Definition of Markup - in Europe
Ian Hoare
I decided to make a new thread, to spare Leo any more semi off topic posts.
In Europe mark up is simply the difference between cost price (including
taxes) and selling price (including taxes). It may be expressed in monetary
terms or percentage terms with equal validity. If in percentage terms, it is
calculated as a percentage of the cost price of course. Only discounts are
calculated against selling prices.
A wine costing for example (tax, delivery etc paid) €3 may be sold in the
restaurant at (say) €9.60. Mark up would therefore be €6.60. it could either
be expressed as that (in monetary terms, therefore) or as a percentage of
the original. (6.60/3.0)*100 = 220%. And as it happens, this is the minimum
figure which the tax inspectors in France expect hoteliers to use (if they
declare a lower wine profit than that, they have to prove it).
To coime to Leo's original question, I know a restaurant (admirable) which
works on a fixed mark up (in monetary terms). They add €8 to the total cost
price (including taxes) to them of any wine they sell. So a wine which costs
them €3 they sell at €11, (a significant markup in percentage terms) but a
wine which costs them €30, gets sold at €38 - a VERY good deal and an
excellent way of encouraging people to drink better wines.
I also know of another restaurant which about 5 years ago sold a wine I
bought retail at FF20 (call it €3) at the ludicrous price of FF140 (call it
€21). As I don't know what price THEY bought it for (certainly way less than
the €3 I paid retail in a wine shop) I can't say what the mark up would have
been.
Finally, as to what is acceptable. Impossible to make any kind of
intelligent answer. A restaurant employing a highly trained expert sommelier
must charge a higher mark-up than one selling simple local wines. A
restaurant paying taxes on stock, and which keeps wine for 10-20 years until
ready to drink will inevitably have to charge a higher mark up to pay the
taxes and for tying up capital than one which carries almost no stock and
sells what they order within the year.
--
All the Best
Ian Hoare
http://www.souvigne.com
mailbox full to avoid spam. try me at website
Michael Pronay
> To come to Leo's original question, I know a restaurant
> (admirable) which works on a fixed mark up (in monetary terms).
> They add EUR 8 to the total cost price (including taxes) to them
> of any wine they sell. So a wine which costs them EUR 3 they
> sell at EUR 11, (a significant markup in percentage terms) but a
> wine which costs them EUR 30, gets sold at EUR 38 - a VERY good
> deal and an excellent way of encouraging people to drink better
> wines.
There is only one problem with this type of fixed mark-up, but
it's a major one: If a bottle of wine corks, no problem with an 11
Euro bottle, profit on this bottle would be 5 Euros instead of 8.
But with the 38 Euro bottle, the next four bottles only recover
the loss.
So in priciple the fixed mark-up is quite OK, but in won't work
with aged and/or high-end wines - you simply need a higher
mark-up.
M.
dick
dinner...is that acceptable. And what to they charge you to allow you to
bring your own wine there?
Dick
"Ian Hoare" <ianh...@angelfire.com> wrote in message
news:3oc7a0l6j4fmud4pa...@4ax.com...
> Hi,
>
> I decided to make a new thread, to spare Leo any more semi off topic
posts.
>
> In Europe mark up is simply the difference between cost price (including
> taxes) and selling price (including taxes). It may be expressed in
monetary
> terms or percentage terms with equal validity. If in percentage terms, it
is
> calculated as a percentage of the cost price of course. Only discounts are
> calculated against selling prices.
>
> A wine costing for example (tax, delivery etc paid) ?3 may be sold in the
> restaurant at (say) ?9.60. Mark up would therefore be ?6.60. it could
either
> be expressed as that (in monetary terms, therefore) or as a percentage of
> the original. (6.60/3.0)*100 = 220%. And as it happens, this is the
minimum
> figure which the tax inspectors in France expect hoteliers to use (if
they
> declare a lower wine profit than that, they have to prove it).
>
> To coime to Leo's original question, I know a restaurant (admirable)
which
> works on a fixed mark up (in monetary terms). They add ?8 to the total
cost
> price (including taxes) to them of any wine they sell. So a wine which
costs
> them ?3 they sell at ?11, (a significant markup in percentage terms) but a
> wine which costs them ?30, gets sold at ?38 - a VERY good deal and an
> excellent way of encouraging people to drink better wines.
>
> I also know of another restaurant which about 5 years ago sold a wine I
> bought retail at FF20 (call it ?3) at the ludicrous price of FF140 (call
it
> ?21). As I don't know what price THEY bought it for (certainly way less
than
> the ?3 I paid retail in a wine shop) I can't say what the mark up would
Arne Ahronovich
"Michael Pronay" <m...@privacy.net> wrote:
> There is only one problem with this type of fixed mark-up, but
> it's a major one: If a bottle of wine corks, no problem with an 11
> Euro bottle, profit on this bottle would be 5 Euros instead of 8.
> But with the 38 Euro bottle, the next four bottles only recover
> the loss.
IMO, the main problem is another one: A fixed mark-up is simply
silly from an economical point of view: If a 40 Euro bottle is marked
up 8 Euro it actually starts losing money if not sold within a two year
period. Too much bound capital for next to no profit. The markup has
to be a percentage of the cost because the owner of the restaurant has to
make money on it.
However, here in Germany Restaurants still sell their wines for ridiculously
high prices. The cheapest bottle of wine on the list of my favourite
Restaurant
is EUR 23 - it's an Albali Reserva 1998. Not at all a bad wine, but it can
be had
at a local shop for around EUR 3,70. On the other hand, a bottle of Moet &
Chandon is only EUR 59.
When I asked the manager about this he told me that their calculation, in
fact,
is pretty much different than I had ever thought. The point is that they
have to
Arne Ahronovich
continued:
The point is that they have to turn around at least EUR 20 per
customer, regardless of what he/she eats or drinks. So if the
customer wants a cheap wine, he can have it - but he'll still
pay the hidden "entry fee" of EUR 20.
Arne
"Arne Ahronovich" <gigo...@inonebox.com> wrote
Ian Hoare
le/on Thu, 13 May 2004 21:48:47 GMT, tu disais/you said:-
>If you had a special wine and brought it to a restaurant to drink with
>dinner...is that acceptable. And what to they charge you to allow you to
>bring your own wine there?
Not that this has anything to do with markups, but (as is often the case) it
all depends upon the restaurant and you.
Given the much higher markups usually practiced in Europe, the sale of wine
is much MORE important to them than you might think. So it is unreasonably
to _expect_ to be able to BYOB. It's not the norm, certainly in France.
However, I'm pretty well known in several of our local restaurants, and most
times I buy their wine. So, if one time I wanted to bring a special wine to
one of these, I'd make a point of asking them first, explaining what I
wanted to do, and why. I think it would be inconceivable that they'd not let
me. I'd also be astonished if they asked me to pay "corkage" (which of
course isn't for opening the wine, but for supplying and washing the
glasses).
There's one circumstance where I'd _expect_ to be able to bring my own wine.
I've got a celebration coming up soon (a surprise party for Jacquie's 60th),
and I've booked a banquetting room in a place where we're very friendly with
the owners. I'm inviting 18 friends, and I've ordered a special meal. When
discussing this with the owners, I said that I wanted to bring my own wines,
but that they should make a point of allowing for this when they work out
what to charge me. I didn't exactly ask their permission, but brought up the
subject so early on in the planning, that they would have easily been able
to say that the day didn't suit, or found another excuse if they weren't
prepared to go along with me. I should add that they refused even to think
of charging me corkage, even when I explained that we were talking about
probably 4-5 glasses per person.
OK, these are circumstances when I _would_ be able to bring my own wine. I
have mentioned others some time ago. In France, I'd not really consider
doing it in a place with a very good wine list (unless I wanted to match a
wine of mine against one of theirs which I'd buy, and then again, I'd ask
very nicely first), even if I was pretty well known there. I'd never ask or
expect to be able to do so one a first or second visit, unless circumstances
were truly exceptional.
Ian Hoare
le/on 13 May 2004 21:31:48 GMT, tu disais/you said:-
>Ian Hoare <ianh...@angelfire.com> wrote:
>
>> To come to Leo's original question, I know a restaura
>> sell at EUR 11, (a significant markup in percentage terms) but a
>> wine which costs them EUR 30, gets sold at EUR 38 - a VERY good
>> deal and an excellent way of encouraging people to drink better
>> wines.
>
>There is only one problem with this type of fixed mark-up, but
>it's a major one: If a bottle of wine corks, no problem with an 11
>Euro bottle, profit on this bottle would be 5 Euros instead of 8.
>But with the 38 Euro bottle, the next four bottles only recover
>the loss.
Good point.
>So in priciple the fixed mark-up is quite OK, but it won't work
>with aged and/or high-end wines - you simply need a higher
>mark-up.
Unless the restaurant (as happens in the case I'm thinking of) has come to
an arrangement with a caviste to get the wines almost on demand, and can get
re-imbursed the cost of a corked bottle, because the caviste expects to be
able to do the same from the winery.
Ian Hoare
le/on Fri, 14 May 2004 13:58:28 +0200, tu disais/you said:-
>Sorry, I hit the Enter key.
>
>continued:
>
>The point is that they have to turn around at least EUR 20 per
>customer, regardless of what he/she eats or drinks. So if the
>customer wants a cheap wine, he can have it - but he'll still
>pay the hidden "entry fee" of EUR 20.
All that is perfectly possible and possibly true. But I shall continue to
patronise an establishment that makes a fixed (relatively moderate) price
markup for top wines, such as the Tate Gallery restaurant used to do in
London and as the Taverne du Sommelier does in Tulle. YMMV. If somehow they
manage to survive and make a profit despite your rules of economics, I'm
only too pleased.
It's not a matter of "cheap" wine, in my opinion, but of meals which pay
their way, and wine sold at a markup which encourages its consumption. Again
YMMV. I have to say however, that I am fed up with restaurants selling
infant wines that are still vibrating from their delivery, at 300% to 400%
markup, and I won't use MY hard earned cash to commit oenopedophilia wines
in such establishments.
Given that most restaurants reckon to apply at least 400% markup to
ingredients' costs for meals, as I see it any meal costing over €25 can pay
its own way very nicely thanks.
dick
No the reason I asked is that sometimes when I go to a restaurant I find
wines not to my liking or so high priced vs. retail that I bring my own.
Did not know how that is in Europe. Here they charge between $10 and $30
bottle to open. Obviously I don't bring Gallo in that case. But for an
anniversary dinner I once brought some 1982 Chateau Margaux I bought for
about $35 dollars and if it was on list it would be about $900 USD. So, I
don't mind paying a small cork fee.
In area I live few restaurants have decent wine list...but its getting much
better in the last 5 years as Charlotte is becoming a great city.
Thanks.
Dick
"Ian Hoare" <ianh...@angelfire.com> wrote in message
news:2a78a01jnd26im0en...@4ax.com...
Thomas Curmudgeon
> "Michael Pronay" <m...@privacy.net> wrote:
>
>
>>There is only one problem with this type of fixed mark-up, but
>>it's a major one: If a bottle of wine corks, no problem with an 11
>>Euro bottle, profit on this bottle would be 5 Euros instead of 8.
>>But with the 38 Euro bottle, the next four bottles only recover
>>the loss.
>
>
> IMO, the main problem is another one: A fixed mark-up is simply
> silly from an economical point of view: If a 40 Euro bottle is marked
> up 8 Euro it actually starts losing money if not sold within a two year
> period. Too much bound capital for next to no profit. The markup has
> to be a percentage of the cost because the owner of the restaurant has to
> make money on it.
There's a restaurant local to me that has a very small markup on good
wine. It's as little as the 8 dollars mentioned here even for 50 dollar
wines. He doesn't have a large selection, but an adequate one. And the
list changes with his inventory. I think the distributor will refund for
returned wine, so there would be no loss when there's a corked bottle.
Is that possible? I'll ask next time.
I think the reason we don't see very low cost wines sold under $20 or
Euro, is that a bottle of wine is equivalent for 4 or so cocktails. What
restaurants sell cocktails for less than 5 dollars? Not many.
There is an Italian restaurant in Brentwood that sells Trader Joe's type
3 and 4 dollar wine for 10 bucks a bottle. I think it's a great scheme,
they sell more food and it really helps keep the meal's cost down when
several people are dining.
Michael Pronay
>> IMO, the main problem is another one: A fixed mark-up is simply
>> silly from an economical point of view: If a 40 Euro bottle is
>> marked up 8 Euro it actually starts losing money if not sold
>> within a two year period. Too much bound capital for next to no
>> profit. The markup has to be a percentage of the cost because
>> the owner of the restaurant has to make money on it.
> There's a restaurant local to me that has a very small markup on
> good wine. It's as little as the 8 dollars mentioned here even
> for 50 dollar wines. He doesn't have a large selection, but an
> adequate one. And the list changes with his inventory. I think
> the distributor will refund for returned wine, so there would be
> no loss when there's a corked bottle. Is that possible? I'll ask
> next time.
Perfectly possible, if the restaurant sticks to quick turning
wines for which a refund is possible.
My reasoning came from Heinz Hanner who runs one the six best
restaurants in Austria (according to the restaurant guide where I
am responsible for the wine part)
<http://www.hanner.cc/restaurant.htm#>
with a wine list that's 1450 positions long and happens to list 22
different vintages of Mouton.
In Europe, a restaurant of your type, i.e. with a list of *fast
turning expensive wines* is extremely seldom.
M.
Michael Pronay
>> So in priciple the fixed mark-up is quite OK, but it won't work
>> with aged and/or high-end wines - you simply need a higher
>> mark-up.
> Unless the restaurant (as happens in the case I'm thinking of)
> has come to an arrangement with a caviste to get the wines
> almost on demand, and can get re-imbursed the cost of a corked
> bottle, because the caviste expects to be able to do the same
> from the winery.
Does the caviste really get refund from Sociando-Mallet, Maison
Guigal or Joseph Drouhin for a 15 year old bottle? If that is true,
congratulations! It certainly won't happen outside the country of
production of a given wine.
M.
dick
English :-)
"Michael Pronay" <m...@privacy.net> wrote in message
news:Xns94EA64E...@pronay.com...
Joel Hopwood
> If in percentage terms, it is
> calculated as a percentage of the cost price of course. Only discounts are
> calculated against selling prices.
Hmm, everybody I know in the wine trade would express the markup as %
Gross Profit or GP, which would be the cash markup expressed as a % of
the selling price.
So if you work on 30% GP, your "markup" is 43%
Joel
Thomas Curmudgeon
> Michael, the link must have been damaged. When I opened it, it was not in
> English :-)
Here's a bad translation:
http://translate.google.com/translate?u=http%3A%2F%2Fwww.hanner.cc%2Frestaurant.htm%23&langpair=de%7Cen&hl=en&ie=UTF-8&prev=%2Flanguage_tools