ON A night out you pay a hefty mark-up on drinks and food, and you accept that this is the way things are done.

You are also paying for the experience, the ambience and the service.

But just how much more are you paying? And which items command the biggest mark-up?

News.com.au spoke to insiders in the hospitality industry who have revealed the margins they make on the drinks and food they serve.

First things first. How do they measure their profits?

Restaurants, bars and cafes work in terms of profit margins, which is the net income divided by sales.

Let's say a restaurant buys a bottle of wine for $10, but they charge you $16.50 for it. The net income they make is $16.50 - $10, which is $6.50. Divide this by the sales ($16.50) and you get 39 per cent, which is the profit margin.

One bar manager said most bars work on a profit margin of 70-80 per cent on all products.

"So at our venue everything that you have listed will have at least a 70 per cent margin."

Spirits

House spirits have the largest mark-up because venues will have a deal with certain suppliers and receive heavy discounts.

"We buy our house vodka for $29 and you get 23 shots out of a 700ml bottle so that's $1.26 a nip and then we charge $8.50."

That equates to an 85 per cent profit margin. You end up paying 674 per cent of what it costs the bar.

Wine

Wine has the next highest profit margin.

"Wine we buy for $6.80 a bottle, you get around 4 glasses in a bottle so $1.70 per glass. We charge $8.50 so that's an 80 per cent profit margin."

Beer

Beers have slightly lower profit margins, but you pay a higher margin on a bottle than you do on a schooner (425ml).

"Cases of beer range from $42-$60. So for example we buy a case of Budweiser for $47, that's $1.95 each and we charge $8.5 so 77 per cent profit.

"We buy a keg of beer for around $210 and you get approximately 120 schooners. So $1.80 a schooner and we sell them for $6 so we get a profit of about 70.8 per cent."

Restaurants and cafes work differently. A restaurant manager who has worked in the industry for 20 years told news.com.au restaurants have to make a 40 per cent profit margin on alcohol and between 25 and 30 per cent on food in order to cover operational costs.

"You need to have something you are making good margins on and a lot of things you're not making as good margins on so you can justify paying wages and rents."

But it's tricky to get the balance right.

"If you go to a restaurant and everything's overpriced, you know that they're ripping you off."

Coffee

A shot of coffee costs 25 cents and people sell it for up to $4, sometimes higher.

"We all know we're addicted to coffee. We're always going to spend $3.50, $4.50 and when [owners] are only spending 25 cents a shot, doing 2-300 a day, those are huge margins."

Wine

Some restaurants have extremely high margins on bottles of wine.

"I personally think it's appalling, and I'm a restaurateur, seeing something you can get at Dan Murphy's for cheap and you're paying $60.

"The classic one restaurants do is Oyster Bay. You can get it for [cheaper], but you'll go somewhere and they'll have that wine on for $60."

Baking

For food, the best margins are in things like baked goods and pizza.

"You can make really good margins on baked products. Baking a whole cake is going to cost you $8 to bake, for a nice rich chocolate cake, and you're going to sell a piece of that for 7 or 8 bucks."

"There are huge margins in pizza. You put flour and water together with a bit of yeast, which costs 8 cents for the dough, sprinkle a bit of toppings and charge $20 for it."

Fruit and juices

Juices and fruit salads also have massive margins.

"You can charge $6-8 for a freshly squeezed juice, but it costs you about 80 cents, 90 cents max."

Salads

Side salads and mixed leaf salads have big margins because lettuce is difficult to keep fresh.

"The other thing I notice is a mixed leaf salad when they charge you $12 for a mixed leaf salad, and it's a bunch of rocket and lettuce with a drizzle of oil, salt and pepper.

"But there's a shelf life on stuff like that. Basically the restaurateur is charging you just to have it on the menu. You know what if you want salad you're going to have to pay for us to get it in every day."

Meat and seafood

Meat and seafood, on the other hand, have much lower margins.

"Meat's really difficult, particularly in restaurants you're getting organic, restaurant quality meat.

"Fish is expensive, really expensive so you can't put big margins on it. If I pay $8 for a really good piece of fish from a supplier, customers won't pay $50 for that."

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