A lot of work goes into making a cocktail. And I don’t mean the careful measuring, rigorous stirring and precise garnishing that you’d see at just about any cocktail bar.

Order a Margarita—a relatively simple and ubiquitous drink that could easily cost $15, plus tip—and within moments the drink appears, prepared by a skilled bartender who makes the task look effortless. With hardly any visible labor, it might be tempting to assume that the majority of that $15 price tag goes toward the ingredients: the tequila, triple sec, lime juice and agave nectar. But most of those dollars in fact go toward the invisible elements of a bar that are no less important than what ends up in your coupe. And more often than not, the sticker price barely covers the true cost of your drink.

The current crisis in the bar industry, caused by the ongoing pandemic and abysmal public health response, has made the inner workings of the field—slim margins, high turnover and poor job security—impossible to ignore. Iconic, beloved spots like New York's Existing Conditions, San Francisco's Bar Agricole and Portland's Clyde Common have closed for good, and the bars that are still open are hanging on by a thread. Now, more than ever, it's important to understand where our bar-going dollars actually go, and perhaps even more important, where they should go.

I was the bar director for the Momofuku restaurant group from 2012 to 2018, where I opened 10 restaurants and oversaw the cocktail menus at a dozen locations. During my time there, we used an elaborate database to determine costs for every ingredient—I could have told you the cost of a dash of Angostura bitters off the top of my head—and based on those costs, we would determine each drink's menu price.

As an example, here is a breakdown of a bar’s costs to serve a typical $15 Margarita in New York (this can be applied to most major markets, including Los Angeles and San Francisco):
Labor: $4.50, or 30 percent
Ingredients: $2.55, or 17 percent
Rent and utilities: $2.55, or 17 percent
Taxes: $1.50, or 10 percent
Credit card fees: $0.45, or 3 percent
Everything else: $3.45, or 23 percent

If you add $3 as a 20 percent tip to that Margarita (which you always should, because the federal minimum wage for tipped workers is currently set at $2.13), your drink has now cost you $18. That tip typically goes to the bartender or server who’s directly helping you, although many spots pool tips and distribute them to all front-of-house staff, including barbacks. Kitchen staff and management, meanwhile, are legally prohibited from taking tips, so that $4.50 of your $15 goes to prep staff, porters, dishwashers, line cooks and managers, who, given the hours they put in, can be some of the lowest-paid members on the team.

After all of this, a bar still has to eke out some cash to squirrel away for a rainy day. Ice machines break catastrophically and without warning, a nightmare I have personally experienced more than once: An emergency service call can run in the hundreds of dollars, and replacement is easily in the five digits. Same goes for equipment like HVAC and refrigeration. Essential items like chairs, glassware and bar tools all inevitably break, and must be replaced.

But ultimately, a bar is nothing without its staff, so understandably labor is the single largest expense for any given bar. “People don’t understand the work that goes into cocktails,” says A-K Hada, former bar manager at the now-shuttered Existing Conditions. In the case of a technique-driven, high-concept bar like Existing Conditions, each drink relies on hours of prep work. But even at a more conventional cocktail bar, juices, syrups, infusions and ice all require daily prep and labor.

If a bar is providing benefits like health insurance to its staff, which Pasha Morshedi, owner of Rosewater in Houston, does, the percentage of each cocktail that must go toward labor increases. “The day we implemented health insurance I wept tears of joy,” says Morshedi. “There is a certain sense of legitimacy that comes with getting a health plan. Bar staff deserve to be treated like professionals.”

But, as Morshedi explains, knowing the true cost of a cocktail only gets you so far. “It almost doesn’t matter what your pour costs are,” he says, “because you have a limit to what people will pay, and you work backwards from that.” In other words, if customers are unwilling to spend more than $15 dollars, certain ingredients, techniques, even styles of service, are impossible to offer without running the business into the ground—or worse, running the business with an unfairly compensated staff.

Even within those boundaries, however, operators can get creative to accomplish their goals. At Hunky Dory in Brooklyn, for example, owner Claire Sprouse aims for a relatively low pour cost, just 12 percent of the drink price as opposed to the typical 20 percent, to accommodate a gratuity-free compensation model that guarantees a reliable schedule and steady take-home pay for her staff. This shift allows her to increase her labor percentage to something closer to 40 percent rather than 30 percent per cocktail. She also uses lower-proof products, such as fortified wines, as a way to keep costs down. Instead of serving a drink with two ounces of bourbon, for example, she might pour something with an ounce and a half of sherry, with a full-strength spirit as a modifier. Additionally, the bar’s focus on sustainability aligns with cost-reduction measures; Sprouse uses spent coffee grounds and cucumber seeds, which would otherwise get tossed, as “free ingredients” for syrups and infusions.

While there is no question that some bars can overcharge for their drinks—and we often have little to no transparency about where that money is going—the vast majority of small, independently owned establishments are just breaking even on a good day. The price of a cocktail is the middle ground between what someone is willing to pay, and what businesses need to survive. But as vaccines roll out and patrons tiptoe back into bars, it’s likely that prices will rise to address the unstable models exposed by the pandemic. And it’s imperative to accept the reasons for it. Just as we know that we pay a premium for high-quality ingredients and fancy glassware, we should accept the added cost of supporting a healthy workplace for staff, and a sustainable industry for everyone.