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Happy Hour

”There is no downside to serving beer and wine,” said Fresh To Order’s COO. He’s among the fast-casual chains aiming to boost sales with alcohol, and will add a full bar when its seventh unit opens this year. Other operators weigh the pros and cons in serving spirits, including expensive liquor licenses and a limit to the age of employees.

Atlanta-based Fresh To Order loves the alcohol business. The six-unit chain has had beer and wine to pair with its grilled salmon or
bourbon steak since the first location opened in 2006, but when the seventh restaurant opens later this year, it will have a full bar. And every other new unit will, too. “I like alcohol so much I bought the bottle,” joked Jesse Gideon, the concept’s chief operating officer.

Plenty of restaurants sell alcohol, but Fresh To Order is a fast-casual concept, part of a growing number of limited-service chains aiming at yet another line of business long owned by their full-service cousins.

Beer and wine, and even full bars in a few cases, have become more commonplace at fast-casual restaurants as they seek a share of that ever-elusive dinner business. Chains such as Smashburger and Noodles & Company have added alcohol in some of their locations. In their view, alcohol gives their concepts a level of credibility as they look to attract a more discerning customer who isn’t eating out just because of the restaurant’s location.

“Everybody is competing for a share of stomach,” said David Henkes, vice president at Technomic, who runs the Chicago-based consulting firm’s beverage practice. Fast-casual restaurants are “perceived as a much higher-quality option with a certain ambiance. Offering alcohol to some degree extends that perception, and adds a little bit of a premium to your offering.”

This is exactly what Fresh To Order is trying to accomplish. “We’re not trying to be fast-casual,” Gideon said. “We’re trying to be fine-fast, or fast-fine. In order to do that, we have to be a step above fast-casual—in the food, the service level, the interior, the exterior. One of the things you also want to do is serve alcohol. Having a serious beer list, and a wine list, validates that it is a dinner occasion.

“There is no downside to serving beer and wine,” he added.

In many cases, the choice to serve beer and wine is due to the restaurant’s menu. Tom Ryan, who developed the Denver-based Smashburger chain, decided to sell bottled beer, wine and hard lemonades for one simple reason: “We’re focused on the beer and burger occasions,” he said. The vast majority of Smashburger’s units sell beer and wine.

“At the outset, my intent was to create a burger concept that catered to a broad set of burger occasions,” Ryan added. “The beer and burger occasion is a good one for a variety of people—weekday families who need to feed a kid in a hurry but Dad wants a beer and a burger after work. Girls night out. Boys night out. We always thought Smashburger could qualify for pre- and post-date night. They’d go see a movie or a play. Alcohol becomes part and parcel of those occasions.”

Likewise, Anthony Russo decided to add beer and wine to the menu when he created his restaurant chains, Anthony’s New York Pizzeria and Anthony’s Coal-Fired Italian Kitchen. In his view, wine goes perfectly with Italian food. And his restaurants sell even more beer—which goes hand-in-hand with burgers.

The amount of alcohol fast-casual chains sell can vary widely, however. Alcohol amounts to only about 3 to 4 percent of sales at Smashburger. Anthony’s Russo, however, said alcohol makes up 7 to 10 percent of his restaurants’ sales.

For chains whose sales are small, there is a question of whether it’s worth the trouble associated with alcohol sales. Alcohol limits chains’ employee base because states have limits on who can serve alcohol to customers—no high school kids, in other words. Companies have to get liquor licenses, which can take months. They also have to train employees on carding customers. There are also space issues. “Those tend to cost a lot,” Henkes said. “You wonder if it’s worthwhile to do that if you’re just generating 3 to 5 percent of your sales.”

Still, most restaurateurs we spoke with said it is worth it—though Smashburger’s Ryan, for instance, noted his chain doesn’t serve alcohol in New Jersey, where the state’s liquor licenses are difficult to get and can cost several hundred thousand dollars. Still, he said, beer sales give his chain a competitive advantage, enabling it to serve more regional and specialty brews as it looks to get a more localized flavor into its restaurants.

And Ryan suggested that customers who do order alcohol at Smashburger might not go there if it didn’t have the alcohol on hand. In other words, having those beers eliminates a “veto vote” of customers who want a beer and a burger.

“If you look at the total revenue associated with beer and wine, if you look at the food ordered with it, it’s in the 10 to 15 percent range,” he said. “To me, we would stand a good chance of never having that overall revenue.”

‘A nice little boost’

Most of the restaurants’ liquor sales come in the evenings or on weekends, and Henkes noted chains that do 80 percent lunch business probably shouldn’t try liquor sales. Gideon  said one of the reasons his chain is expanding its alcohol program is to get more dinner business—he’d like the business to be about 50-50 lunch and dinner. “That’s the point of having a serious beer menu,” he said. He did add that, “It’s amazing how much wine is being popped” in the middle of the afternoon.

Russo said the key component in serving alcohol in a fast-casual setting is to make sure the selections go with the food being served. “It should complement what you’re doing in the kitchen,” he said.

For the most part, fast-casual restaurants that serve alcohol limit the selection to bottled beer and wine, rather than mixed drinks, to simplify the selection and avoid having to employ bartenders or install full bars. But, like Fresh To Order, a few are going with full bars.

Wahoo’s Fish Taco, the 65-unit Mexican chain based in Santa Ana, California, has full bars at some of its locations, where the drinks are mostly Mexican style to go with its menu. “We try to emphasize the margaritas,” said co-founder Wing Lam. “It’s more our space, as opposed to champagne, vodka or those crazy drinks that are out there. They take too much time to make.” Still, he said, alcohol provides a higher margin at a lower cost that increases business in college towns and near the beach. “It’s a nice little boost,” he said.

“It’s worked out real well. It brings in a younger crowd, the crowd that wants more than just food. They want to have a beer or a margarita, but they only have an hour and want to get something quick.”

Source: http://www.franchisetimes.com/November-December-2012/Happy-Hour/