Industry News | January 31, 2017 | QSR Exclusive Brief

A Fast Casual's Guide to Selling Alcohol

Beer can be a major traffic driver to your new concept, if done correctly. Thinkstock
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Earlier this month, Starbucks ended its experiment with alcohol at all company-owned U.S. stores.

The “Evenings” program, which had grown to 400 locations, included beer, wine, and small plates food and launched in 2010 to attract an after-work crowd looking to unwind with a drink.

Launching an alcohol program can be a difficult decision for quick serve and fast casual executives, particularly with the legal maze that exists in states and locales across the country and the financial investment that is often required.

Michele Stumpe, a partner with Taylor English Duma who focuses on counseling fast casuals in the decision to serve alcohol, spoke with QSR about what brands should consider before popping the cork.

For concepts that have abandoned alcoholic beverage programs, what are usually some of the driving factors behind this?

Bringing in alcohol is a relatively new thing in the fast-casual market so (a lot) of programs are in the pilot phase. It’s really driven by the market, the difficulty in getting the licenses, and whether or not it makes the cost benefit analysis of bringing alcohol into the establishment.

A lot of people bring in alcohol not because they want to sell a lot of alcohol, but because they want to attract diners who are more interested in the full-service type of restaurant from a menu selection standpoint, but still want that fast-casual atmosphere. And if that’s not increasing your incidental sales of food, you have to assess whether the cost of the license and the cost of bringing that business is going to be justified by the revenue that you might derive from people, whether your customers really want that or not.

What are some of the financial and legal challenges in launching a program?

Particularly for businesses that have multi-unit models, every jurisdiction is different so every state is different. And in some states, like Georgia, every city and every county may be different with respect to what their requirements are. For example, in some places, you might have to have every single employee get an alcohol server permit, which is $30 that they have to get every year. So now, if you’ve got any kind of turnover that can be a factor that you’re constantly having to keep up with and current.

Or it might be with respect to the sales laws. Every place is going to have differences with respect to hours or to what kind of specials you can offer. So with a business that has multiple units, they’ve got to make sure that they’re familiar with what the rules are in every single unit – and each unit might be different—so that efficiency of the economy and being able to implement the same procedures and practices across the board, you lose that when you have multiple locations.

If you’re selling a lot of alcohol, then that is just a cost of doing business. But if alcohol isn’t a big driver for your model, then that’s just yet another administrative burden that you’ve got to face when you have more units.

How can restaurants design a program where benefits outweigh the cost?

On the front end, they’ll need to assess what’s going to be required from a licensing perspective, both the initial expense and time and long-term expenses, and then also make sure that they’re familiar with the different alcohol laws and all the different jurisdictions to make sure it’s something they can manage and keep up with. I don’t think either of those have been issues with the few companies that have started to do this and have either backed off or haven’t grown as fast as other people would expect in this realm. They are not going into decisions lightly. Most of them have done that kind of analysis and that’s something you certainly want to do but you also want to look at it as a pilot program and see whether it’s something that ends up being profitable. But if you’ve got a $5,000 license and you’re only bringing in $1,000 a year in revenue, then it’s something that you might end up not doing because the value isn’t there.

Do the concepts you work with often find that customers are looking to drink a glass of beer or wine in a fast-casual environment?

It really varies across the board. For example, at a lot of my pizza places, people like to have a pitcher of beer with their pizza, whereas barbecue, people don’t really expect to have alcohol as much. Barbecue is much more come in, sit down, and grab it, so your customers aren’t really expecting (alcohol). Once you get to your higher-end barbecue place that’s surrounded by a lot of other restaurants, then that barbecue place might benefit from a beer license or a beer and wine license just to stay competitive. I’ve got a number of clients who have the same concept in multiple locations and half of the locations are deemed to be potentially ripe for a license depending on where you are, and other locations just aren’t going to support that type of market.

By Alex Dixon