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One of the most brilliant things that ever happened to me as a bar manager was to manage a bar owned by a man who was almost always on the verge of bankruptcy. It made me learn how to stretch the dime, make and create a lot on my own because we couldn’t afford to buy it, and made me figure out how to fix nearly every piece of equipment behind the bar because if I didn’t fix it, it wasn’t going to get fixed. It also made me extremely good at doing costing, inventory, and forecasting – because I didn’t ever have the luxury of overspending. Friends often ask for advice on these matters and it occurred to me that it might be information that others would like.
This post: Costing
What is Costing?
A way of figuring out bar costs by breaking down the cost of each ingredient in a recipe so that you know exactly how much money it costs to make each drink. It is best to figure this out before you price your menu – as then one can ensure they are charging enough to ensure a profit. (You would think that all bars made profit off of their drinks, but I’ve been in many that sell boozy cocktails for less than they paid for the raw materials or absinthe pours that are so grandiose that it would be cheaper for the neighbor bar to buy absinthe from them rather than the liquor store). A bar should be extremely profitable – and it will be if you know exactly what your raw materials cost and how much you are charging for them. Which sounds quite simple – and is if you are willing to put in the leg work.
I’ve actually worked in very few bars that cost out everything behind the bar. I believe it’s one of the main reasons restaurants fail. I have time and time again gone into a place and turned their bar around by lowering liquor costs by pricing according to the actual cost of what is in the drink and taking drinks off the list that are not profitable.
One of the most important thing that a bar manager must recognize is that he/she is almost always going to lose money on Grey Goose (or any premium call) martinis and top shelf manhattans. If a Grey Goose martini has 6 ounces of Grey Goose in it and Grey Goose is $1.20 an ounce. The cost of the spirit in the martini is $7.20! Unless you are in a hot spot in a city, a bar manager is going to have a hard time charging much more than $9 for this drink which only leaves $1.80 in profit. Once you add in the labor of shaking the drink, the garnish, washing the glassware and breakage – it is a loss liter. Therefore, the smart bar manager creates a cocktail list that is highly profitable to compensate for the straight booze drinkers.
What should I cost out?
As much as you have time for. The constant battle with the restauranteur and the restaurant manager is that the job really takes a human being that doesn’t need to sleep. But even Randy Gardner who holds the world’s record for most days without sleep (eleven) eventually has to get some rest medicine. It is understandable why one might not have the time to cost out every tiny ingredient behind the bar (i.e. the salt on the rim of a margarita) but the main ingredients should be accounted for.
Do what you have time for in this order.
1. Cost out the spirit.
–If the spirit is an infusion – you must account for the cost of what was used to infuse.
2. Cost out fresh fruit mixer.
3. Cost out any other expensive mixer (i.e. fruit puree, heavy whipping cream, coffee, tea)
4. Cost out syrups
How do I figure out how much a mixed cocktail costs?
First, you need to have a recipe for each drink that states how many ounces of each ingredient are in the drink. For example we will take a lemon drop that is made with 2 ounces of vodka, 2 ounces of simple syrup, and 2 ounces of lemon juice.
How to figure out how much an ounce of vodka costs:
It is easy to figure out how much an ounce of vodka costs in Oregon because the OLCC does all the costing for you and publishes each month when any price changes (or sales) go into affect. However, if you do not live in Oregon – it is easy math with a calculator.
First you must know how many ounces are in a full bottle.
- In a 750 ml (a fifth) there are approximately 25 ounces.
- In a liter bottle there are approximately 34 ounces.
- In a 1.75 bottle there are approximately 59 ounces.
Take the price of the bottle. Let’s say a .750 bottle of Absolut costs $22. Take $22 and divide it by 25. Absolut vodka is 88 cents per ounce.
How to figure out how much simple syrup costs:
If you make simple syrup with granulated white sugar, there are 2 1/4 cups per pound of sugar. Let’s say that five pounds of sugar costs $5. Therefore, one pound (2.25 cups) costs one dollar. Each cup of sugar yields 1.3 cups (approximately 10.5 ounces) of simple syrup. That means that 10.5 ounces of simple syrup costs $1. Or simply that simple syrup costs about 10 cents per ounce. ($1 divided by 10.5 ounces)
How to figure out how much lemon juice costs:
If you are using lemon juice that is already squeezed and bottled – use the same equation as the liquor costing by dividing the cost of the bottle by the number of ounces in the bottle. For example if 30 ounces of lemon juice costs $5 then each ounce costs 17 cents. ($5 divided by 30 ounces)
If you are using fresh squeezed juice, there are obviously more variables since you don’t know exactly how much juice you are going to get from a piece of fruit and there is labor involved in the juicing. I have done costing where labor is included – but that can get complicated and if you have never costed out a bar before I would leave labor out until you feel really comfortable with costing in general. Then it might not be such a difficult calculation.
How to figure out how much fresh-squeezed lemon juice costs:
In general there are about two ounces of juice in a lemon. You need to figure out how much that lemon costs. Ask your produce man how many lemons there are in the cases you are buying. A lemon weighs on average six ounces. So if you have a 40 pound box there are around 106 lemons in the box. (Calculated by multiplying 40 (pounds in the case) x 16 (ounces in one pound) and then divided by 6 (ounces in one lemon). 106 lemons will produce approximately 212 ounces of lemon juice. Lemon prices heavily fluctuate during the year depending on the season. If a case of lemons costs $40 then each ounce of lemon juice costs 18 cents. (40 (dollars) divided by 212 (ounces of lemon juice))
So to figure out the cost of the lemon drop:
Vodka = $.88/ounce
Simple syrup = $.10/ounce
Lemon juice = $.18/ounce
2 ounces of vodka + 2 ounces of simple syrup + 2 ounces of lemon juice =
$1.76 + $.20 + $.36 = $2.32
How do you use this number to get figure out a percentage of cost to price?
Determine the price you would like to charge for this drink based on the price. Then divide the cost by the price of the drink.
If you charge $5 for the drink – then you are running 43% cost.
::::: 2.14 (cost of lemon drop) divided by 5 (price of drink)
$5 for the drink – 43%
$6 for the drink – 36%
$7 for the drink – 30%
$8 for the drink – 27%
$9 for the drink – 24%
How much juice is in?
One lime: 1 ounce
One lemon: 2 ounces
One orange: 2 ounces
One grapefruit: 8 ounces
How much simple syrup does one cup of sugar make?
1 1/3 cups
How many ounces of booze are in a bottle?
In a 750 ml (a fifth) there are approximately 25 ounces.
In a liter bottle there are approximately 34 ounces.
In a 1.75 bottle there are approximately 59 ounces.