Ultimate Guide to Restaurant Markups

Bar Markups

There's one guaranteed way to drive up your restaurant tab: order a round of drinks from the bar. Bar markup is typically high -- often 200 percent -- and up to 575 percent at one restaurant [sources: Dubner, Lape]. Oddly enough, markup acts as a bit of an equalizer among drinks. It's typically lower for the drinks that have a higher wholesale cost, and higher for those with a lower cost [source: Sherman].

The markup on alcoholic drinks has grown more pronounced in recent years, as the wholesale prices of many foods have spiked. In many cases, restaurants have opted to give their customers the impression of a deal on food, recouping the loss by raising the price on alcohol [source: USA Today].

Why not just raise the price of the foods that are getting more expensive? Perceived value plays a big role in how much customers are willing to pay [sources: Bockelman, Mullis]. The ratio between the price of a drink and the price of a meal influences our willingness to buy the drink. We perceive alcohol as a luxury rather than a necessity; we're less likely to object to a high price on a drink than on a sandwich. Plus, sometimes, if an item seems underpriced, we assume its quality is low [sources: Pizam, Sherman]. So -- accurately or not -- we perceive that we're paying for quality when we help ourselves to a $7 draft at the pub. But we're likely to grumble if the burger goes from $8 to $10.

Wines can cost a lot because restaurants don't always buy in bulk, the way retailers do [source: Sherman]. Sometimes the restaurant ages the wine on the premises, so you're paying for an investment of selection, time and storage. If you buy by the glass, the markup is probably higher, because the restaurant expects some of the bottle to be wasted [source: Gibbons].

Cocktails and liquor drinks can be especially expensive because, in some states, they require separate licensing [source: Chowhound]. The decision to maintain a full bar as opposed to a wine cellar is a large up-front expense.

What do these gargantuan markups cover? It costs a bit to train and retain a wait staff that's knowledgeable about wine. A good restaurant likely has specialized glassware -- red wine glasses, white wine glasses, snifters, highball glasses. And as you've probably guessed, it is more expensive to purchase and replace than standard glassware.

We've saved the lowdown on dessert markups for last. Read on.