The New Economics of Fountain Soda

Restaurant operators can see their profitability pop by making strategic investments in their beverage programs. The category is getting more attention these days because the economics are unusually attractive and guest expectations have changed, Tim Harms, CEO of Enliven, told Modern Restaurant Management (MRM) magazine, adding that while fountain soda was one of the highest-margin items on the menu, it was also one of the least strategic. 

“Most operators treated it as a bundled add-on: pick a supplier, install the fountain, sell the same drinks everyone else sells. That model still has value, but it no longer captures where the category is going.” 

This investment is being fueled by three things: higher guest willingness to pay, better gross profit per serve, and the need for operators to find growth without adding a lot of kitchen complexity, he added. For more than two decades, Harms has advised restaurants, theme parks, airports, and other multi-unit operators on national pouring-rights negotiations, helping clients save money and increase beverage incidence through data-driven strategy and vendor collaboration.

Beyond the Fountain

Guests are now comparing restaurant beverages to Starbucks, smoothies, energy drinks, dirty sodas, refreshers, functional beverages, and premium non-alcoholic drinks and that has changed the reference price, he explained. 

“A guest may hesitate at a $3 fountain drink, but a $5.50 crafted refresher can feel like a treat, especially if it offers flavor, customization, caffeine, function, or some visual appeal,” said Harms.

McDonald’s national rollout of crafted sodas and refreshers is a good example because they are not treating beverage as a side item, he added. Instead, they are building a category platform, with dedicated internal support and products that stretch beyond the traditional fountain set.

One of the main reasons beverages can be a margin driver is because the incremental cost of making a drink feel premium is often small compared to the price guests are willing to pay, he noted. 

For example, a standard fountain soda might sell for roughly $2.50 and generate around $2.15 in gross profit. That is already attractive, Harms explained. But a crafted soda or refresher selling for $5.50 may only cost an additional $0.50 to $0.90 in syrups, creams, cold foam, boba, or other ingredients. That can move gross profit into the $4.25 to $4.75 range per serve.

“That is the core reason operators are paying attention. For less than a dollar of added ingredient cost, the operator can nearly double gross profit per drink.”

The Beverage Advantage

There is also an operational advantage. While food innovation often requires new equipment, more labor, more prep, and a more complicated supply chain, beverage innovation can often run through existing equipment, existing counter space, and a simpler training model, he said. 

“That does not make it effortless, but it is usually easier to scale than a major food menu change. The key is not just adding a few premium drinks. The real margin opportunity comes from designing the whole beverage program intentionally: pricing, menu placement, supplier economics, category mix, equipment, promotional strategy, and contract flexibility.” 

That said, in these value-seeking times, operators have to give guests a reason to trade up. A higher-priced drink has to feel meaningfully different from something they can get for free, but that does not always mean expensive or elaborate, Harms said. It can mean flavor, caffeine, refreshment, customization, lower sugar, functional benefits, or a limited-time item that feels new. The point is that “soda or water” is too narrow a choice set for where the category is headed. 

“If a guest is cutting back, a basic fountain drink may be the first thing they skip. But a mango pineapple refresher, dirty soda, energy-based drink, or premium iced tea may still feel like an affordable treat compared with coffee-shop pricing. Restaurants have an advantage because they can offer something that feels premium without asking the guest to make a separate stop.”

A good program gives guests a few clear reasons to buy, instead of relying on the same carbonated soft drink lineup and hoping attachment rates hold, he said, noting that not every guest wants maximum indulgence. Some guests want low-calorie, low-sugar, functional, or hydration-oriented options, while others want dessert-like options. 

Finding the Profit Pops

Fountain selection affects the P&L in more ways than operators often realize, Harms added. The obvious piece is product cost and rebate structure, but that is only one part of the equation. The broader questions are: which brands drive attachment, which drinks support premium pricing, which products fit the guest base, and which supplier agreement gives the operator the right economics without boxing them out of faster-growing categories? 

“For a long time, operators looked at fountain decisions mainly through a procurement lens. Who gives the best rebate? Who provides the equipment? Who handles service? Those questions still matter. But if the agreement limits the operator’s ability to add energy, refreshers, functional beverages, premium teas, or other high-growth categories, the ‘best’ deal on paper may be costing money in practice.” 

McDonald’s decision to bring in Red Bull for an energy drink is the signal worth watching, Harms noted, because McDonald’s is one of Coca-Cola’s most important fountain customers, yet they carved out a product that sits outside its portfolio. That tells you operators are starting to think by category, not just by supplier.

“The P&L opportunity comes from matching the right partner to the right lane: carbonated soft drinks, energy, hydration, functional, indulgent, premium non-alcoholic, and so on. A strong deal protects the value of the bundled fountain agreement while giving the operator enough flexibility to participate in categories where the growth is happening.”

Be Strategic

Because the category is much bigger than traditional soda programs, operators can’t roll forward their old programs and supplier agreements, Harms suggested. 

“Many operators still ask, ‘will I see more sodas from the red company or the blue company?’ That is an important question, but it is incomplete. The better question is, ‘What do we want our beverage program to do for the business over the next five to ten years, and does this deal help us get there? What’s our strategy for all growing beverage categories?’”

Operators can make a mistake by underpricing premium beverage opportunities because they are still anchored to fountain soda economics and overvaluing simplicity.

“Guests are not comparing a crafted refresher to a $2.50 soda. They are comparing it to a $6 coffee or an $8 smoothie. A single supplier and a clean equipment package are valuable, but if the agreement is too rigid, the operator may miss growth in energy, functional, hydration, or other premium categories.”

Operators also fail to model the tradeoffs, he said. Adding another beverage partner can mean more complexity, but it may also create better attachment and stronger gross profit. Beverage program architects need to run the numbers both ways.

Because a good beverage idea can underperform if the operating model is sloppy, operators need to launch new drinks by paying enough attention to execution, Harms noted. Menu placement, staff training, speed of service, cup presentation, pricing, and POS setup all matter. 

“The improvement path is pretty practical: audit the program by category, not just by supplier. Model the economics of premium drinks and category flexibility. Review the current contract for restrictions that may limit future growth. Then negotiate the next agreement with the future category mix in mind, not just today’s fountain volume.”