Hitting on All CylindersJune 19, 2012 By: Robert Plotkin
Beverage operations have to be hitting on all cylinders to crank out maximum profits. When they fall out of tune, profitability quickly takes a beating. Keeping an operation running at optimum efficiency, takes knowing what to look for and making the necessary adjustments at the appropriate time.
Unfortunately when it comes to beverage management, most of us are graduates of the school of hard knocks. We graduated only after making every possible mistake several times until it dawned on us to do things differently. Don’t laugh; it’s an effective way to learn.
The downside to this curriculum track is that it takes years to earn your diploma and the tuition is unbelievably expensive. Another consideration is that good businesses needlessly suffer while you’re trudging up the learning curve.
If you’ve looked at your day planner and decided that you don’t have the ten years or so to learn from your mistakes and you need to know now how to turn your bar into a profitable entity, here you’ll find a strategy designed to keep the learning curve short and shallow.
• Monitoring PC — Determining your bar’s ongoing cost percentages—pour costs—reveals your level of profitability. As your cost of goods increases, gross profits diminish. Success behind the bar greatly depends on safeguarding your profit margins. No profit, no success.
Tracking your cost percentages is a fundamental form of control. The more frequently you conduct an audit and determine your pour costs, the more insight you’ll have into the operation. If the audit indicates a problem, you’ll be able to respond quickly and appropriately.
• Reduce Shrinkage — One of the plagues of the beverage business is the scourge of shrinkage. Bartenders control both ends of every transaction at the bar. They portion and prepare product, as well as handle all sales proceeds. Compounding the peril, this all occurs before your register or P.O.S. system knows anything about the transaction. For some, the temptations of handling a steady stream of cash can be irresistible. Implement solid cash controls and look to reduce your vulnerability to theft. The savings often spell the difference between financial viability and the unpleasant alternative.
• Track Productivity — Every industry tracks employee productivity except ours. In this case, we’re looking to measure each bartender’s productivity, or sales per hour, which is calculated by dividing the shift’s gross sales by the number of hours the person worked. A bartender with chronically low sales per hour may indicate a serious problem. On the positive side, a bartender with consistently high sales per hour deserves acknowledgement.
If a bartender’s sales per hour consistently fall below the staff average, five things are possible. He may work too slowly and literally can’t keep up with demand. He could make lousy drinks, so people don’t stick around for a second or third lousy drink. His personality and attitude could be so off-putting that customers leave early, or his sales ability could be so unrefined that he consistently undersells. The last explanation is that he is likely stealing from you. There isn’t a method of theft that won’t negatively affect productivity.
• Suds Watch — Industry wide, we lose roughly 20% of our draft beer due to waste, spillage and theft. That translates to losing one out of every five kegs of beer we purchase. Clamping down on the associated cost is essential.
Proper maintenance of the delivery system and staff training are fundamentally important. Operations that depend on draft beer sales to remain financially viable should also consider investing in a draft beer control system. These microprocessor driven systems are capable of tracking every ounce of beer dispensed and detailing exact usage and providing cost percentages per brand. It’s an effective way to close what has been a chronic black hole for operators.
• Loss of Control — Running a bar requires making a significant investment in liquid inventory, stock that can disappear at an alarming rate. Failing to implement an effective inventory control system places at risk the capital you’ve invested in that inventory. To be profitable, you need to know exactly what inventory you have, what you paid for it, at what rate you use it, and exactly where it is at any point in time. Tracking inventory throughout your operation doesn’t require specialized software, it’s a question of accurate bookkeeping.
• Weak Links — Your business is only as strong and vital as your weakest employee. The bartending staff impacts every aspect of your operation, from portioning and marketing your bill of fare to rendering prompt and gracious hospitality to your clientele. It is therefore critical to assemble the most professional staff you can. One of the most important steps in this process is implementing an on-going training program. What your people don’t know can most certainly hurt you and reflect poorly on your business. Educating your staff is an investment, not a hardship.
• Shoddy Product — A restaurant that doesn’t routinely change its menu will always have plenty of open tables. The same holds true for the bar. Add some pizzazz to your beverage line-up. Shake up your specialty drinks. Change spices things up and helps keep your guests interested. Likewise, bartending staff typically operates without a clearly defined set of recipes. The result is a loss of product consistency, fluctuating costs and shoddy, hit-or-miss drinks. Determine what they’re to pour, or they’ll do it for you.
• Slash Marketing — The only marketing some operators do is to slash prices during happy hour. Promote your business from the inside out. People are open and receptive to timely suggestions on what to drink. Develop bar menus and table tents that market your house specialties. If you’ve created delicious signature drinks, make sure you announce your success. You’ll notice that sales for whatever you actively promote will skyrocket.
• Alcohol Orientation — Increasingly more people are socializing without alcohol. Fortunately our stock and trade is hospitality, not alcohol. It is critically important to market to this growing segment of the population with a diverse and dynamic selection of alcohol-free beverages. They’re loaded with profits and incur no third party liability.