The Value of Food-Based Happy Hours
Food-based happy hours are a way to drive guests to your bar without cutting into your bar sales. For many bars, food is used as a way to sell drinks. Statistically, guests who eat food while at a bar stay about an hour longer. That means that food is a great way to increase your beverage sales. By using time-specific food promotions you can keep the higher margins on your drinks while increasing guest satisfaction and length of stay without decreasing your cocktail margins.
What is Happy Hour?
Most folks who work in and around bars are very familiar with the concept of happy hour. But it actually can mean different things in different places. At its most basic Happy Hour is a time-limited discount on alcoholic beverages. For example, half-priced cocktails from 4:00 pm to 6:00 pm. These discounts are usually very steep and are used to drive guests in during what otherwise may be a slower time of day.
Multiple states in the US and countries and cities around the world ban or limit time-specific alcohol discounts. In the US, 9 states ban happy hours outright, and other states restrict happy hours in one or multiple ways: limits on when a happy hour can occur, limits on how long a happy hour can be, limits on the size of the discount, or bans on all-you-can-drink specials. Only 18 states in the US allow happy hours without restrictions. Ireland, France, and the city of Glasgow also ban happy hours outright. The general thought process behind these bans and restrictions is that time-limited discounts encourage people to drink in excess while the discount is available leading to binge drinking and an effort to prevent drunk driving.
That means for many bars, they do not have the freedom to do whatever they want for happy hour. But, almost everywhere in the world, offering a time-limited food special is unrestricted.
Why are food discounts better than alcohol?
When most people think of promotional bar ideas, they think of discounting their beverages. It makes sense. Most bars are doing two or three times the beverage sales compared to food sales. Plus, beverage cost is often lower than food cost, so discounting beverage prices means that you are still making a profit, while discounting food prices can mean taking a loss on the individual item.
However, if you look holistically at sales, your goal is to maximize profits. It’s about increasing sales and maximizing profits. It's about the total value of your transactions with your guests. Which part of the transaction is discounted doesn’t matter if the total transaction brings in more overall profit.
Food-Based versus Beverage-Based Specials - The Math
As an example, let's compare the difference in overall profits between a 50% off food and a 50% off cocktails special, assuming the guests ordered the same thing. To keep things simple, let's say the guest ordered two cocktails and an appetizer, two rum and Cokes for $7.50 each and some nachos for $12.50, for a total bill of $27.50, and model out the two scenarios.
Now, that is assuming only one person consuming the meal. If you had two guests, both order two drinks and then split the nachos, the difference is even more profound.
The difference is now huge. But that still isn’t factoring in the fact that guests who eat stay on average about an hour longer. If we modify the scenario based on that information, we could say that the food special not only is the reason the food was ordered but that it generated an extra cocktail sale for each of our two guests as well. In that case, with the food happy hour special we are selling three cocktails to each patron and nachos, but without it, we would just be selling two cocktails to each guest.
Clearly, the math shows a huge difference between the two discounts. It isn’t going to always work this way in practice, but the point is to not be scared of increased food costs due to discounting food. What matters is not the specific menu item you discount, but the money you put in the till. And, while your actual food cost percentage may be higher due to food specials, you have not cut into your beverage profits at all, so you have maintained your margin on your most profitable products.
What food discounts work best?
You can make almost any food work as a food happy hour special. But, you need to keep your food cost in mind and promote items that will help increase and not decrease sales. You also need to make sure you structure your discounts to not cut too deeply into your ideal food cost. There are a few key considerations for choosing the best items from your menu to discount for a food happy hour special.
What foods to discount?
The best foods to discount are ones that you already have a low food cost percentage on. For a happy hour food special, most customers are not looking for a full meal. We are catching these guests on their way home from work, and they are generally after a snack before going home and having dinner a few hours later. So, what you need to do is focus on appetizers and small plates.
The good news is that generally appetizers are some of the highest-margin, lowest total food cost menu items that a bar offers. Plus, you do not have to offer all of your appetizers in the special. This strategy works best when you pick five to seven appetizers or small plates to push during your happy hour special. These can change on a regular basis, week-to-week or month-to-month to avoid your guests getting tired of the same items, and the special losing its appeal.
Beyond just looking at food costs, you want to pick items that will encourage your guests to drink. The best dishes to drive thirst and therefore beverage sales are items that are fried and salty. For most bars, they already have plenty of items like that on their menu, especially when it comes to appetizers. At the same time, you want to avoid foods that are too filling. You are aiming for an after-work snack, not a full meal.
Picking the right discount
One of the easiest and most common happy hour food specials is 50% off your current menu prices. It is easy to understand, and as long as you pick items with a food cost percentage of under 50% (which should be everything on your menu), you are still making a profit on the food that you serve. If you chose several small plates or appetizers from your menu that had a food cost percentage less than 25%, you could even offer a 75% discount and still not lose money on that item. Remember, the goal is not to make money on the food, the goal is to increase drink revenue during the happy hour period.
You can also do deals that are not a straight percentage off and do not revolve around your current menu items. For instance, you might offer free food with the purchase of a drink. The whole concept of small plates and tapas stems from this idea. In Spain, after work, many people visit bars and sit outdoors to enjoy a glass of wine. The problem is wine is sweet and bugs love sweet liquids. So, it became common to put a bread plate on top of the wine glass to stop flies from getting into the wine. Smart bar owners made up little bites of food that they would put for free on the plates. And this wasn’t expensive food. That is why many classic tapas dishes have a very low food cost percentage. They saw the plate as an opportunity to differentiate themselves from the competition.
You could also look at discounts like buy one appetizer, and get one free. The only real limit is your imagination. Just stay away from complex discounts. You don’t need your bartender to explain the happy hour special for 2 minutes to every guest who walks in the door.
How to market happy hour food specials?
The idea that you can just “build it and they will come” never works in the bar business. Just discounting food and not marketing it to your guests will just result in increased food costs and decreased revenue. You need to make your customers aware of the discount and bring in more guests to increase sales. You can not make a promotion a success unless you promote it. For a food happy hour promotion to work, you need to push it both internally and externally.
Internal Marketing
From an internal marketing standpoint, you should focus on two things when it comes to pushing a food happy hour special. First, training your team to know how to sell it, and second, using materials within your establishment to help raise guest awareness.
Training your team on the special is the single most important thing you can do to push your happy hour special. They must have solid, first-hand knowledge of every menu item that is included in your special. They need to be able to describe them in detail to the guests and ensure the guests that they are getting the same items and portion sizes as when those items are not on special. To speak with that kind of authority, your servers and bartenders should have tried every item on your menu and know the ingredients.
One other piece of internal marketing that needs to happen is some way for your guests to know about the special before talking with their server or bartender. This could be a sign promoting out the food happy hour in table tents on each table, a separate happy hour menu on each table during the happy hour times, or just putting it on a chalkboard during the happy hour period.
External Marketing
To maximize the profitability of your happy hour special you need to reach not just the customers already in your establishment, but the larger customer base you draw from outside of your establishment. This means the promotion should be part of your website, SEO, and social media strategies.
You should always have any specials you are currently offering on your website. Increasingly, people will not go out to eat unless they can view the menu and specials online before going out. Studies have shown that Gen Z has a high level of menu anxiety and goes out less because of it. That means they are even more like to view your menu online before they decide to come to your bar. So, your website needs to tell them as much as it can.
SEO, or search engine optimization, is essentially how you put things on your website in a way that search engines can read. You are using keywords, tags, and phrases to make Google more likely to show your bar’s website when someone searches. While you can spend a lot of time and money on SEO, the big thing is to just think through what people may search for. For example, you should use the term “happy hour” all over your description of your happy hour special. That way if someone in your area searches for “happy hour” you are more likely to come up higher in the results. Also, think about related terms like “food special” or “appetizers”.
For your social media, you need to post about your special. But, just posting a picture of the menu, or of a flyer doesn’t cut it anymore. You could feature a picture of a few of the dishes with a description of the special, just make sure that your food picture is “Instagram worthy”. A better idea would be to post a video of your chef or kitchen manager explaining the food items, going into some detail about how they are made, and inviting people in to give them a try. Social media works best when you create a connection with your guests.
What to avoid in a happy hour food special?
Happy hour food specials are simple, and there are not many pitfalls to avoid. But, you do need to make sure that you set menu prices for your special that ensure profitability. Like mentioned above, try to discount food items that you are still making a small profit, even after the discount. Always keep your food costs in mind.
Another pitfall to avoid is serving an item on special that is different than the same item normally. You do not want to reduce portion sizes. This will make it seem like you are not offering your guests a deal, and rather than feeling good about the transaction, they could view it as a bit of a bait and switch.
Finally, avoid running a discount without supporting it. Make sure that you have the discount properly programmed in your POS system, that your team is well-trained on it, and that you have your internal and external marketing on point. The benefits of a food-based happy hour come from increased sales, and that doesn’t happen without systems, training, and promotion.
Final Thoughts
However you determine to run a food-based happy hour special, make sure that you rely on your sales data to show you how well it is working. While you will see increased food costs, you should also see increased alcohol revenue, guest counts, and ideally a higher guest check average, meaning you are not just bringing in more bar patrons, but that they are spending more on average.
If you would like to learn more about how to use food-based happy hours to increase profitability for your bar or want assistance with executing a happy hour strategy, schedule a free thirty-minute strategy session with The Bar Business Coach to learn how we can collaborate.