To the uninitiated, the business of bars, nightclubs and cocktail lounges seem predicated on the straight-forward proposition of “make drink, sell drink.” Unfortunately, on-premise businesses have far too many moving parts for there to be anything straightforward about them. The reality is that operators face tremendous challenges in realizing the necessary margins on their liquor inventory to ensure themselves and their investors’ profitability.
The magnitude of the problem becomes clear when one takes into account all of the various challenges. First, the capital invested in liquor can slip through the cracks in a heartbeat. It can be stolen, given away in free drinks, drunk by staff or disappear out the back door. Revenue and profit are not guaranteed even when it is sold. It can be sold at a severely discounted price and further, sales proceeds are not always actually deposited into the till.
Part of the problem is that bartenders are free to portion liquor and collect sales proceeds without the point-of-sale system having any record of either transaction. This also means the only actionable cost and revenue information you receive through the point-of-sales system is, at best, incomplete.
Another operational challenge stems from the fact that bartenders can pour a different grade of liquor into a drink than what has been ordered. High quality spirits cost a significant amount more than well spirits. In most instances, there’s no way to determine what exactly a bartender has poured into a drink; a fact of life that often works against the best interests of the house. When all of these factors are combined, it is little wonder that beverage profitability is so elusive.
LEVELING THE PLAYING FIELD
The best way to rectify the existing operational impediments to success would be to reverse engineer the on-premise business and eliminate the common pitfalls. That’s the approach that Beverage Metrics took to develop its revolutionary monitoring technology. After years in development, the Sonoma-based company has unveiled a system that offers comprehensive real time control over liquor, wine and draft beer. Beverage Metrics is so radical in concept, design and scope that it will change how we’ll be running our businesses in the near future.
“Everyone in our company has an in-depth knowledge of the on-premise business borne out of hands-on experience,” says CEO Alain Piallat. “We therefore developed our system to decrease the degree of difficulty by placing real time controls on inventory, which dramatically reduces losses attributable to theft, over-pouring, under-pouring, substitutions and giving away free drinks.”
Here’s how it works. Radio frequency identification devices (RFID) are attached to the neck of every bottle of liquor in the inventory. Having scanned the UPC, the wireless, Internet-based system is then able to track each individual product from the point of delivery through its life cycle behind the bar. The small, tamper-proof RFID tags send data to the customized software every time the bottle is moved.
When the bottle is returned to its upright position, the algorithm in the computer chip determines the exact amount of every pour by analyzing how long the bottle was inverted and precisely at what angle it was held. Following the capture of the pour data, the software automatically reconciles with the POS, matching pour data to register receipts.
Because the hardware and software interface in real time, operators can actually monitor individual performance. The system can determine whether bartenders are over-pouring, under-pouring or substituting one brand for another. All unaccounted for pours are flagged in the system until a corresponding sale is entered. The system also verifies how much guests are being charged for their drinks.
Beverage Metrics automatically updates inventory levels and identifies what products need to be purchased for every outlet in the establishment. Then, when bottles are emptied, the RFID tags are removed and reused at a later time. The system also tracks inventories in cases in the storeroom by scanning their UPC.
MAKING EVERY DROP COUNT
Beverage Metrics issues reports that detail all aspects of the beverage operation’s performance to a degree not previously possible. For example, not only will the system determine what your exact cost percentages are, it’ll also reveal what your pour costs should have been based on actual depletion.
According to Piallat, the wireless technology system identifies variances between actual cost and potential costs. “It can produce customized reports and trend charts that reveal what’s actually happening behind each of your bars. Rather than continuing to guess, Beverage Metrics can show you exactly what your pour costs are with hard data gathered through the monitoring of your beverage service.”
With such technology on the job, a manager or operator can be sitting at a bar in the next county and still be assured that his or her business is operating at optimum profitability. As Piallat says, “Every drink is a business transaction. Every drink matters.”