How alcohol taxes influence restaurant expansion and executive decisions.
(Excise Tax Rates by Dollar per Gallon)
North Carolina $13.02
New York $0.30
New Hampshire $0.00
Cooper’s Hawk is flying high. Since opening in 2005, the 13-unit winery and restaurant has stretched its reach from its suburban Chicago home into Indiana, Wisconsin, Missouri, Ohio, and Florida. Next year, the upstart eatery will make its debut in Virginia.
At each Cooper’s Hawk location, alcohol accounts for about one-third of revenue, a figure in line with many others in the full-service restaurant space. Adult beverages represent an important pillar in the chain’s business model, a reality that heightens the leadership team’s attention to alcohol taxes, including liquor-licensing fees, in areas throughout the U.S.
“We’re a wine-themed restaurant, so there’s no way around these taxes, and no matter where you go, taxes are going up, not down,” Cooper’s Hawk senior vice president of real estate development Ron Dee says.
As full-service restaurants enjoy the friendly margins alcohol sales bring and as alcohol sales in U.S. restaurants hustle toward the $100 billion mark, according to research firm Technomic, an unfortunate reality emerges for restaurant operators: Corresponding alcohol taxes sting profitability and impact a restaurant’s ability to hire new staff, make capital improvements, and open new units.
“A higher tax burden typically translates into a lower growth rate by reducing the amount a restaurant owner has to invest in his business,” says Distilled Spirits Council chief economist David Ozgo, who considers alcohol taxes “the biggest discriminatory tax” facing the restaurant industry.
While population, income, demand, and a plethora of other data points may top any restaurateur’s list of development considerations, alcohol tax burdens—from ongoing excise taxes to licensing fees—cannot be pushed aside.