Running a Bar: Beer vs. Cocktails

As a man, I have uttered those five famous words every man says at least once in his life: “We should buy a bar.” And when you work at One Fat Frog Restaurant Equipment and you see the bottle coolers, the ice machines, the kegerators, it gets your head thinking funny things. But regardless, any bar owner that’s hoping to make money…and we hope that’s most of you bar owners out there…wants to sell the drinks with the best profit margin.

Alcoholic beverage break down into three categories for those who don’t know it: beer, wine, and spirits (liquor as most of us know it). Now, wine is its own entity, so we’ll discuss that another time. But if your between selling beer and selling spirits, you want to sell spirits.

Here’s the reason: the average beer costs about four dollars in the U.S. Of that four dollars, 75 percent is profit for your business. The average cocktail, or mixed drink featuring spirits and mixers like soda, runs an average of seven dollars, 85 percent of which is profit. So if you’re selling a more expensive drink and the profit margin is higher, you’re making a lot more money. Keep that in mind when making your drink prices as well. You need to get that profit. You can also get to your projected earnings quicker by selling cocktails than with beer.

Of course, there is a cost here: we all know that there are two separate licenses that a bar needs to get, one for beer and wine and one for liquor. Now, does a liquor license cost more? Yes, it does. But with a good business, you can make up the cost of the liquor license quickly.

So there you go: you want booze, not beer, sold more than anything. Of course, selling a beer is not a horrible thing, but the more money will come from your liquor. And don’t doubt my interest in opening a bar…it could happen.

One Fat Frog Restaurant Equipment

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