To calculate the cost of an ounce from a liter bottle, divide the bottle cost by 33.8 ounces. To calculate the cost per ounce for a 750ml bottle, divide the bottle cost by 25.4 ounces.
Fact is making mistakes is an inevitable consequence of gaining experience. Some things can only be learned at the school of hard knocks. For us fallible types, success can be defined as keeping mistakes to a minimum and the learning curve short and shallow.
That having been said, in every business there is a special class of mistakes that should be avoided like the plague. Leaving the place unlocked at night is an example. Bouncing payroll checks and stiffing vendors are critical errors in any line of work.
The list of capital crimes in the on-premise business encompasses every aspect of the operation—from serving boring drinks and mangling your relationship with the staff to being an inhospitable host and running an inexcusably loose ship. In an effort to shorten and shallow out the learning curve, here are the 10 critical errors beverage operators make
1. LOSS OF CONTROL — Running a bar requires making a significant investment in liquid assets, working capital that can disappear at an alarming rate. Failing to implement an effective inventory control system places at risk the capital you’ve invested inthat 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 purchasing specialized software either. What is required is a system of over-lapping controls referred to as “cradle to grave” accounting. It’s an inventory system that tracks products from point of purchase to the moment they’re delivered and received, through the requisition process—which also involves recording comps, spills and transfers—until the end of the accounting period in which they’re depleted.
2. NOT MONITORING PC — One of the many truisms in this business is, “If you can’t measure it, you can’t manage it.” Nowhere is that truer than behind the bar. Determining your bar’s ongoing cost percentages—pour costs—reveals your level of profitability. As your cost of goods sold increases, gross profits diminish.
While tracking your pour costs is a fundamental control, managing through the use pour cost alone is problematic. The inherent weakness with pour cost analysis is it doesn’t take into consideration that products sell at different mark-ups. Premium and super-premium products sell at a higher cost percentage than do well brands, yet generate significantly more revenue and gross profit. For example, were your staff to begin selling more drinks made with premium brands than well, the bar’s pour cost would increase.
While bartender-related issues like over-pouring and theft are often at the root of the problem, a rising pour cost may also indicate that management is doing a better job of promoting higher profit premium spirits and drinks.
3. SHODDY PRODUCT — A restaurant that doesn’t routinely change its menu always has plenty of open tables. The same is true about bars. Add some pizzazz to your beverage line-up. Shake up your specialty drinks. Change spices things up and helps keep your clientele interested. The sales axiom “Don’t sell the steak, sell the sizzle!” is directly applicable. If it doesn’t sizzle, who needs it?
People in this country are more frequently opting for the good stuff. Surging premium spirits sales is the most significant mega-trend in the beverage business. Consumer expectations have changed. People today are looking for more from the drinking experience. To coin a phrase, “Americans are looking for better built drinks.”
Can every drink you serve be built better? Believe it or not, the answer is probably yes. For instance, consider one of the most common of mixed drinks, the gin and tonic. Although not an involved recipe, some bars make much better gin and tonics than others. How’s that possible?
The possibilities include preparing the drink with a premium dry gin instead of a value brand from the well and a high quality bottled tonic water. Pour the ingredients over ice cubes made from spring water and garnish with an ample, freshly cut wedge of lime. Serve the drink in a good looking, heat-tempered highball glass with a classy swizzle stick and you’ve got yourself a well-built gin and tonic.
If you can build a better gin and tonic, imagine the boundless potential of such classics as the Margarita, Daiquiri, Martini, Piña Colada and Bloody Mary, to mention but a few.
4. FISCAL IRRESPONSIBILITY — Left unchecked, employee theft can reduce cash flow to a trickle. How extensive is the problem? Bevinco, an international beverage auditing service, estimates that losses attributable to internal theft cost its clients on average 24-26% of gross sales. The very thought is enough to make seasoned managers wince and bar owners shudder.
Preventing it from happening is far from easy however. Bartenders typically work for long stretches without direct supervision and are afforded autonomy in handling guest transactions at the bar. Their position requires them to portion inventory, prepare drinks and collect sales proceeds and they do it all before recording a single detail into the operation’s point-of-sale. The result is a job laced with endless opportunities to rip off the house and its clientele.
Familiarity with how bartenders steal and knowing what to look for constitute management’s first line of defense. Sometimes theft is overt and undisguised, like pouring heavy shots to receive bigger tips, or stuffing cash sales directly into a tip jar. However, ploys like these are so easily detected they’re actually risky, so bartenders usually rely on less obvious schemes.
One reason why behind the bar schemes are so effective is that most bartenders conduct themselves professionally. Faced with the same opportunities to pad their income, they choose instead to look out for the best interests of the house and perform their jobs sans a hidden agenda. Paradoxically, it’s the ethical behavior of the majority that thoroughly obscures the actions of the few, making it harder to diagnose the problem and root out its cause.
Implementing cost control procedures at the bar serves two purposes. Although primarily intended to eliminate operational areas of weakness, anti-theft measures also make it easier for honest bartenders to remain honest and harder for the others to operate undetected by establishing standards of conduct and clearly defining expectations.
5. NOT TRACKING PRODUCTIVITY — Every industry tracks employee productivity except ours. Calculating sales per hour is easily done and is an enormously effective means of assessing employee effectiveness. Bar productivity is calculated by dividing the bartender’s gross sales by the number of hours he or she worked. After several weeks it’ll become evident who on your staff are the sales leaders and who consistently fall short of the mark.
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.
How do you know which it is? Take some time and observe the person. If the first four explanations don’t fit, the remaining explanation is the person is stealing from you. Regardless of the scam, theft takes a toll on productivity. Between tracking pour cost and bar productivity, there isn’t an employee scam or fraud that you can’t catch.
*Part 2—Next Issue!