Expert Advice on Hospitality Topics

Vending Machines Pay!

• Respond to customer requirements. People go to bars for three reasons: to drink, have fun and meet people. That last reason might make you want to consider fitting your club with a condom machine. One of these machines in the women's and men's restrooms can bring you a great source of income, especially on busy nights. Offering other bathroom essentials, like cologne, lip balm, women's essentials and aspirin, can add further profitability to your operation.

• Snacks.A selection of snack products can be another great earner, not just inside your bar but also outside. Chocolates, candy, chips, mints, cookies, granola bars; these snacks will keep your patrons going all night long without bothering your bar staff - or tempting them to enjoy the snacks themselves. Also, if you have some machines positioned outside your venue, they will continue selling for you even when the bar is closed!

• Water. In a nightclub, charging for glasses of water can be seen as profiteering by your customers. However, installing a bottled-water- vending machine can not only save your bartenders the time spent pouring out free water, it can also bring you in a hefty profit when patrons start to work up a sweat on the dance floor. Initiate a "bottled water only" rule when the dance floor is in operation and have your bartenders point to the vending machine whenever they're asked for water. Or have a selection of bottled waters available from the bar. You might even consider a special menu just for bottled waters. Your customers won't mind paying for it so much if they're getting the bottled product.

• Pay phones. It seems everyone these days has a cell phone, but there's still a huge need for the good old payphone. Incorporating phone card vending machines alongside a bank of pay phones is a way to double your profits on your customers' phone habits. Have them give you quarters for local calls or ten bucks for long distance. If you give your patrons options, they'll invariably choose one.

This article is an excerpt from the Food Service Professional Guide to Bar & Beverage Operation, authored by Chris Parry, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com

Upsizing is Essential

When you go to the movies, quite often you can buy a double-sized popcorn for only $0.75 more than the $3.50 regular size. This would seem to be an astonishing bonus for the customer, so why does the cinema operator push this "up-sizing" so hard? Quite simply, because they're selling about $0.04 worth of popcorn for that extra $0.75. That second portion might not bring as large a profit margin as the first, but it's still profit. Your drinks run the same way - if you can get another buck out of a customer selling a drink that costs you $0.45 to prepare, it's worth doing.

• Consider the cost per ounce of your well spirits. Let's assume you're using El Cheapo brand tequila at a base cost of $7.54 a liter. That would mean that an ounce of that spirit is costing your establishment $0.22, while a more-expensive brand of tequila, let's say Cuervo for the sake of this example, might come at a base cost of $14 per liter, or $0.41 per shot. Common thinking might lead you to say that by using the cheaper tequila you're saving yourself $0.19 on every drink sold. But, if you consider the alternative of up-selling the more expensive spirit for an extra $0.80 or so, you're actually making an extra $0.61 profit on every up-sized drink.

• Offer your customers a discount to spend more than they planned. This works in other areas, too. Turning a single into a double for an additional dollar, or selling half-price burgers with every shot of a specific brand of spirit, brings you more money per order, while bringing your customers added value. Your profit margin might not be as high, but you'll be extracting more money from your customers than they might otherwise have spent - a definite win-win.

• Up-selling. Most bar customers will bring out more money than they initially want to spend -just in case - especially those that don't have easy access to it through ATM machines and credit cards, so it's imperative that your staff don't let those customers walk out the door having spent less than they planned. Incentives for up-selling are commonplace in the theater and fast-food industries, so why not offer your staff an incentive to up-sell and watch your better staff earn a few extra dollars while earning you hundreds?

• Incentives. For example, if a member of your staff engages someone in conversation and discovers they're looking for somewhere to hold a private function, birthday party, girls' night out - any large gathering of people - there's certainly no harm in making it worth their while to bring that prospective client to you. Twenty dollars here, $50 there - even a percentage of the bar take - if you offer the incentives, you'll be surprised how far people will go to bring you new business.

This article is an excerpt from the Food Service Professional Guide to Bar & Beverage Operation, authored by Chris Parry, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com

By Chris Parry

Structuring a Price List

Guesswork just won't do in today's corporate world. Figuring that if your scotch costs you $14 a bottle you can sell a shot for $3, is just a little hit-and-miss when you take in all the other potential costs, like rent, insurance and wages, that your establishment has to cover over the course of a month. It's possible you might be able to charge less than $3, but it's also possible you should be charging way more. Take these factors into account when making your next price list adjustment:

• Market positioning. Take a look around at what your competitors are charging. Figure out if you need to undercut them or match their level. Does your establishment give added value enough to increase your prices and still draw a good crowd? Are you a level above them in terms of services and product? Are you evenly matched? Are you looking for a more "low rent" crowd? Price accordingly.

• The competition. They're not always right, but if they've been around a while, your direct competitors probably have a good gauge of what your local customers are prepared to pay for a drink. Take the time to look around and take particular note of any specials they offer on certain nights.

• Customer demographics. Are your patrons blue-collar workers? Are they white-collar? Do they have families to get home to or are they likely to stay all night and spend every penny? Are they young adults or senior citizens? These all impact what you can charge without losing clientele, and you should have the information already from your market research.

• Embrace simplicity. It's far better for your customers and staff to have to deal with a simple pricing structure as opposed to forcing them to break their brains over an intricate maze of differently priced products. Set across- the-board levels of prices; for example, well spirits might cost $3, middle-shelf $3.50 and top-shelf $4. Of course there's always going to be the occasional variation, but for the most part, a three-tiered system gives you flexibility in pricing without your staff continually needing to check a price list or hand out handfuls of change.

• Include tax in your pricing. There's nothing worse than getting $0.84 change from a five- dollar bill on every drink you buy and getting home with a pocket full of silver and copper. If you're going to set your prices at a round level, include the tax in that price so you can use price levels to your advantage. If your alcohol tax rate is 10 percent, the non-tax price for a shot that costs your patrons $3.50 would be $3.18 ($3.18 plus tax of $0.32 equals $3.49). Let your accountant do the math, not your bar staff. Sales tax is a complicated matter that varies dramatically from state to state. Prior to estab­lishing the net price inclusive of tax, discuss the issue with your accountant and state Department of Revenue. Don't find out later in a five-year audit that you've been calculating the tax incorrectly.

This article is an excerpt from the Food Service Professional Guide to Bar & Beverage Operation, authored by Chris Parry, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com

By Chris Parry

Part 1 of 2: The Profits

• Cost per ounce. There is 33.8 ounces in a liter, so if you're paying $15 a liter for a certain spirit, simply dividing that amount by 33.8 will bring you the beverage's ounce cost (in this case, $0.44). If your bottle size is 750ml, then divide the bottle cost by 25.35 to get the ounce cost. Likewise, dividing a 500ml bottle by 16.9 will give you that product's ounce cost.

• Total beverage cost. When calculating what it costs you to provide a mixed drink to a customer, simply figure out the ounce cost of each item in the drink. A half-shot means adding half the ounce cost of that shot, whereas a double shot would mean doubling the ounce cost. Make sure to include every aspect of the drink, such as mixers, dashes of cordial and garnishes. The total of each of these ounce costs will be your "beverage cost" for that drink.

• Cost percentage.  When you're investing in inventory, you want to know that you're getting a good return on your money and the best way to figure out your percentage return is to estimate your cost percentage for each drink you sell. Simply divide your ounce cost (or bottle cost) by the sale price you've set for that item and then multiply that number by 100. The total will tell you exactly what percentage of the final drink price you are spending on the purchase of its raw contents. The lower the number, the more profit you're making.

• Gross profit margin. To figure out each item's gross profit, simply deduct the cost price from the sale price. To figure out your gross profit margin, take the gross profit, divide it by the sales price and multiply it by 100. The figure remaining is your gross profit margin. You may well find it varies greatly from beverage to beverage. This will tell you which items have a high enough profit margin to push on your customers and which items are just making up the numbers.

This article is an excerpt from the Food Service Professional Guide to Bar & Beverage Operation, authored by Chris Parry, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com