profits by the glass
Drink Revenue Proves Essential for Chain Operators
No doubt about it, full-service chain restaurants have been hit hard by the recession. With guest traffic down and guest checks decidedly smaller than just a few years ago, chain operators are discounting and bundling like never before in an effort to get patrons through the door. Once in the seats, however, chain diners are looking for value and watching their spending, which for some means cutting back on appetizers, desserts and, yes, that second or sometimes even that first drink.
Savvy chain operators, however, continue to promote and innovate around adult beverages, recognizing that the profit in beer, wine and spirits is worth the effort. Those who are really on their game are training staff to talk up drink offerings, knowing that patrons attracted by a discounted app-and-entrée offer might feel they’re getting such a bargain that they can afford to enjoy a glass of wine or a cocktail with their meal.
To find out the role drinks play at the nation’s leading chain restaurants, we turned to Chicago-based industry market research firm Technomic Inc. Slightly more than half — 54 percent — of chain restaurants on the Technomic Top 500 list served spirits, wine and/or beer in 2008, with an average 12.2 percent of sales generated by drinks.
Looking at the leading casual dining chains, Technomic provided Nightclub & Bar with information on Beverage Alcohol Sales in the Top 50 Casual Chains (see chart).
Among the Top 50, drinks accounted for 14.4 percent of sales on average and represented $5.9 billion in sales, according to David Henkes, Technomic vice president and director of its on-premise practice. Five chains enjoyed drink sales of 30 percent or more of total sales — Hard Rock Café, Dave & Buster’s, The Capital Grille, Champps Americana and Old Chicago — while eight chains registered drink sales of 25 to 29 percent, including Buffalo Wild Wings, which posted a 20.8 percent gain in total sales in 2008 and continues to experience growth this year. Upscale concepts Ruth’s Chris Steakhouse and Morton’s The Steakhouse also report beverage alcohol sales in that range.
Four bar-centric casual concepts — T.G.I. Friday’s, BJ’s Restaurant & Brewery, Bennigan’s and Chevys — logged beverage alcohol sales between 20 and 24 percent of total sales. Eight concepts came in at 15 to 19 percent, including three Italian concepts — Carrabba’s Italian Grill, Maggiano’s Little Italy and Uno Chicago Grill — one Mexican concept, On the Border Mexican Grill & Cantina, and four varied menu chains.
Drinks account for 10 to 14 percent of sales at 18 casual dining concepts, including Applebee’s, Chili’s Bar & Grill, Outback Steakhouse and Cheesecake Factory, all of which rank among the top 10 chains in terms of total sales. Chains in which alcohol accounts for less than 10 percent of sales include two Darden Restaurants concepts: Olive Garden and Red Lobster.
While the chain business is compressed, this report demonstrates the important role of drinks in the survival and success of these concepts. “Most operators accept that growing top line sales is not likely, so they know they need to ensure a good a profit picture,” observes Henkes. “Beverage plays an important role in profits. Build and maintain a healthy bottom line by building and maintaining a healthy beverage program.” NCB