your chosen pub you will be asked to develop a business plan in collaboration with your independent business advisor. The business plan will look at every aspect of the pub business and calculate the margins for profit. It will also serve as a road map for your pub's growth and profitability, providing a clear understanding of your objectives and the strategies required to attain them.
The business plan outlines key components that will enable your pub to thrive and allow you to capitalise on market trends by seeing opportunities that could be profitably filled and produce higher profit margins.
What Support And Training Is Available From Greene King Pub Partners?
To help our licensees calculate their profit margins, we offer support in the form of training courses and resources. You will also have a designated Business Development Manager (BDM) available to support you throughout your tenure as a Partner.
The Greene King Partner Portal provides a library of resources and training tools to support Partners throughout their journey.
How Do I Take The Next Step?
Why not watch our webinars for more information on running a pub with us?
Alternatively get in touch today on 01284 843200 or email email@example.com