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Savings challenge: Avoid this costly menu item

Mixing and pouring drinks

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Want to save money? I have four words for you when you’re dining out: Don’t order the booze.

Wine, beer, shots — whatever. If it’s on the cocktail menu, expect a huge markup. Restaurants and bars always jack up alcohol prices, charging customers much more than what the restaurant paid its supplier, says W. R. Tish, managing editor of Beverage Media Group, a publication that tracks the wine and spirits trade in America.

“It’s absolutely true” that restaurants make most of their money from alcohol, Tish says.

The amount of the markup depends on a variety of factors: A popular restaurant or bar may be able to charge a higher price than others for the same drink. And establishments in big cities, such as New York, pay higher fees for liquor licenses, so that can push prices higher.

In general, industry experts advise restaurant and tavern owners to mark up their alcohol prices by three to five times. In other words, you could buy a bottle of beer for you and four of your friends at the grocery store for the price of buying just one bottle of beer at a bar.

This happens with the food, too, but at least the restaurant can justify the increase: Your dish is prepared by an expert, brought to you by a server, and restaurant staff will even do your dishes afterward. When it comes to many alcoholic drinks, the preparation is comparatively simple: There’s no real craftsmanship — the bartender just hands you a bottle or pours it into a glass. It’s so simple that Homer Simpson (or I) can do it from the other side of a bar and save big bucks.

How do I know this? Each week, one of Bankrate’s personal finance reporters is reporting on a new way to save and chronicling the savings journey. This week, my wife and I put this theory to the test so I could share my experience with you. See what happened.