How do you figure liquor cost percentage how much I charge for the glass and bottle of wine?

Here's a breakdown of how to calculate liquor cost percentage and determine your selling prices:

1. Understanding Liquor Cost Percentage

* Definition: Liquor cost percentage (LC%) is the ratio of the cost of your liquor (what you paid for it) to the revenue you generate from selling it.

* Formula: LC% = (Cost of Goods Sold / Total Revenue) * 100

* Example: If you buy a bottle of wine for $10 and sell it for $30, your LC% is (10 / 30) * 100 = 33.33%

2. Setting Your Target Liquor Cost Percentage

* Industry Average: Liquor cost percentages typically range from 20-30% for restaurants and bars.

* Your Business: Factors like your operating costs, desired profit margin, and competition will influence your ideal LC%. A higher LC% means more profit per sale but might make your prices less competitive.

3. Calculating Selling Price for a Glass of Wine

* Cost per Glass: Determine the cost of a single glass of wine from the bottle. For example, if a bottle costs $20 and yields 5 glasses, the cost per glass is $4.

* Desired LC%: Let's say your target LC% is 25%.

* Calculation:

* Divide the cost per glass by (1 - desired LC%): $4 / (1 - 0.25) = $5.33

* Selling Price: The recommended selling price for the glass of wine would be $5.33.

4. Calculating Selling Price for a Bottle of Wine

* Cost per Bottle: This is the price you paid for the bottle.

* Desired LC%: Same as above.

* Calculation: Use the same formula as above, but with the cost per bottle.

* Divide the cost per bottle by (1 - desired LC%): $20 / (1 - 0.25) = $26.67

* Selling Price: The recommended selling price for the bottle of wine would be $26.67.

Important Considerations:

* Waste: Consider potential wine loss due to spoilage or under-consumption. Factor in this waste when calculating your cost per glass.

* Markup: Your selling prices should cover not only the cost of the wine but also your overhead (rent, utilities, labor, etc.). The difference between your cost and selling price is your markup.

* Competition: Research your competitors' prices to ensure you are competitive in your market.

Example: Liquor Cost Percentage for a Cocktail

Let's say you're making a classic Martini:

* Ingredients:

* 2 oz Gin (cost: $4)

* 1 oz Dry Vermouth (cost: $2)

* Olive (cost: $0.10)

* Total Cost: $4 + $2 + $0.10 = $6.10

* Desired LC%: Let's say 25%

* Calculation: $6.10 / (1 - 0.25) = $8.13

* Selling Price: The recommended selling price for the Martini would be $8.13.

Software Tools:

* There are various liquor cost management software programs available that can automate these calculations, track your inventory, and provide valuable insights.

Remember: Liquor cost percentage is a crucial metric for profitability. Regularly tracking and adjusting your pricing based on your LC% will help you optimize your pricing strategy and maximize your profits.