Science of finding hidden losses ian foster from sculpture hospitality
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Transcript of Science of finding hidden losses ian foster from sculpture hospitality
How much of your inventory is lost
every day?
20% To 30% 20%
30%
Sources: “Beverage Institute”; California Restaurant Association; Bevinco
How do these losses occur?
Cause: Loss at cost Loss at retail
Spillage/waste 100%
Missing inventory 100%
Free Drinks 100%
Missing revenue 100%
Over-pouring 50% 50%
• Shrinkage losses under 2%
• Average shrinkage of 20+%
• Spend $billions to control
shrinkage
• Inventory control compares units sold to units used
• Majority of owners don’t think they have a problem
• Inventory control cost of goods sold as % of sales
Retail vs Bars
Why does our industry have such
high losses?
• Bartenders control both liquor AND cash • Bartenders main source of remuneration: tips • Operators use outdated and misleading methods
to analyze bar profitability (pour cost)
22% pour cost looks good here:
What do you compare it to?
17%
18%
19%
20%
21%
22%
23%
24%
25%
Jan Feb March April May June July August
22% pour cost =
happy bar owner
17%
18%
19%
20%
21%
22%
23%
24%
25%
Jan Feb March April May June July August
But not when you look at the ideal pour cost!
PC doesn’t measure
bar performance
Knowing you
should be at
17% changes
everything!
You cannot rely on pour cost to tell
you if you have a problem
For two reasons…
Why Pour cost hides losses
1) Every drink has a different pour cost
Product Drink Cost Price Pour Cost
Vodka & Tonic .19¢ $3.50 5.4%
Margarita .35¢ $4.50 7.8%
Grey Goose $1.34 $6.50 20.6%
Glenfiddich $1.50 $7.00 21.4%
Baileys & Coffee $1.00 $4.50 22.2%
Grand Marnier $1.64 $6.50 25.2%
Goose Martini $2.68 $9.00 29.8%
Bud draft .64¢ $3.00 21.3%
Bud bottle .76¢ $3.25 23.4%
Heineken bottle $1.11 $3.75 29.6%
Guinness draft $1.29 $4.00 32.3%
Gls House Cab $1.01 $3.50 28.9%
Btl Stags Leap Cab $22 $58 37.9%
Dom Perignon $110 $195 56.4%
When pour costs range
from 5% to as high as
56%, how do you pick a
target pour cost?
Even bars happy with their
pour costs invariably find
that their p.c. should be
two to four points lower
Reason Cost
Bartender drinks it 75¢
Spilled 75¢
Theft $5
The cost depends on the reason for the loss
Over-poured Sometimes 75¢…
…but usually $5
#1 measure efficiency
20% Ideal Pour Cost
÷ 24% Actual Pour Cost
= 83% Bevinco Efficiency Rating
Measure the right thing
#2 institute controls
that deter shrinkage
Cash controls
• Monitor and track void, spillage and comp reports
• Question no-sale transactions
• Blind cash drops
• Cash drawers should remain closed between transactions
“trust, but verify”
#2 Controls (continued)
Other controls
• Inventory counts and controls should not be performed
by staff
• Check deliveries
• No staff drinks/staff need to drink at table, not bar
#3 Hold Management Accountable
• More efficient than trying to hold every bartender accountable
• More effective
• Managers are paid to do exactly that, manage
• Most can do a great job if they are motivated
Bonus on the right thing
Management Bonus Program
• Bonus is more effective than straight salary
• But a bonus based on efficiency,
not on a pour cost target
Management Bonus Program
• Example: manager making $50,000/year:
• Pay $40k base salary with a weekly bonus every week
based on the Bevinco Efficiency Rating:
• 95% - $200/week
• 96% - $230/week
• 97% - $260/week
• 98% - $290/week
• 99% - $320/week
• Over 100%, drops $60/week each point over 100
Management Bonus Program
• Manager hitting 95 would make his old salary
$40,000 + (52 x $200) = $50,400
• Hitting 98 every week = $5,080 extra income
• Awareness/Coaching • Bartender meeting
• Recipes
• Coaching/training
• Group consequences • Bar Policy statement
• Pour testing
• Slower pour spouts
• Additional bartenders on shifts
• Individual consequences • X-Reading
• Beer bottle counts
• Daily audits
• Suspensions/Termination
#4 Escalating Consequences
Rung up by Karla at 11:45pm on check #13746
Brand Oz Used Oz Sold Oz Missing % Missing
Glenfiddich 2.45 1.5 -0.95 -38.8%
Rung up by Karla at 11:45pm on check #13746
Daily Audits
Track losses in real-time using flow meters
16.98oz pour =
2-½ oz over-pour
Pint not rung up
Get text alerts in real-time:
• If beer isn’t rung up
• If beer is poured after-hours
• If cooler temperature rises
Flow meter ROI is very high
Calculate the Return-on-Investment
20%-30%
losses
100%+ ROI: if
you sell at least
½ keg per week
per tap
How are you looking after your regulars?
• Over-pouring • Impossible to manage
• Who gets over-pour?
• How big a portion?
• Taken for granted by your guests
• Very expensive:
• Over-poured drink becomes the new “normal”
• Comping • Easily managed
• Who is being comped?; by whom?; how often?
• Highly valued by your guests
• Much cheaper
Best practice: Manager must sign off on comp
How are you looking after your regulars?
Inefficient Ordering
• Why are you “out-of-stock” so often when you have $8,000 too much inventory?
• How come we have 2 full bottles of Galliano but we haven’t sold a Harvey Wallbanger since 1974?
Inefficient Ordering
• Liquor Salesman
• Empty Bottle > Full Bottle
• Bar Manager’s experience & intuition
• Historical Pars
Ordering with InteliPar
1) Calculate peak weekly usage
2) Add a safety margin/”buffer”
3) Adjust for changing usage patterns
4) Accounts for lag time until delivery
Eliminate Excess Inventory
•Pour as well liquor
•Drink Specials
•Use it in the kitchen
•Sell it to your staff at cost
•Give it away – sales contest
Double keys = lost profits
Drink Price Profit Up-sell Profit
Well tequila $3.50 $3.12
Patron Anejo $10.00 $7.12 $4.00
Drink Price Profit Up-sell Profit
Well tequila $3.50 $3.12
Patron Anejo $10.00 $7.12 $4.00
“Double” key adds $2.50 to price
Dbl Well teq $6.00 $5.20
Dbl Patron $12.50 $6.75 $1.55
Drink Price Profit Up-sell Profit
Well tequila $3.50 $3.12
Patron Anejo $10.00 $7.12 $4.00
“Double” key adds $2.50 to price
Martini bump keys = lost profits
Drink Price Profit Up-sell Profit
Well vodka $3.50 $3.20
Grey Goose $6.50 $5.50 $1.80
Drink Price Profit Up-sell Profit
Well vodka $3.50 $3.20
Grey Goose $6.50 $5.00 $1.80
Martini “bump” key adds $2.50 to price
Well martini $6.00 $5.40
Goose martini $9.00 $6.00 60¢
Drink Price Profit Up-sell Profit
Well vodka $3.50 $3.20
Grey Goose $6.50 $5.00 $1.80
Martini “bump” key adds $2.50 to price
Every drink at optimal price
Drink Price Profit Up-sell Profit
Well vodka $3.50 $3.20
Grey Goose $6.50 $5.00 $1.80
Well martini $5.50 $4.90
Goose martini $10.50 $7.00 $2.10