How Keeping Close Tabs On Your Liquor Supply Can Both Cut Costs & Generate Revenue
Industry studies have consistently shown that a full 25% to 30% of a bar's liquor inventory never converts into registered sales. That is the equivalent of about six to eight 1.25 oz portions per bottle (which should yield at least 25 portions.) This loss of liquor volume--due to unauthorized comps, over-pouring, spillage or theft--should be of great concern to any bar manager. While losing 25% of a $25 bottle may not seem like a very serious problem--an unavoidable cost of doing business--the true cost is much greater than that $6 or $7 per bottle. The question you need to ask yourself is: Where is this lost liquor going? And how is it affecting sales? For instance, if your bartender is not pouring 1.25 oz portions, but is instead pouring 2 oz portions (say, perhaps, to curry favor with clients and receive a bigger tip), you're not just losing liquor volume, you're also losing potential sales. Where the customer may have been disposed to buy three drinks (3.75 ounces), he may now be content to buy just two 2-ounce drinks. Your bartender's actions, in this case, haven't merely cost you a dollar's worth of liquor, they may well have cost you $6-$8 in lost sales revenue (depending on how you price your drinks). And that's just for one customer buying two drinks. How often is this occurring? What if your bartender also happens to be giving away free drinks without your knowledge or authorization? The point is: "shrinkage" does not only affect supply costs, it can also affect revenues in a big way.
That's why loss prevention is so important. The profitability of your business depends on whole bunch of variables--the location of your establishment, the overall economy, ever-changing customer tastes.... Achieving profit growth can be difficult and can rarely be accomplished overnight. Increasing the price of your drinks is risky, and can prove more harmful than helpful as far as your bottom line is concerned. And growing your clientele usually takes time. The best way to increase profits in the short-term, therefore, is not to try to fiddle with pricing or to increase your client base. (Of course, this is something you should always be doing. But it is not easy to do in the short-term.) The quickest way to increase revenue is to make the most of the clients you're already serving. And one way to do this is to improve operations by getting tighter grip on your inventory. Loss of liquor supply at double-digit levels is not an "unavoidable cost of doing business". It is "bad business". And it is entirely avoidable. Put simply, loss prevention can pay big dividends. What's more, it can be achieved quite quickly through the implementation of a quality liquor inventory control system.
A typical beverage operation generates a constant stream of data and information, endless columns of figures and daily records. But you'd be surprised how few managers actually do anything with these figures, let alone fully grasp their implications. So how can you tell if you're operating profitably? The answer is you can't, unless, of course, you get to grips with some basic mathematics. For a start, you'll need to know how to perform a few simple calculations, such as working out an item's cost percentage. You don't need to be a mathematician to figure the following straightforward formulas:
Making a good mixed drink isn't always a matter of A + B = C. In fact, there are numerous small details that can contribute to turning your creation into something just that little bit better than the norm and, more still, that can help you keep your ingredients at peak freshness and productivity. Consider the following:
The difference between a good and great martini is very small, but very important. The quality of your cocktail menu should be of paramount importance to you. The methods by which those cocktails are prepared should be a point of pride for all concerned.
Herb-infused spirits. Whether they be whiskies, vodkas or gins are gaining herb-infused drinks are gaining in popularity. Expect gin, especially, to continue to make a splash as both large producers such as Bombay and a slew of new micro distilleries continue infuse this old stalwart with fresh and interesting botanicals.
Seasonal and flavored beers. While nothing new, seasonal and/or flavored beers are starting to gain traction.
Value. After several years of economic recession, consumers have acquired a taste for value wines. They are seeking bang for the buck—not cheap inferior wines, but good, well-balanced, flavorful wines at an affordable price. With many of these wines coming from Spain and South America, expect Spanish, Chilean and Argentinian wines to continue to grow in popularity.
When you design your service area, it's important to realize that every step a bartender takes in the serving of a drink is costing you money and making your customers impatient. Where does your staff need to walk to get a clean glass? How far from there to the ice bins and then to the spirit dispenser? And where are your soda guns in relation to the bottles? Is the cash register yet another trip away from the customer? Even if your bartender has to take only four or five steps between each of these posts, consider how far that means your bartender has to walk in the course of serving 500 drinks a night! This is bad enough for a solo bartender, but when two or three people are working behind the same bar and sharing facilities, it can be an unproductive nightmare.
Accounting (bookkeeping) theft is a major concern within the beverage industry. From falsifying daily inventory records to complicated auditing abuse, this area of theft is often the most difficult to detect. Sometimes, it is the managers themselves who are behind the scams. Owners need to be aware of the following possibilities:
Theft reduction policies and procedures are no good unless they are strictly enforced. Employees must be made clearly aware of the dire consequences of flouting house rules. There can be no gray areas. New members of staff should be asked to sign a confirmation that they have read the rules and fully understand the implications.
By Elizabeth Godsmark
