Should Your Fast Casual Restaurant Add Alcohol to the Menu?Serving beer and wine can increase your profits — if it's the right fit for your brand and you can get a liquor license.
Fast casual restaurants have become a dime a dozen. And the line between fast casual and full-service restaurant has started to blur. Which means you need a way to compete. One possible strategy to set yourself apart and increase profits: Add wine and beer to your menu.
Serving alcohol is a tactic that’s been used by big quick service players like Chipotle and Shake Shack. Many smaller chains are starting to serve booze to increase checks and appeal to a wider base of customers, including millennials, who are all of legal drinking age, come in second in wine consumption (behind Baby Boomers) and lead the consumption of craft beer. Couples on dates also tend to like to tipple.
“One of the challenges for fast casual restaurants is getting the dinner date customer,” said Ed Doyle, president of the Boston-based RealFood Consulting, which works with quick service restaurants. “For restaurants to truly be competitive in this market, it’s critical to have some sort of drinks service. The reality is that at dinner time, people are still looking for a glass of wine.”
To determine whether adding alcohol is right for your fast casual restaurant, follow these four tips.
Consider the benefits
The biggest plus to adding alcohol is that it can increase the average bill. Thomas Nguyen, partner and chief marketing officer of Texas-based Peli Peli, a fast casual restaurant that serves South African food with wine, beer and cocktails, said about 10 percent of dinner checks include alcohol at his restaurants.
“Now instead of a $10 entree and $3 soda, people are getting $6 wines and sometimes getting an extra glass after,” he said. “It’s a no-brainer. If you want to reach the maximum amount of guests, you have to include a quality wine and beer program.”
Michael Mohammed, president and CEO of national chain Chronic Tacos, said some of his restaurant’s locations see bills with as much as 20 percent of sales coming from beer, wine and liquor.
“In the fast casual industry, customers still want the feel of full-service dining,” he said. “They want food prepared from scratch, and they want the experience to include a relaxing beer or cocktail.”
Doyle adds that not only can alcohol increase profits, they do so with minimal labor costs when compared to all the work that goes into prepping, cooking and serving food.
In addition to helping fast casual restaurants compete with full-service restaurants in the dinner date market, Doyle said alcohol also helps businesses grab the “veto vote.”
“If we’re going to dinner and I don’t care about beer but you do, it’s really easy for us to find a place that sells beer,” Doyle said. “If a place doesn’t serve beer though, it’s immediately off the list. Catering to the veto vote drives more frequency.”
Think about your brand
When making any change to your menu, first consider whether the addition fits with your brand and satisfies the needs of your customers. This is true when it comes to serving alcohol, too.
Doyle said he believes adding booze is most often a good choice for quick service restaurants, but that it depends on who the customers are and why they’re going to eat there. If your restaurant caters to families and has a wholesome vibe, alcohol may be a deterrent. If the majority of your business is done at lunch, when fewer people drink, Doyle said getting an expensive beer and wine license won’t help your bottom line because sales increases will be minimal.
“But where fast casual restaurants are really going head to head with full-service restaurants, alcohol is something you have to have,” he said.
Mohammed noted it’s important to serve alcohol that makes sense with your food menu rather than serving wine and beer just for the sake of serving wine and beer.
“We’re a Mexican fast casual restaurant and our third generation recipes are what really differentiate us,” he said. “We are not bar-focused, and we didn’t want to do something that will take away from our authenticity.” Mexican beer features prominently on the beer menu. Some locations also serve margaritas and tequila.
Know your local laws
For quick service restaurant owners who are ready to serve alcohol, local and state laws are the main roadblocks, according to Doyle. Every municipality, town, city and state has its own red tape and permit requirements.
Municipalities with loose laws may require restaurants to fill out paperwork and buy a one- or two-year license that covers all beer, wine and liquor sales. Other states, such as Doyle’s home state of Massachusetts, impose liquor license quotas based on the population in a given town (for example, one license for every 2,000 people), forcing businesses to buy licenses on the secondary market for up to six figures. In some states, licenses have gone for more than $1 million.
Given the potential minefield of bureaucracy involved in procuring a license, Doyle recommends hiring a local lawyer with expertise in restaurants and small business. The lawyer can advise on local licensing as well as insurance, zoning restrictions and other laws related to alcohol. (Some states, for example, require that anyone serving booze be of legal drinking age.)
“Put your advisory team together before you start spending your money on this,” he said.
The alcohol offered at Mohammed’s restaurants varies by location. But at a minimum, all locations serve beer to keep in line with the brand.
“We think it’s important to offer a few options to customers, but it is a must to carry bottled beer,” he said. “We’ve seen lots of guests who specifically come in for a taco and one the many Mexican beers we carry.”
Execute with care
When restaurant owners change the menu or modify any policies, they know they have to train their staff. The same goes with alcohol. “If you’re going to train people to prep food, you can train them to serve alcohol,” Doyle said.
Mohammed recommends easing into your new beverage program to find the right offerings for your customers.
“We suggest experimenting and researching what your customers like,” he said. “At the end of the day, restaurants should look for things to enhance the customer experience and drive repeat business to grow the average check.”