Recently a number of cities and counties have become victim to taxes on sugary beverages, especially soda. As a Restaurant owner you must know how these taxes are affixed and how to protect your bottom line from them.
Philadelphia recently levied a 1.5-cent-per-ounce tax on sweetened beverages that took effect in January. This makes Philadelphia the first large city to have an actual soda tax enforced. So, how can restaurants in Philadelphia mitigate the effects of these taxes?
- Clean it UP! – Spilled soda is still taxed. It’s common for restaurants to have a lot of wasted product when cleaning the lines that supply soda and filling soda cups. In order to keep this in order, restaurants must minimize spills and keep machines running properly.
- Relocate! -Make sure your company reconsiders the location of the soda stations and refill policies. A lot of restaurants have a free refill policy, which causes customers to fill up their own cups, causing more over spills and wasted sodas. Practicing this might need to be leaned away from and adapt more of an organized plan aka giving your cup to an employee for refill. Changing the location of the soda station may cause customers to be discouraged to refill their beverage, which may over all save your company money.
- Size Does Matter! – What size cups are you using? If the drinks are poured and made on demand, it is understandable that the sizes vary. This is a common practice at grocery stores, which tend to shrink product sizes rather than increase prices. This happens for one reason, people do not like to pay more at one place than another, and if the product is cheaper at one place than another, it’s commonly to be purchased at the least expensive competitor.
- Price Check Please! – Start to think of a smart pricing strategy. If your plan is to higher your prices directly on the board for the customers to see, it might seem obvious to increase prices by the amount of the tax. Customers will respond differently to price changes based on the restaurant location and item. It’s not uncommon to believe that customers have been responding to price changes in the past. Consider other items that have gone unharmed after a price increase to drive incremental profit. You might find opportunities outside the beverage category to offset those prices.