Recession Mgmt. - Driving Profits in a Slow Economy

Even if the conventional wisdom is true that people drink during good economic times and bad, the odds are your customers have less money in their pockets now than they did last year. As the current recession grinds, bars and restaurants are finding themselves competing for a dwindling pool of dollars.

Managing a bar during tough economic times changes how you approach every aspect of the business. Things you used to take for granted—like cash flow and a steady revenue stream—assume greater importance. Looking after every dollar and every ounce of profit becomes second nature, a survival instinct. A large part of your effort needs to focus on reining in costs and clamping shut all internal sources of loss.

To that end, the following initiatives have proven highly successful in promoting the growth of new profit, especially when applied in tough times.

ANALYZING SALES — While there are numerous methods for analyzing revenue, none have more far-reaching implications than tracking your bartenders’ productivity. In this instance, productivity is calculated by dividing a bartender’s sales for a shift by the number of hours the person worked. One benefit of tracking productivity is identifying those on staff with the highest hourly sales. In addition to meriting recognition, your top earners deserve first shot at the busiest, most lucrative shifts.

On the flip side, a bartender with chronically low sales per hour warrants close scrutiny. The individual may make lousy drinks, so customers leave without ordering a second or third lousy drink. His attitude could be so off-putting that people don’t stick around for the abuse or perhaps he works too slowly and can’t physically keep up with demand.

Then again, the explanation could be that the person is ripping off the house. Each dollar diverted from the till is another dollar negatively impacting the bartender’s sales per hour. Every variety of bartender theft will be reflected in productivity ratings.

MAINTAINING CONTROL — Running a bar requires maintaining a significant investment in inventory, liquid assets that can disappear at an alarming rate. Realizing the necessary ROI is a question of control. 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. It requires accurately tracking inventory from the moment it comes through the back door until it’s depleted.

It’s referred to as “cradle to grave” accounting and it involves implementing a series of overlapping internal systems—e.g. purchase orders, requisitions, bar par, perpetual inventory, comp and spill sheets—that track every product through the inventory cycle. While uncomplicated, the key to the system is ensuring that all of the components are in place and being used properly.

LABOR PAINS — For food and beverage operations, payroll is a significant ongoing expense, the second largest after cost of goods sold. To keep payroll in check, some operators schedule the fewest number of staff they can to handle anticipated demand. Invariably the first casualties are professionalism and a positive working environment.

It subjects employees to undue stress and robs guests of quality service. Spending a few extra labor dollars is better than losing potential sales and making good people wait for bad service.

A better approach is to begin scheduling a bartender and bar back to cover shifts too busy to be handled effectively by only one bartender, yet not busy enough to warrant scheduling two. The bartender gets the logistical support he or she needs behind the bar and gets to keep a larger share of the tips. The bar back gains invaluable experience, and since they’re paid less than bartenders, the business saves on payroll.

Article Courtesy of Robert Plotkin