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On Premise Advice: The Winds of Change

By January 4, 2025Rhode Island, Top News

Len Panaggio, Beverage Consultant

By Len Panaggio

As we close the books on 2024, the blustery winds of change offer new possibilities in the new year. How this affects you depends on your level of planning and participation going into 2025. Regulatory changes can pack a punch to your bottom line and keeping abreast of potential legislation is incredibly important.

Obviously, one of the biggest changes takes place at the very top of our country. While I’m not writing a political column, both presidential candidates were floating a concept with significant impact on the hospitality industry: eliminating taxes on tips. I think the initial reaction of those working in the industry was positive and, on the surface, this concept looks very appealing.

The definition of a tip may be butchered to include bonuses and other forms of typically taxed income. Many opposing this idea will claim it is creating an unfair advantage for the hospitality industry; however, my biggest concern is: will it include payroll taxes?

Let’s face it, our industry is primarily populated by younger workers and the idea of retiring is not even a blip on their radar. Let’s not forget that President-elect Trump has also proposed a 25% tariff on Mexico and Canada, and as of writing this column, all three countries are in talks, but the outcome of those discussions is still up in the air. Nevertheless, this could not only affect the cost of beverages but a whole slew of goods used in our industry to operate.

Another big change is the 3% credit card usage charge on guest checks. It is a rapidly growing movement as restaurateurs continue to look for meaningful ways to cut costs. The pressures on an operator’s bottom line swell as the cost of goods and labor continue to rise, and the government continues to impose higher fees, etc., as well as many other line items.

 

How can you best prepare based on the information we have now? First, inventory is key. Your last inventory is the most important. It is where you are sitting on either a lot—or a little—of tied-up money. Perhaps it’s time to change that amount, as well as clean up the products that are not selling well. As you also get closer to having your P&L for 2024 finalized, assessing the good, the bad and the ugly in terms of operating expenses is crucial to operating profitably in the upcoming year.

January is also a key month to huddle with your bar team and propose changes to your beverage program. There are a lot of factors impacting your establishment beverage-wise. Consumption of alcohol continues to drop and the hardest-hit category so far is wine and beer. The impact is so great that many microbrewers across the country are closing and, in the wine world, many smaller wineries are shuttering as well. These changes will force you to adapt to the desires of your guests.

Clearly, the level of your establishment (i.e., white tablecloth down to dive bars) attracts those from differing socioeconomic levels. In some, wine thrives; in others, beer wins out, but martinis are ubiquitous. Bottom line: Much thought into what you are offering is critical at this juncture and requires input from your team and reading your product mix carefully.

The good news is that January is typically a quiet month across the state, so it gives you the time necessary to evaluate your operations carefully and prepare for the new year. It’s also a good time to recharge your batteries, go on a vacation and sit at a bar and grab a drink.

To quote someone special, “Changes in latitude, changes in attitude!” Happy 2025!

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