Errors That Drain Beverage Profits

The goal to grow revenue and maximize profits remains top of mind for all of us in the hospitality industry.  Let’s examine the profit side to determine some of the common errors that drain your beverage profits. 

Who Owns It:  Bars and restaurants often don’t have the right individual responsible for all activities in the bar, including hitting financial goals.   Has your bar manager set crystal clear expectations for their team to follow?  Is your bar manager held accountable for his/her results and are those results reviewed frequently?  A large part of the bar managers’ performance review should be placed around his/her ability to achieve targeted and budgeted costs.    If this is not a significant part of their requirements, you should adjust properly.

Team Involvement: Now that you have a key manager leading BEVERAGE, let’s insure team members are highly involved and accountable for outstanding results.  I see this dimension overlooked quite often. A well informed team will greatly assist management in achieving outstanding targeted results. As you evaluate you beverage costs consider the following:

-         Pouring Tests:  Love Malcolm Gladwell’s 10,000 hour rule in his recent best seller, Outliers, “The idea that excellence at performing a complex task requires a critical minimum level of practice surfaces again and again on studies of expertise”.  So, practice, practice, practice. Click Here after finishing this article to view our shot pouring training system.

-         Promos:  Insure you team understands what they are allowed to comp or not.  Some states prohibit giveaways, so insure you know the law.

-         Spotters: If you utilize a service, follow up on results with your team.

-         Compliance:  Best policy “follow the recipe 100%” is consistently not followed. Deviating from recipes can cost you considerably as bartenders change ingredients.  While I love the mixology movement today in our business, there is a time and place.  This is not that time. 

-         Reward and Recognize:  Recognize teams for both sales achievement and margin excellence.  Design filters to insure outstanding beverage costs are achieved with integrity.

Inspect What You Expect: When your strategy demands strong performance in beverage costs, you need to inspect how your team achieved those results. 

-         Take the time to personally observe correct pouring and recipes procedures.  Strong compliance will support best in class beverage cost.

-         If you discount drinks insure you provide guidelines for both sales improvement and margin gain.  Discounting a drink feature from $7 to $4 on a monthly feature without knowing how many more drinks you must sell for $4 can cripple you. 

-         Measure your results.  Strong performers have a clear vision on what areas to measure.  Poor performers either track too much or compile the wrong data. Insure you measure what you desire to improve.

-         You also have an option to utilize external “best in class” pouring and costing programs and initiatives that can deliver solid results.

-         Inspect and monitor “best in class” ordering procedures. Case breakage charges as well as not taking full advantage on post-offs (scheduled discounts when available) are two consistent errors in purchasing. 

It Really Comes Down to:

-         The Human Factor. Create a culture and environment where your team will want to perform to their maximum.  Your bartenders are the key ingredient in a great beverage cost.

-         The Equipment Factor.  Ice machines, clean glassware, proper bar tools, locked liquor rooms, clean beer taps with the correct amount of gas moving brew are all factors to monitor. 

-         The Technology Factor:  Do not assume that your POS system will properly capture the right retail charge. A margarita retailing for $6.50 and rung up at $6.20 costs you .30 cents per drink.  This happens all too often. In addition, transitioning out of Happy Hour back to normal pricing can insure the correct balance in costing and beverage profits. 

We have touched upon a few of the key deliverables and tactics that will help you deliver the right costs and margin improvements in your bar and restaurant. Remember, your team can and will assist greatly in assuring those results are achieved.  They are the key ingredient to the formula. 

Article courtesy of Night Club & Bar
Author: George Barton