About the Author: You may have seen Michael Neff behind the bar at New York's Ward III and The Rum House. He stops by on Wednesdays to share insights on cocktails and the life of a barman.

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[Photo: Christine Tsai]

What I'm Drinking:
High West Rendezvous Rye Old Fashioned

What we offer for sale in bars and what people pay for are often two different things. We list food and beverages on a bill of fare, but what we can't write down is the bulk of the experience. Things like service, cleanliness, vibe, notoriety, and a host of other intangibles are all vital to success. The trick is figuring out how to monetize them.

Someone asked me recently how the price of a cocktail is determined. It's an interesting question. Let's take a Manhattan, for example.

The first component is pricing the ingredients. Our Manhattan cocktail starts with a decent rye whiskey. Let's say a liter wholesales for twenty dollars. The simple conversion rate is 33.81 fluid ounces per liter, which works out to be about sixty cents per ounce. The two ounces that go in to a Manhattan work out to be a dollar twenty. The vermouth costs less, and we use less of it, so we'll say that is another seventy cents. A dash of a fifteen dollar bottle of bitters costs almost nothing; let's call it a nickel. So component-wise, our Manhattan has a product-cost of $1.95, give or take.

We have more to consider, though. That Manhattan takes a garnish of a cherry or a twist of fresh lemon, both of which must be on hand and both of which cost money to procure and produce. Someone must also be paid to cut those twists and stock those cherries.

The cocktail comes in a glass, which must be kept clean and chip-free. Glass is easily breakable, and a case of cocktail glasses hovers around $75, depending on the style. Even if only two glasses break on an average night, the replacement cost per year is substantial. When glass breaks there's the chance someone will get cut. There are hospital bills to consider, and insurance.

What about rent? What about the electric bill? What if the toilet needs replacing, or the ice machine breaks? What about the cocktails that are made that someone sends back because something is not quite right? The fact is, every facet of running a physical business in an actual bar is factored in to the price of a cocktail. Everything from rent to glassware to the flowers on the table.

Cocktail bars have an added layer of expense that also must be accounted for. We do a fair amount of experimentation before we can write a menu that makes us proud, and no one pays for those experiments. This adds a layer of expense for R&D, some of which is absorbed by liquor companies, but most of which we have to pay for out of our own pockets.

What if I want to spread the word about my cocktails? A publicist costs at least $4000 every month, and we hope that expenditure is outweighed by revenue from new business.

What's in a Manhattan? Bourbon or rye whiskey, sweet vermouth, and Angostura bitters. Simplicity itself, but incredibly difficult to execute to perfection. Let's assume that, all things being equal, the difference between a good Manhattan and one that is mediocre is the skill of the bartender. Who pays for the bartender? Well, the person buying the Manhattan does.

When people see a busy bar, they assume that the owners are making money hand over fist. While this might be true, there is a lot that goes in to operating a bar that is invisible to those who drink there. The price of a cocktail is a complicated affair, and the cash you hand over for your Manhattan must literally pay for the entire operation. What we hope you get in return is an amazing cocktail and an amazing experience. Whether or not that's worth $12 is up to you.

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