Fast Food, Booze, and the Future
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Lately, there seems to be a lot of restaurants adding booze to their menus. Starbucks (NASDAQ: SBUX) recently expanded their wine and beer offerings to Chicago, adding to stores already in Georgia, California and Washington. The general idea is, "people like hanging out here during the day, but they leave as soon as happy hour rolls around, so let's fill them with booze and keep the money flowing," or something like that. In addition to wine and beer, Starbucks is offering complementary menu items such as premium cheese and cured meat.
Burger King (NYSE: BKW) has also jumped into the alcohol trade by opening "Whopper Bars." So far they are only in three US locations, but there are plans for more. Reviews have been mixed thus far with one side saying it's irresponsible to sell beer in a kid-friendly environment, and the other side making the far more rational argument that nothing tastes better with a burger than a beer.
So, are these things making money? Well, they're expanding beyond the test market. Beyond that, both Starbucks and Burger King are pretty quiet about it. We can, however, look at other restaurants that have been doing this for awhile to get an idea.
Darden Restaurants (NYSE: DRI) has a very clear hierarchy of restaurants, and it's fairly obvious that the lower-end restaurants depend less on alcohol. Olive Garden and Red Lobster, for instance, see average checks per person at $20 and $16, respectively. Of that, they derive around 7.5% of from alcohol. Capital Grille, on the other hand, has an average per person check of $70, with 31% coming from alcohol. Brinker's (NYSE: EAT) restaurants skew a bit higher: Chili's has an average check of about $14, with 13% of that coming from alcohol, Maggiano's has an average $26 check, 18% of which is booze. With few exceptions, it is safe to assume that alcohol consumption increases the further up market you go.
The best comparison to Burger King and Starbucks in this regard is most likely Chipotle (NYSE: CMG). Chipotle offers Beer and Margaritas at a fairly high price point, around $5 for beer and $6.50 for a 12 oz. pre-made margarita. Even at these levels, alcohol overall contributes to around 5% of sales. This suggests an almost impulse-buy mentality. It's doubtful people will start to think of Starbucks or Burger King (or Chipotle for that matter) as a place to go have a drink. But, on the occasion where an alcoholic beverage seems like a good complement (margarita with a burrito, beer with a burger, wine after a long day of tele-working at Starbucks), it's safe to say there is at least extra 5% out there to be had.
So why does this matter? It seems there are quite a few opinions that adding alcohol to the menu will be a golden ticket. But there are so many other factors working into the actual consumption of alcohol that it would be a mistake to think that just by offering booze, Burger King and Starbucks will take off. Although the addition of alcohol to the menu might help, I don't see it as being a defining factor.
TheLaowai has no positions in the stocks mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill, Darden Restaurants, and Starbucks. Motley Fool newsletter services recommend Burger King Worldwide, Chipotle Mexican Grill, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.