Eat, drink, and spend money: Restaurants ply diners with cheap booze
Filed under: Economy
Facing its steepest revenue decline in 28 years, the restaurant industry has decided to appeal to its customers' baser instincts. Offering more and cheaper drink specials, extended happy hours, and all-you-can-drink promotions, eateries from Chili's to Morton's are moving to pull in customers with deals that often seem too good to be true.Conventional wisdom holds that sin stocks -- alcohol, tobacco, and gambling -- are recession-proof: that financial downturns lead consumers to drown their woes in a cocktail of stimulants, depressants, and other distractions. The truth is far more complex: sin stocks are resistant to economic downturns, but not immune. Consumers may drink more in hard times -- but they try to drink on the cheap.
A second recessionary alcohol trend is that, beginning in 2007, more consumers began drinking at home instead of in restaurants. Last year saw a 2.2 percent drop in on-premises drinking, paired with a 2.9 percent increase in off-premises (or home) drinking. In 2009, estimates of the on-premises drop range as high as 10 percent.
For restaurants, this has been devastating. Alcoholic beverages are less labor-intensive and require fewer ingredients than most food items, which makes their bottom line is cheaper. With the addition of a markup that is generally the same or more than comparably-priced menu items, the profit margins on cocktails hover around 30 percent -- roughly double that of food items.
Alcohol consumption -- particularly in suburban and rural areas with less public transportation -- often inspires customers to linger in and order food, further increasing a restaurant's booze bonus. If an establishment can persuade customers to buy a couple of highballs, it can anticipate significant revenues from both the alcohol and from subsequent food sales.
With this in mind, the move toward increased drink specials makes a great deal of sense. To begin with, researchers at the University of Florida and San Diego State University have determined that drink specials encourage customers to drink more than they normally would, which suggests that a narrower per drink profit margin can translate into equal or larger per-customer profits. Add in increased food sales as tipsy customers try to sober up, and the drink special bonus becomes a major recessionary factor.
While economic improvement may spell the end of super-cheap recession drink specials, consumer changes in hard times sometimes linger long after finances improve. Cultural mainstays -- tacos, spaghetti, movie popcorn, soup -- all had their genesis in hard times, yet they're as popular as ever. With that in mind, once Bonefish Grill's $5 highballs and Chilis' $3.99 margaritas bring customers through the door, they'll probably win a permanent place on the menu.
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Reader Comments (Page 1 of 9)
9-30-2009 @ 10:30AM
Vickie said...
Why not give better food value for your money? Encouraging people to potentially drink more than they normally would then drive on home is NOT a responsible sales tactic.
Reply
9-30-2009 @ 11:00AM
Diana said...
You make an excellent point...do not need more drunks on the road...all you can drink?? longer and cheaper happy hours? Hope I am not on the road with those folks when they hit the street! YES! Better food values/coupons! Bring THOSE on!!
9-30-2009 @ 11:01AM
Nicole said...
Vicki.....its not that the restaurant offers cheaper drinks to get people to drink more. The restaurants figure if you consume a drink or two more then you would order with out having a meal, eventally you would order a meal before you leave. The longer you sit and drink the more likely you will order a meal.
9-30-2009 @ 12:50PM
JOE CAPRIO said...
I AGREE WITH VICKIE. DO YOU THINK PEOPLE WHO GO OUT TO DRINK ARE NOT WORRYING ABOUT SOBERING UP. THERE WORRYING ABOUT DRINKING AND THE BUZZ THEY GET FROM IT.THE RESTURANTS SHOULD CONCENTRATE ON MORE FOOD AND LESS BOOZE.
9-30-2009 @ 11:52AM
Sawfingers said...
I have no sympathy for chain restaurants. They overran privately owned restaurants and now you can enjoy their cookie cutter food in New York as well as LA. Smokers are cursed, but it's perfectly OK to promote drinking and ultimately driving after drinking.
9-30-2009 @ 12:27PM
dee said...
i agree vicki
dee
9-30-2009 @ 12:58PM
Rich Unger said...
As a restaurant and nightclub/bar consultant, very very foolish to give the bar away that is where the money is, give the food away at lower prices, keep the liquor prices the norm and roll out the FUN and the WOW FACTORS keep your dining patrons at your establishment longer by offering what no other competing casual dining or bistro or eatery near is offering.
But leave the bar alone.
Stop giving away the bar, that is where you make the most money with the least amount of overhead.
www.promotingnightclubs.com
9-30-2009 @ 1:07PM
Amber said...
I have to agree with you. Im in a dry county so why not do something for those in dry counties or for those that DONT DRINK - im not a drinker so how is a drink deal going to pull somone like me in?
9-30-2009 @ 1:49PM
Dudley Haas said...
Drinkin' is my thing. That's how I met my wrinkle faced wife. If I'd been sober, I wouldn't have fallen on the floor and fer her! HeeHee..
9-30-2009 @ 2:00PM
Lollypalooza said...
Really...why is alcohol served anywhere? It is illegal to drive under the influence of it, and precious few drinkers allow for cab rides or friends, though I don't have numbers to back me up.
And to lure customers with alcohol? For shame...but then drinkers are a lot like smokers, and have many people supporting them.
sigh
9-30-2009 @ 10:38AM
Debbie said...
Nowhere in this article did the names Chilis or Mortons get mentioned. Once again, the headline is a teaser but does not delliver.
Reply
9-30-2009 @ 10:37AM
Dan said...
Chilis and Morton's are mentioned in the first paragraph third line from the bottom...
9-30-2009 @ 10:37AM
Niki said...
Re-read the article. Chili's and Morton's are mentioned in the first paragraph. However, it does not state what their "deals" are to entice customers to dine in the restaurants.
9-30-2009 @ 10:47AM
Diana said...
I agree with you!! It always seems when I open one of the "teasers", it either has not a lot or even not a thing to do wiht what you think it will, or you have to jump through hoops and circles to find what was mentioned, I have yet to be impressed and do not usually waste my time.
9-30-2009 @ 10:51AM
Gina said...
Had you actually read the article instead of scrolling directly to the comment box so that you could jump on the "Let's slam AOL" bandwagon, you would have seen that both Chili's and Morton's were named in the first paragraph.
9-30-2009 @ 1:01PM
nic said...
just like the obama administration all sizzle and no steak
9-30-2009 @ 6:40PM
dan said...
the reference in the first paragraph was an alphabetical one, it could have been A-Z for that matter. I was also expecting to see something specifc to Chili's & Morton's "offerings".
9-30-2009 @ 10:43AM
What The said...
I'll drink to that...
Reply
9-30-2009 @ 10:41AM
joduff said...
I agree, where is the article on Chilis?
Reply
9-30-2009 @ 1:36PM
Pamela said...
Chillie's is in last paragraph...$3.99 margaritas!