Driving profits in the new economy proven strategies for maximizing profitability
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Driving Profits in the New Economy: Proven Strategies for Maximizing Profitability. Presented by Robert Plotkin BarMedia Sean Ludford BevX.com Nightclub & Bar Show Las Vegas Monday, March 2 nd , 2009 3:30 p.m. – 4: 30 p.m.

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Driving Profits in the New Economy: Proven Strategies for Maximizing Profitability

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Driving profits in the new economy proven strategies for maximizing profitability

Driving Profits in the New Economy:Proven Strategies for Maximizing Profitability

Presented by

Robert Plotkin

BarMedia

Sean Ludford

BevX.com

Nightclub & Bar Show

Las Vegas

Monday, March 2nd, 2009

3:30 p.m. – 4:30 p.m.


Driving profits in the new economy proven strategies for maximizing profitability

Bevinco estimates employee theft at 24% to 26% of gross sales

As the recession drags on, it’s safe to presume that theft behind the bar will increase

Left unchecked, theft can reduce your cash flow to a trickle

Preventing Internal Theft — “No Bar Avoids Internal Theft — No Exceptions”


Driving profits in the new economy proven strategies for maximizing profitability

F&B only industry that doesn’t assess employee performance by sales/hour

Monitoring bartender productivity crucial to cost control efforts

Also management’s most effective countermeasure against theft

Tracking productivity detects all types of theft of cash and product behind the bar

Productivity Analysis — “Measuring More Than Staff Output”


Driving profits in the new economy proven strategies for maximizing profitability

Tracking Bar Productivity


Driving profits in the new economy proven strategies for maximizing profitability

Tracking Bar Productivity


Driving profits in the new economy proven strategies for maximizing profitability

Tracking Bar Productivity


Driving profits in the new economy proven strategies for maximizing profitability

Jim worked 7 shifts and generated an average $123 sales per hour

Adam worked 5 shifts and generated an average $152 sales per hour

Neil worked 2 shifts and generated an average $153 sales per hour

Weekly Staff Average —14 PM shifts generated average $144 sales per hour

Tracking Bar Productivity


Driving profits in the new economy proven strategies for maximizing profitability

Explanations for a bartender’s continued low productivity:

Bartender is too slow to keep up with sales demand

Bartender’s poor drink-making abilities lessens demand

Bartender’s service abilities and personality off-putting

Bartender is giving away unrecorded drinks or stealing proceeds.

Tracking Bar Productivity


Driving profits in the new economy proven strategies for maximizing profitability

Unrecorded sale proceeds are a significant target of opportunity

Cash drawer likely repository for stolen proceeds

Mid-shift cash drawer audits heighten risks involved stashing the cash

Preventing Internal Theft — Management Countermeasures


Driving profits in the new economy proven strategies for maximizing profitability

Run sales report and replace cash drawer with a fresh bank

Be unpredictable about what time the cash drawer audit is taken

Periodically take mid-shift readings twice in one night

How can a bartender explain away being “over” in a drawer?

No legitimate explanation for a drawer being “over” by a dollar or two

Preventing Internal Theft — Management Countermeasures


Driving profits in the new economy proven strategies for maximizing profitability

The other primary repository for stolen cash is the bar’s tip jar

Prohibit two-way tip jar transactions — money stays in until cash drawer removed

Move the tip jar away from the POS; better exposes the act

Preventing Internal Theft — Management Countermeasures


Driving profits in the new economy proven strategies for maximizing profitability

Beverage Operation Cost Breakdown

Pour Cost Realities

$18,877

$73,001

25.8%

$54,124

74.2%


Driving profits in the new economy proven strategies for maximizing profitability

While analyzing cost percentages is standard business practice, it has shortcomings

Pour cost ineffective at catching theft — will only detect about 1 out of 4 scams

Pour Cost Realities


Driving profits in the new economy proven strategies for maximizing profitability

Substitutions scams victimize guests who order drinks made with premium brands

Bartender prepares drinks with lesser products, but charges premium prices

Bartender then enters sales at the well price and pockets the difference

Pour cost unaffected — bartender poured 2 shots of well liquor and entered 2 well sales

However, the bartender’s productivity will be lower by the amount of cash stolen

Pour Cost Realities


Driving profits in the new economy proven strategies for maximizing profitability

Pour cost is also unaffected by tampering or smuggling schemes

For example, bartender sells 16 drinks at $5 each and pockets the $80 cash

Later he takes a 16-ounce tumbler of water and adds it to a number of the well bottles

By replacing the stolen 16-ounces with 16-ounces of water, pour cost remains unaffected

However, bartender’s productivity will be lower by $80

Again, every scam and scheme affects bar productivity

Pour Cost Realities


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

Pour Cost Realities

$ 26,491


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

Pour Cost Realities


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

Pour Cost Realities


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

Pour Cost Realities


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

Pour Cost Realities

= 22.7%


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

= $ 5,473

= 21.7%


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

To achieve the same 1% reduction in pour cost, gross liquor sales would need to increase $1,143.03

÷ $26,355

= 21.7%


Driving profits in the new economy proven strategies for maximizing profitability

Liquor Pour Cost Analysis

$ 5,473

= 21.7%

÷ $ 26,355

= 21.7%


Driving profits in the new economy proven strategies for maximizing profitability

How Much Profit Can You Save Cutting Beverage Costs?

Gross Beverage Sales $ 600,000

Beverage Cost @ 29%- $ 174,000

Gross Profit = $ 426,000


Driving profits in the new economy proven strategies for maximizing profitability

How Much Profit Can You Save Cutting Beverage Costs?

Gross Beverage Sales $ 600,000

Beverage Cost @ 24%- $ 144,000

Gross Profit = $ 456,000


Driving profits in the new economy proven strategies for maximizing profitability

How Much Profit is There in Cutting Beverage Costs?

Gross Beverage Sales $ 600,000

Beverage Cost @ 29%- $ 174,000

Gross Profit =$ 426,000

Gross Beverage Sales $ 600,000

Beverage Cost @ 24%- $ 144,000

Gross Profit =$ 456,000

Difference in Gross Profit = + $ 30,000


Driving profits in the new economy proven strategies for maximizing profitability

Working for blowhards is a bummer

Their caustic temperaments undercut morale, performance and foster conditions for theft

Human nature — it’s easier for bartenders to rip-off a jerk of a boss

Shouldn’t there be a set of commandments governing owner conduct?

Don’t Be Your Own Worst Enemy


Driving profits in the new economy proven strategies for maximizing profitability

Owner Commandment — “Get With the Program”

When the doors are open, owner needs to work within the established chain of command

Lose the phrase, “As the owner, I think I have the right to....”

Statement derails constructive communication, undermines authority of management

Especially when doors are open, rank has no privileges.

Don’t Be Your Own Worst Enemy


Driving profits in the new economy proven strategies for maximizing profitability

Owner Commandment — “Leave the Jag at Home”

Most bar owners and restaurateurs don’t live paycheck to paycheck like the rest of us

Leave the Jaguar at home and drive family sedan when stopping by the bar or restaurant

Likewise, don’t hold the staff holiday party at your estate or summer home by the beach

Flaunting good fortune can incite negative repercussions

Don’t Be Your Own Worst Enemy


Driving profits in the new economy proven strategies for maximizing profitability

Owner Commandment — “Seat, Greet and Leave”

Don’t patronize your establishment during peak business hours

Owners are bound to attract an undue amount of attention from the staff

But shouldn’t that attention be lavished on the guests instead?

Most owners can typically perform one invaluable function, namely schmooze the guests

Do it well and then leave the heavy lifting to the staff

Don’t Be Your Own Worst Enemy


Driving profits in the new economy proven strategies for maximizing profitability

Owner Commandment — “There’s No Free Lunch”

Walking out with a case of wine or a châteaubriand sends the staff the wrong message

Nothing’s on the house, not even for the owner

If owner orders a drink at the bar, pull out cash and pay for it. And leave a generous tip

Commandment reinforces that this is a business so hands-off the inventor

Don’t Be Your Own Worst Enemy


Driving profits in the new economy proven strategies for maximizing profitability

Consistency of product is a cornerstone of the on-premise business

Your drinks should taste the same regardless of the night or who’s behind the bar

Otherwise, the result is a loss of consistency, fluctuating costs and hit-or-miss drinks

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Find out what recipes your bartenders are pouring by giving them a test

Ask them the recipe and price for the top 20 most frequently ordered drinks

Will likely reveal they’re using different portions, ingredients and charging different prices

Inconsistent drink recipes lead to varying costs and fluctuating margins

Standardizing Drink Recipes


Driving profits in the new economy proven strategies for maximizing profitability

Standardizing Drink Recipes

Your Long Island Iced Tea

$1.50 drink cost ÷ $8.00 sales price = 18.7% cost percentage


Driving profits in the new economy proven strategies for maximizing profitability

Standardizing Drink Recipes

Your Long Island Iced Tea

$8.00 sales price - $1.50 drink cost = $6.50 gross profit


Driving profits in the new economy proven strategies for maximizing profitability

Standardizing Drink Recipes

Bartenders’ Long Island Iced Tea

$2.20 drink cost ÷ $8.00 sales price = 27.5% cost percentage


Driving profits in the new economy proven strategies for maximizing profitability

Standardizing Drink Recipes

Bartenders’ Long Island Iced Tea

$8.00 sales price - $2.20 drink cost = $5.80 gross profit


Driving profits in the new economy proven strategies for maximizing profitability

Standardizing Drink Recipes

  • Your Long Island Iced Tea

  • $8.00 sales price - $1.50 drink cost = $6.50 gross profit

  • Bartenders’ Long Island Iced Tea

  • $8.00 sales price - $2.20 drink cost = $5.80 gross profit

  • Their version results in the guest ingesting an additional ounce of liquor

  • Also, the drink the bartenders are serving costs $ .70 more, an increase of 46%


Driving profits in the new economy proven strategies for maximizing profitability

Portioning Controls

Bars are often nickled and dimed into submission — it happens with a flick of the wrist

Lax or nonexistent portioning controls impacts costs, as well as, drink consistency

Over-pour a shot by a ¼ ounce and the drink’s cost will increase 25%

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Portioning Controls

Another issue is the drink now contains 25% more alcohol

Prohibit over-pouring alcohol — costly and dangerous

Causes inequity — some bartenders pour “good drinks” for some guests

Over-pouring exacerbates over-service issues/increases liquor liability

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Portioning Controls

Prohibit tailing measures — rips off either the guest or the house

Either the bartender bailed on the measure early and is being deceptive…

…or he hit the measure and is over-pouring liquor

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Portioning Controls

Prohibit under-pouring measures — a classic scam to rip-off the house and defraud guests

Bartender short-pours liquor into a series of drinks, thereby creating a surplus of liquor

Shortage is likely to go unnoticed by guests as the liquor is poured on top of mixer

Surplus is later sold and the cash proceeds pocketed

Pour cost unaffected; bartender productivity negatively affected

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Optimizing Draft Profitability

Draft beer yields the highest margins of any product in the house

Yet industry wide, we lose 20% of the draft beer we purchase due to waste and spillage

Shrinkage translates to losing 1 out of 5 five kegs — negates much of the profit potential

Inability to accurately audit kegs makes draft a target of opportunity

Measure bar’s waste and spillage by letting draft beer drain into 5-gallon bucket

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Optimizing Draft Profitability — FOB Detectors

FOB detectors prevents empty kegs bleeding out the beer in feed line

They prevent kegs from draining the beer in feed line when they blow

FOB detectors reduce waste and increase productivity

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Optimizing Draft Profitability — Flow Meters

Flow meters work within the feed lines and are completely non-intrusive systems

System determines the exact volume of beer dispensed during shift

Derives pour cost for each beer, creates staff accountability

Flow meters don’t affect quality or impact portioning; quick return on investment

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Optimizing Draft Profitability — Pouring Practices

Proper pouring practices significantly reduces draft beer waste

Inadequate training results in increased costs — amount of head/unclean glasses

Leads to unprofessional service

Review pouring procedures often and regularly

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Bar Savvy — Bar Backs

Bar backs afford you flexibility in scheduling and will lower your payroll

Aren’t there shifts at your bar too busy to schedule only one bartender…

…yet not busy enough to warrant scheduling two?

Increasing Beverage Profitability — “No profit, no success”


Driving profits in the new economy proven strategies for maximizing profitability

Bar Savvy — Bar Backs

By scheduling a bartender and bar back to work the shift…

…the bartender gets the extra set of hands he needs behind the bar

…the bar back gets the experience he needs to learn the job

…the house benefits by saving on payroll

…and it creates an in-house program for promoting bartenders from within

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Bar Savvy — Getting More Bang Out of Comps

Complimentary drinks are a longstanding aspect of the business

Comps are expensive — deprives the bar of sales, depletes product and increases liability

What if you could get more mileage out of comp’ing guests their drinks?

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Bar Savvy — Getting More Bang Out of Comps

Guests realize GM or owner just wave their hands and the drinks appear…not a big deal

But what if the GM or owner pulled out some cash and actually paid for the guests’ drinks?

On top of that, what if the bartender were allowed to keep 20% as a tip?

There’d be good will breaking out all over the place.

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Bar Savvy — Getting More Bang Out of Comps

Before each shift, the GM or owner is allotted $100 out of a petty cash-like account

At the end of the evening the remainder of the cash is turned in with the receipts

Imagine the lasting impression it will make on guests, produces long-term good will

Increasing Beverage Profitability — “No Profit, No Success”


Driving profits in the new economy proven strategies for maximizing profitability

Driving Profits in the New Economy:Proven Strategies for Maximizing Profitability

Presented by

Robert Plotkin

BarMedia

[email protected]

Sean Ludford

BevX.com

[email protected]


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