Will Off-Premises Alcohol Sales Continue for Restaurants?
For all the hardship the pandemic wrought on the restaurant industry, it made at least one thing easier for operators: selling alcohol off-premises.
As governors across the country enacted states of emergency, many also temporarily lifted certain laws that prohibited restaurants from selling cocktails or other adult beverages to-go, opening a new revenue stream for these businesses.
Around the world, alcohol has long been a key part of the restaurant experience, whether that’s a champagne toast to a life changing event, a glass of wine with the meal, or just having a beer with friends. Without alcohol, restaurants lose a key part of what makes the dining experience unique and a key financial driver of profitability.
So when prohibitions were lifted, it’s no wonder that most restaurants jumped at the opportunity. In this industry, where margins are razor thin even in the best of times, alcohol is the one product that always sells and is always profitable. According to the National Restaurant Association, roughly 70% of full-service restaurants with alcohol licenses started selling adult beverages to-go since the start of the pandemic, and more than half of quick-service and fast-casual restaurants that sell alcohol did the same.
These off-premises alcohol sales were a lifeline for restaurants during COVID-19. In fact, 35% of restaurant consumers aged 21 or older said they were more likely to choose to order from a restaurant if it sold alcohol for takeout or delivery orders.
But now that those states of emergency are about to be lifted, state legislators are grappling with how to reopen the local economy without further hurting the restaurants that survived. Texas recently made to-go cocktails a permanent fixture of the state, while a couple of Massachusetts state senators and a cohort of restaurateurs and small-business groups are leading the charge to do the same in the Bay State.
This national reckoning with how alcohol sales are regulated makes perfect sense when we consider what we’ve learned during COVID. Consumers and restaurants were able to handle off-premises alcohol sales rather well. There were no major infractions over underage sales or negative ancillary effects. We also know that off-premises sales are here to stay for the restaurant industry and will in fact grow at a steady rate in the future. Won’t the continuation of alcohol sales be essential to restaurant survival?
Paytronix data suggests it would be immensely helpful to restaurants’ recovery to authorize off-premises alcohol sales indefinitely. In 2020, 6.3% of all orders placed at restaurants that sell alcohol online contained an adult beverage. These sales accounted for 3.4% of all spend at these restaurant brands, and on average represented 27% of the subtotal on checks that included alcohol.
That may represent only an incremental help, but after a year like 2020, restaurants can’t afford to lose that 3.4% in sales, especially considering that 63% of U.S. consumers’ total food expenditure in 2020 – about $486 billion – was spent on food that was consumed at home. With off-premises dining representing a bigger piece of the restaurant picture than ever, restaurants will need to be able to sell alcohol via this channel.
What’s more, guests have come to expect the ability to order alcohol with their takeout order – especially younger consumers. According to the NRA, 20% of all guests who placed a takeout order last year and 18% of all guests who placed a delivery order reported buying alcohol in at least one of those purchases. Millennials are the most eager adopters – roughly one-third of all takeout consumers aged 24–39 ordered a drink to-go.
Even as restaurants begin to reopen, it’s clear that the takeout and delivery market will remain a key part of any brand’s future. Most will need to find a way to balance the on-premises and off-premises experiences to create a cohesive brand. Offering alcohol sales to any customer, no matter where they choose to physically dine, will help make for a better balance. Imagine a brand that can offer an anniversary dinner in the restaurant or an anniversary picnic, both with a wine pairing. Another brand may offer an after-work cocktail that is delivered to the office, or one served at the bar. Those brands that are able to create the most holistic experience from a distance will emerge from the COVID-19 pandemic the strongest.
Key to this, however, is action from state and local governments to ensure that this valuable revenue stream remains open. The emergency measures that states like Massachusetts put in place during COVID should remain permanent to match consumer expectations and ensure that the restaurant industry not only recovers, but remains vibrant and growing well into the future.
About the author
Andrew Robbins is CEO of Newton-based Paytronix Systems Inc., which provides customer experience management (CXM) solutions for restaurants and convenience stores.