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The great restaurant rip-off

By Jamie Goode

[See the response to this article by Chris Chown: a restaurateur's perspective]

One subject of continual annoyance to many wine lovers in the UK, USA and Europe, is the excessive mark-ups applied to wine in restaurants. In the UK, this is routinely 300% of retail price, often more -- and bear in mind that the restaurants pay trade price for their wines, too. What does this mean for the consumer? For a house wine that would cost some £4 at a wine shop, expect to pay around £10, a profit margin for the restaurant of £6-7. I can live with this, after all, the restaurateur has to make a living. But for the sort of wine that might interest a wine geek, costing say £10 in Oddbins, you will be charged a whopping £30 on a restaurant list, which gives a margin over trade price of about £23. Go any higher up the wine list, and the margin becomes even more ludicrous. The consequence is that only the particularly wealthy can afford to drink really interesting wines when they go out to eat, a particularly frustrating situation for most wine lovers who feel they are being ripped off. There are very few exceptions.

Why is this? Ask any restaurateur why they have such huge mark-ups, and they will probably trot out the usual excuse -- they only break even on the food, but the drinks are where they make their profit. To me this seems illogical. With the food, the chef is doing something creative -- good cooking is a complex and skilled process that involves transforming often simple and relatively inexpensive raw ingredients into something grand. It is a process that most of us would be incapable of performing in our own homes. In contrast, the process of serving wine in a restaurant is far less creative: whether you order the house white, or a much grander wine, the process of purchasing, storing and uncorking it is just the same for the restaurant, yet you pay the restaurant £6 to do this for former, and possibly hundreds of pounds for it to uncork the other.

What restaurants are relying on is consumer ignorance about wine, and I think this is a real shame. As a wine geek, rip-off mark-ups put me off eating out as regularly as I otherwise might. I don't know of any restaurants that operate a flat mark-up rate on their wines, but this would encourage people to drink the most appropriate wine with the meal. Surely it makes no difference for a restaurant if a diner who would have ordered the house wine switches to something far more grand with an equal mark up? Presumably, there are enough people who are either wealthy enough or who are on a generous enough expense account for them to plunder the lower reaches of the wine list, thus giving the restaurants easy revenue which they are reluctant to lose.

One option is restaurants that allow individuals to bring their own wine (BYO). Of the many thousands of eateries in London there are perhaps two dozen of these establishments, but most are small cafés. There are just a couple of high end restaurants that allow this practice. One of the best is Chez Max (168 Ifield Rd, SW10, Tube: Earls Court, phone 0207 835 0874), which charges a substantial but fair corkage of £7.50, and has superb food. Could we see more BYO restaurants, or at least more venues that charges fairer prices for their wine? Despite the claims of restaurateurs that this would spell financial ruin, the example that they could follow is that set by the Australians. BYO restaurants are more common there than not, and this also has the beneficial effect of keeping the mark-ups on lists reasonable, even in big cities. This makes dining out an excellent experience for wine geeks, and probably contributes to the observation that eating out seems to be more popular in Australia than in the UK. I for one hope that restaurants in the UK wake up to the fact that as UK diners become more wine-savvy, they will increasingly resent the rather shameless fashion in which they are being ripped off on restaurant wine lists.

Response: the restaurateur's perspective

Chris Chown (chris@bodegroes.co.uk)

Whilst I am sad and embarrassed to have to agree with a great many of your sentiments, Jamie, I feel you and other customers are making generalisations which tar the whole restaurant trade with the same brush.

There are unscrupulous sectors in any trade, profession or industry, but I am naive enough to believe that the more conscientious practitioner of his skill will always offer a fair deal. And of course, your generalisations focus on our great and glorious city of London, where it costs £10 to look at a taxi.

Let me look first at "trotting out the usual excuse". I am a chef. I work in a remote area where overheads are low, but so are price expectations. There is strong resistance to high food pricing in Great Britain. I charge £24.50 for three courses of often Michelin-star standard food, upon which I do break even. To make any sort of reasonable profit after pricing my time at, say £8.00 per hour (not an unreasonably high wage, Jamie, I'd hope you'll agree - I apprenticed for several years and am acknowledged to be among the top 50 or so chefs in Great Britain for 10 years now) I would be charging double that, and nobody would come to my restaurant. I therefore have to subsidise my wages from my wine list. So the "excuse" has a measure of truth in it.

Moving on to actual markups, I would agree that an across the board percentage is unscrupulous, particularly as one reaches the higher echelons of the list. But is the restaurateur entirely to blame? I know several leading wine merchants and consultants who routinely recommend to restaurateurs that they "treble and add VAT". The restaurateur takes this advice on board as an experienced professional opinion - my feeling is that it is a bad one.

I am in the fortunate - and for a restaurateur, notoriously uncommon - position of having a degree in accountancy. This enables me to equate a fairly simple formula to my wine pricing, namely: Selling price inc VAT = Purchase price ex VAT x 2.5 + £3. This balances the simple percentage, which penalises the expensive wine, and the over-simplistic flat rate, which would obviously be impracticable on cheap wines. Even then, for very expensive wines, if the formula comes to an astronomic sum, I take a view, and charge what I think is fair. I would point out here that my glasses are lead crystal, cost £4.00 each and are broken at the rate of 8 per 100 customers - my glass overhead is therefore considerably higher than if I used cheap heavy-rimmed glasses, which to my mind spoil the enjoyment of wine more than another few quid on the price.

I say over-simplistic as the flat rate proposed by many wine buffs out for a good deal ignores several basic economic and ergonomic facts. Firstly, in order to keep a comprehensive list, the restaurateur needs to keep fair stocks of fine and rare wine. The availability and turnover of these wines is by definition much lower than of cheaper wines, and there is a much higher chance of the wine being defective in some way. For instance, I reckon an average of 1.5 bottles per case corked in wines from Burgundy. I seldom if ever am able to reclaim this cost from the merchant. Secondly, there is a large degree of skill and time required in offering a balanced list, and a fair investment of time and money in the not entirely unpleasant task of tasting. The finer the wine, the less likely the merchant is to offer a free sample!

You say that the restaurant is relying on customer ignorance. This is a patronising and insulting viewpoint unworthy of your general argument. For many people, a comprehensive wine list, and the ability to peruse without necessarily buying expensive on every occasion, is one of the joys of eating out. Whilst I entirely agree that Chez Max is an excellent, and fairly priced restaurant, the BYO restaurant denies the customer the pleasure of being advised. Not many restaurant customers have comprehensive private cellars, and look to restaurants to help expand their wine knowledge and therefore future enjoyment. Do you go to your solicitor confident in your own knowledge of the law, or do you pay the man £300 per hour because he knows that touch more than you about it? Or perhaps you are the sort of customer who brings his own Turbot into a restaurant because he doesn't trust the restaurateur to provide fresh fish. Stay at home and barbecue, Jamie. Break your own glasses and pat yourself on the back for how much you've saved.

You put down restaurateurs' exploitation of innocent customers as the reason not more people eat out in Britain. It is more likely that the paranoia of being ripped off, expressed loudly by a minority of the British eating out public, casts a bad light over what can be as enjoyable experience here as anywhere else in the world.