Hope you had a good week.
I am sensing that my explanation of the Long Game was a bit rushed and murky last week.
To clarify, Tom MIller, our COO, sent me this video which should clear up any confusion.
(Please Watch)
Hilarious, I know.
The saddest part is, it basically sums up how 80% of the brewing industry operates.
Yes, I am saying this is your competition and they are obsessed with the Short Game.
On a sheet of paper, list your local competition. Go ahead and cross off every family run brewery and loud mouth.
Who’s left?
(don’t cross yourself off, you get a pass bc you are reading this)
20%
The Long Game mindset is the single most important business topic you should be thinking about right now.
The mere fact that you know your peers are chasing trends and acting like a 4 year old, is a competitive advantage.
That stuff is exhausting.
Today we are talking about Long Game strategies for your taproom.
Think, sustainable, long-term.
Back in the day I had a million suggestions on how to increase your taproom revenue by 30% in 30 days.
- Get a 9-foot retail cooler
- Spend up to 4% on advertising to promote the taproom
- Etc
While these suggestions do work, they are Short Game plays. Right now I need us thinking over a longer horizon.
Your taproom today probably does not look anything like it did 36 months ago.
Why?
Market conditions evolve, pandemics happen, ownership reads the room and CHANGE NEEDED TO HAPPEN.
Something that didn’t change…..
The taproom in 2022 continues to be the highest profit center for your business.
Duh!
Repeating the obvious, the overall taproom model has drastically changed over the past 3 years. Most taprooms now have a permanent food program. Food is helping to keep customers at your place longer which in turn should drive ticket averages higher than ever before. Food is also accommodating all customers, rather than just beer drinkers.
The result….More profit.
Do you see it?
For most breweries, the taproom has always been the backbone of the business. For others, this is new. The decline in distribution has forced your hand into reconsidering the business model.
Some embrace the change and lean into the reality that what they intended to build may not be a viable long term solution.
Others are sitting on the sideline with a half-ass food program, forced upon them by a pandemic, wondering if the next hazy IPA is their answer to financial freedom.
Long Game Strategy
I am here to tell you that your taproom is the way of the future. The breweries who have figured this out are thriving.
When I say the taproom is the way of the future, what I really mean is retail sales is the way of the future.
Take a look at this graph that was included in my CBC talk.
I know where I am aiming for on this graph.
If the average gross margin in the taproom is 80 cents on every dollar sold, you need to put that margin to work!
Let’s look at the numbers.
Traditional taproom
- Pint Price – $7.00
- Cost of beer – .56 (8%)
- Taproom Labor – .84 (12%)
- Gross Profit per pint $5.60
With a full kitchen
- Individual check average – $22.00
- Cost of food & beer – $4.84 (~22% bc you make the beer)
- Cost of labor – $6.60 (30%)
- Gross Profit per customer – $10.56
If your profit and loss statement ended there, we wouldn’t be having this conversation.
You have a large list of other expenses that you need the gross profit to pay for. Once you factor those in the result is a Net Profit or Loss.
In order to do this, the Long Game strategy for your taproom is to generate enough revenue to cover 75% of your total monthly expenses.
Excluding COGS, if your labor, overhead, other expenses, and debt service are $100,000 per month, then your taproom revenue needs to be $75,000 per month.
$75,000-$100,000 = ($25,000)
That’s a loss dummy.
This Long Game strategy assumes you are distributing beer. The tiny profit margin in distribution will cover the rest and should leave a small profit.
If you are 100% retail (zero distribution) the numbers should be flipped and there should be a healthy profit each month.
As you have probably figured out, this Long Game strategy is a mathematical equation.
The equation has 2 sides….Increase Revenue or Decrease Expenses.
Love it when I have options.
Where am I going with this? No more excuses or coverups. Do the math. Can you get there in the next 6 months?
Figure it out.
Long Game strategies must be sustainable, no quick fixes in 2022.
-cf