Chapter 16 — Exercises

Items marked † have worked solutions in the answers appendix. No answers appear in this file.

Unless stated otherwise, use Bellwether's frozen figures: beverage revenue \$434,000 at a 22% blended pour cost; wine \$164,920 (38% of beverage) at a 28% wine cost; by-the-glass \$99,000 at 22%**, bottles **\$66,000 at 37%; a 5 oz house pour yielding 5 glasses from a 750 ml bottle; 207 bottles / \$4,068 of inventory at par; the ladder in Figure 16.2.

A. Recall and definition

  1. In one sentence each, define wine list architecture, BTG yield, and bottle-price laddering.

  2. State the three tiers of the three-tier system in order, and name the transaction each tier is generally prohibited from making.

  3. What amendment ended Prohibition, in what year, and what problem was the three-tier system built to solve?

  4. A 750 ml bottle holds approximately how many fluid ounces? How many 5 oz pours does that yield, and how much slack remains?

  5. Convert each markup to a cost percentage: 2.0×, 2.5×, 2.8×, 3.2×, 3.5×.

  6. † Explain the difference between wine markup and wine cost percentage, and state which one a distributor rep is more likely to be talking about and which one your accountant is.

  7. Name the four ways the three-tier system constrains a small independent buyer, as listed in §16.3.

  8. What is corkage, and what is the first question you must answer about it before setting a fee?

  9. List the four sommelier/wine credential bodies named in §16.7 and one distinguishing feature of each.

  10. Why does Bellwether organize its list by style ("Crisp & Bright," "Dark & Structured") rather than by grape or region? Give the reason in terms of what the guest already knows.

B. Applied reasoning

  1. A restaurant's beverage program runs a 22% blended pour cost with spirits at 18% and beer at 19%. Explain why the wine category can run 28% and still be a good business decision. Use the labor argument from §16.1, not just the margin arithmetic.

  2. † §16.5 argues that by-the-glass waste is "an opening problem, not a storage problem." Restate the argument in your own words and give one operational control that follows from it.

  3. Bellwether prices its \$9-wholesale by-the-glass white at \$11 a glass rather than \$9, breaking the "glass price equals bottle cost" rule of thumb. Give the reasoning, and then give the reason the same rule is broken in the opposite direction nowhere on this list — that is, why nothing is poured above \$17.

  4. A colleague argues that the \$133 Nebbiolo in Figure 16.7, having sold zero bottles in ninety days, should be cut immediately. Give the two strongest arguments against cutting it and the decision §16.8 actually recommends.

  5. Explain why a preservation cabinet that pays for itself in three months at one restaurant has a 4.4-year payback at Bellwether. What variable changed, and what does that tell you about buying equipment generally?

  6. † The chapter claims the wine list is "a document about the guest, not about you." Design the test §16.1 describes, state what a passing result looks like, and name the most common structural reason a list fails it.

  7. Chapter 11 taught target-cost pricing. Explain, in a paragraph a lender would understand, why wine is the clearest case in the book of a category where that method fails at both ends of the range simultaneously.

  8. A restaurant with a \$46 check average buys a nitrogen dispensing cabinet in order to pour \$32 glasses of wine. Predict what happens over the following six months and explain the mechanism.

  9. Why does §16.7 insist that the server pours and the table does not self-pour? Give both the hospitality reason and the compliance reason.

  10. Bellwether's plan has no sommelier and none planned. Argue for that decision from the plan's numbers, then state the single largest risk it creates and which later chapters must answer it.

C. Cost this

  1. † A wine costs \$21.50 wholesale. Using Figure 16.2's ladder, determine the applicable multiple, compute the menu price (rounded per the chapter's rule), and state the resulting gross profit and cost percentage.

  2. A bottle costs \$46.00 wholesale. Apply the ladder's top rule — 1.9×, or cost + \$55, whichever is lower — and show both candidate prices before selecting one. State the gross profit and cost percentage of the price you chose.

  3. A by-the-glass selection costs \$16.50 a bottle and is poured at \$17 a glass, 5 oz. Compute: cost per glass, revenue at full yield, pour cost at 5 of 5, at 4 of 5, and at 3 of 5.

  4. † A restaurant pours 6 oz instead of 5 oz from a 750 ml bottle and prices the glass at wholesale bottle cost. Compute the yield, the pour cost at full yield, and the ounces stranded per bottle. If the restaurant opens 1,200 by-the-glass bottles a year at an average wholesale cost of \$15, what is the annual dollar value of the stranded wine?

  5. Compute the average bottle price, average wholesale cost, and average gross profit per bottle for Bellwether's \$66,000 of bottle sales at a 37% cost, given 1,243 bottles sold.

  6. † Build the four-shelf inventory table for a restaurant carrying a 24-selection list: 8 BTG selections 6 deep at \$14 average, 8 selections at \$18 average 6 deep, 5 selections at \$26 average 4 deep, and 3 selections at \$48 average 2 deep. Give bottles, dollars, and average wholesale cost per bottle.

  7. That restaurant's wine COGS is \$31,000 a year. Compute total inventory turns and days on the shelf. Then compute turns for the top shelf alone if it accounts for \$1,900 of that COGS.

  8. A \$62 bottle sits 200 days before selling. At a 10.5% annual cost of capital and a 4% annualized loss allowance, compute its total carrying cost and express it as a percentage of the \$55 gross profit it earns when it sells.

D. Price this / engineer this list

  1. † You are handed six wines with wholesale costs of \$7.50, \$11.00, \$16.00, \$24.00, \$36.00, and \$58.00. Price all six on the ladder, present them as a table with menu price, gross profit, and cost percentage, and then compute the blended cost percentage assuming each sells exactly ten bottles.

  2. Take the same six wines and price them at a flat 3×. Compute the same table. Then state, with reference to the room's \$46 check average, which of the six you believe would fail to sell at the flat-multiple price, and recompute the blended cost percentage with those wines selling zero.

  3. Bellwether wants to raise wine's share of the check from \$4.90 to \$5.40 per guest without changing a single price. List four operational moves from §16.7 and §16.2 that could produce it, and rank them by cost to implement.

  4. † Your list's second-cheapest bottle is currently a \$9-wholesale wine priced at \$32. You want to replace it with a \$15-wholesale wine you are proud of. Price the replacement on the ladder, compute the cost-percentage change on that slot, and argue for or against the swap in contribution-margin terms assuming the slot sells 180 bottles a year either way.

  5. Redesign Bellwether's 40-selection list as a 24-selection list for a 40-seat sibling restaurant with a \$38 check average. State how many selections per section, how many by the glass, the bottle price range, and the resulting approximate inventory in bottles and dollars. Defend every cut.

E. Read this report and find the leak

  1. † Here is one week of a restaurant's by-the-glass open-bottle log:

    Selection Bottles opened Glasses possible Glasses sold Glasses dumped
    Sparkling 4 20 13 7
    Crisp white 6 30 29 1
    Round white 4 20 16 4
    Rosé 3 15 14 1
    Light red 4 20 17 3
    Dark red 5 25 23 2

    Average wholesale cost \$14.00; average glass price \$14.00. Compute total glasses sold and dumped, achieved pour cost, full-yield pour cost, and the dollar value of the dumped wine. Identify the two selections doing the damage and state what you would change about each.

  2. A wine sales report shows a selection with 3 bottles at par, 1 sold in 90 days, \$58 wholesale cost, \$113 menu price. Compute days of cover and the gross profit it produced over the quarter. Then compute what the same \$174 of capital would have produced on a shelf turning 9.1 times at a 35% cost. State your recommendation and its limits.

  3. † A restaurant's wine cost has run 31% for a quarter against a 28% target on \$40,000 of quarterly wine sales. Bottle sales are on plan. List the five most likely causes in the order you would investigate them, say what document or count would confirm each, and quantify the dollar size of the miss.

F. Write this

  1. Write the wine-service section of a server training manual: two pages maximum, covering the two questions, pronunciation policy, the tasting-note card, when to open a new by-the-glass bottle, and the refusal procedure. Write it so a person on their fourth shift can use it.

  2. † Write the corkage policy that will be printed at the bottom of your wine list — three sentences maximum, guest-facing — plus the internal version for staff, which must cover the two-bottle limit, the waiver, the "not on our list" rule, and what to do when a guest disputes the fee.

  3. Write the memo to your distributor rep declining a ten-case deal. Be specific about your reasoning and preserve the relationship; you want them to bring you the next posted special.

  4. Write the paragraph of Bellwether's business plan that discloses the storage risk to a reader who will notice it. Do not minimize it and do not solve it with money the plan does not have.

G. Judgment and ethics

  1. A distributor rep offers to pay for your list printing and provide branded glassware for a wine they represent. Walk through how you would decide whether to accept, whom you would ask, and what you would do if you had already accepted before learning the rules.

  2. † A regular guest, clearly a wine enthusiast, orders a \$135 bottle and tells you at the table that it is "showing a little tired." It is not corked; it may have been heat-affected in your storage room, or it may simply be a wine they expected more from. Describe what you do at the table, what you do afterward, and how you record it. State the cost of each option.

  3. A server tells you they are uncomfortable selling the second-cheapest bottle because they think it is not good. Investigate. What are the possible underlying facts, and what does each one obligate you to do?

  4. A four-top has finished two bottles and orders a third. The host is a regular who spends well. Your server signals you. Describe exactly what you do, in what order, and what you say — and state what the policy in your training manual must have already established for this to go well.

H. Business Plan extensions

  1. † Rebuild Bellwether's wine section on the assumption that wine carries 45% of the beverage line rather than 38%, with the spirits and beer categories absorbing the difference and total beverage revenue unchanged at \$434,000. Recompute wine revenue, wine COGS at 28%, the blended beverage pour cost, and the per-guest wine spend. State whether the blended 22% target still holds and what would have to change if it does not.

  2. Write the year-two version of the wine plan, assuming year one's POS data shows the by-the-glass program hitting \$4.90 per guest but the \$96–\$135 shelf selling only 22 bottles all year. State what you change, what you keep, and what you would need to see before adding any selection back.

  3. Bellwether's partners are arguing about whether to open with a 28-selection list instead of 40 and add the top shelf in year two. Build the argument for each side using the capital, turns, and anchoring material in §16.6 and §16.8. Then make the call and say what would change your mind.

  4. Add a wine line to the thirteen-week cash forecast you will build in Chapter 33 — but do it now, at a sketch level. Given that alcohol purchases may be COD or short-term in your jurisdiction, state which weeks of the year the wine order is most dangerous to cash and what you would do about it in advance.