Chapter 16 — Instructor Material
Teaching Notes
Where this chapter sits. Chapter 16 closes Part III. Students arrive holding target-cost pricing (Ch. 11), menu engineering (Ch. 12), inventory usage and par levels (Ch. 13), and the bar program (Ch. 15). Wine is the chapter where the pricing framework they were just taught breaks on purpose, and the chapter works best if you set that up as the day's central event rather than burying it in §16.4.
The three arguments, in the order they land.
- Wine is capital, not inventory. (§16.6 — the distinctive one; no other chapter makes it.)
- Cost-percentage pricing fails at both ends of the same page. (§16.4 — the connective one.)
- The margin does not exist until a nervous guest says yes. (§16.7 — the one students remember.)
If you have only ninety minutes, teach 2 and 3 and assign 1 as a problem set. If you have three hours, teach 1 first — the capital argument makes the pricing argument land harder, because students who understand that a bottle is money-over-time immediately understand why a \$240 bottle that never sells is worse than a \$135 bottle that sells four times.
Common misconceptions, and how each one surfaces
"A lower cost percentage is always better." This is the big one, and it is the entire reason the chapter exists. It survives Chapter 11 in most students because food genuinely does behave that way within a narrow band. Wine breaks it visibly: Bellwether's list runs 28.6% at the bottom and 59.3% at the top, and the 59.3% bottle earns \$55 while the 28.6% bottle earns \$20. Surfacing move: before teaching anything, put the two bottles on the board with only their cost percentages showing and ask which one they'd rather sell. Then reveal the gross-profit dollars.
"A bottle that doesn't sell is a 0% cost item." Students who have internalized percentage thinking genuinely say this, and it is the cleanest illustration of why the framework fails. A bottle with zero sales has zero revenue and zero COGS — the ratio is undefined, and what it actually is is capital. Surfacing move: ask them to compute the cost percentage of the \$133 Nebbiolo in Figure 16.7. Let them discover the division by zero themselves.
"Preservation systems solve by-the-glass waste." Students reach for equipment. §16.5 answers with payback arithmetic and then complicates it honestly: the machine's real value is unlocking a revenue stream, not saving waste, and that stream only exists if the guests do. Surfacing move: have them compute the two paybacks (4.4 years vs. under four months) before you say anything about which restaurant each suits.
"Wine cost is a purchasing problem." It is 80% a purchasing problem and 20% a drain problem, and the 20% is where the controllable variance lives. The chapter's 28% = 26% theoretical + 2 points of shrink structure makes this concrete.
"You need a sommelier to run a serious wine list." Aspirational students believe this; it is budgetarily false for most of the restaurants they will ever work in, and the chapter's answer — the list and the training do the expert's job — is the practical one.
"Corkage is a way to punish guests who bring wine." Reframe it as the highest-margin product on the list with a cannibalization risk, and the fee-setting arithmetic follows immediately.
Arithmetic errors to watch for. Students routinely (a) forget that the bottle cost stays constant as glasses sold falls, so they compute the four-of-five pour cost as 20% rather than 25%; (b) divide 25.4 by 6 and round up to 5 glasses; (c) compute turns on revenue rather than COGS; and (d) apply the ladder's top rule as "whichever is higher" instead of lower.
The hardest point to teach
That the freed capital in §16.8 does not go into more wine.
Students who follow the argument all the way to "\$348 on the fast shelf earns seven times what it earns on the slow shelf" reach the obvious conclusion — so buy more of the fast wine — and it is wrong. The fast shelf is demand-limited. Owning more Côtes du Rhône does not sell more Côtes du Rhône; it just means you own more of it and your turns fall.
This is genuinely hard because it requires holding two ideas at once: the return per dollar is higher on the fast shelf, and the fast shelf cannot absorb more dollars. The resolution — the money becomes cash, and cash in February is the point of the whole book — is a Chapter 33 idea arriving early.
How to teach it: run the seven-times comparison, let the class reach the wrong conclusion, then ask one question: "If you double your Côtes du Rhône inventory, how many more bottles do you sell?" The silence does the work. Then ask what the only remaining destination for the money is.
A secondary hard point is the anchoring exception to the pruning rule — that a bottle with zero sales may still be earning its shelf space by making the middle of the list read as reasonable, and that no units-sold report can ever show this. Students who have just been taught to prune find this maddening, which is the correct response. The resolution is reduce, don't cut: one bottle anchors as well as three.
Demonstration ideas
1. The five-glass pour, with actual bottles. (20 minutes, high impact.) Bring an empty 750 ml bottle, a 5 oz measure, and five glasses. Pour water. Let the class see that 25.4 ounces produces five glasses and about a swallow of slack. Then do it again at 6 ounces and let them watch 1.4 ounces sit in the bottle with nowhere to go. Then compute the annual dollar value of that 1.4 ounces on the board. Nothing in the chapter converts as reliably as this.
2. The list legibility test, live. (15 minutes.) Print two versions of the same 40-wine list — one organized by grape/region, one by style with grape underneath. Hand them to students in pairs, one version each, with a strict 30-second limit, and ask each to choose a wine for a hearth-roasted chicken. Compare how many chose confidently. The result is usually stark and requires no commentary.
3. "Something around here?" (10 minutes.) Have students pair up and run the two questions on each other, one playing a guest with a \$50 budget they are embarrassed to name out loud. Then have them try it without the finger gesture — asking "what's your price range?" directly. The discomfort is immediate and the lesson does not need explaining.
4. The distributor role-play. (25 minutes.) One student is a rep offering the ten-case deal from §16.6; one is the buyer. The buyer must decline without damaging the relationship and must state the arithmetic out loud. Rotate. Exercise 16.39 becomes the written follow-up.
5. Build the ladder from scratch. (30 minutes, whiteboard.) Give the class six wholesale costs and have them propose a pricing rule with no guidance. They will propose a flat multiple. Let them price the \$80 bottle at \$240, then ask who in the room would order it at a restaurant with a \$46 average check. Then build the ladder together as the repair.
Timing
A single 3-hour session:
| Minutes | Content |
|---|---|
| 0–15 | Cold open: the two bottles, cost percentages only. Which would you rather sell? |
| 15–35 | §16.1 — what the list is obligated to earn; the \$434,000 split; \$4.90 a guest |
| 35–55 | §16.2–16.3 — architecture, the BTG core, the three-tier system (Figure 16.1) |
| 55–75 | §16.4 — build the ladder from scratch (Demonstration 5) |
| 75–85 | Break |
| 85–110 | §16.5 — the five-glass pour demonstration; Figure 16.3; the open-bottle log |
| 110–140 | §16.6 — storage, capital, turns by shelf, the case-stack deal |
| 140–165 | §16.7 — the two questions (Demonstration 3); responsible service; the training arithmetic |
| 165–180 | §16.8 + the Business Plan checkpoint; assign Exercises 21†, 24†, 29†, 34†, 45† |
Two 90-minute sessions: break after §16.4. Session one is the list and the price; session two is the money and the sale. Open session two with Figure 16.6 and the sentence "these two shelves are four feet apart and are not the same kind of asset."
As part of a beverage-management unit with Chapter 15: teach Ch. 15 first, then open Ch. 16 with the §16.1 split table and the question why does wine cost ten points more than the bar, and why is that fine? That single question carries the first hour.
Assessment guidance
The daggered exercises grade well as a set. 16.21, 16.24, and 16.26 test arithmetic mechanics. 16.29 plus 16.30 together are the chapter's best single assessment — a student who computes both tables and correctly explains why the ladder's 42.1% blended cost beats the flat multiple's 33.2% has understood the entire chapter. 16.34 and 16.36 test diagnostic reading. 16.45 tests whether they can propagate a mix change through a blended target, which is the skill Chapter 31 will demand. 16.42 is the ethics item and is worth grading on the afterward rather than the at the table.
Watch for students who produce the right numbers and the wrong conclusion — particularly on 16.35 and 16.47, where the correct answer includes its own limits.