Running a bar business is challenging; it presents many obstacles that most other small businesses simply do not. There are a lot of possibilities for error and keeping all systems in optimal working conditions is difficult most of the time.
In previous articles, we’ve discussed why keeping your inventory systems in optimal shape is important and we’ve also shown you how to figure out some of the most important metrics to keep your bar business profitable.
Always Check Your Variance
In both articles, we’ve touched a bit on the importance of figuring out your variance.
In short, variance measures the difference between your perpetual (or theoretical) inventory and your actual, physical inventory. You could give the BarKontrol app a try if you are looking for a more efficient inventory management solution for your physical inventory.
As you buy and sell goods, your POS system keeps track of the inventory you should have on hand.
However, things are never perfect, so from time to time, you need to take a physical inventory to reconcile that with your perpetual inventory – the one tracked by your POS system. When you confront the theoretical values with the actual values in your stock, you can figure out your variance.
Variance = Theoretical (perpetual) inventory – Physical inventory
The lower the variance, the better managed your bar’s inventory is. The variance will never be 0, there will always be mistakes, but keeping a close eye on it will allow you to have more control over your inventory costs.
Top 3 Sources of High Cost
A high variance indicates shrinkage, the biggest enemy of any bar manager. Shrinkage represents goods purchased that were unsold and are missing from your inventory. This isn’t always due to theft, as some people might assume – spillage and breakage are also main culprits here. By keeping an eye on variance, however, you can implement systems to minimize mistakes on all these fronts before they happen.
1. Spillage can be beverages that were spilled while preparing or before they made it to the table but also comped beverages or beverages sent back by customers.
2. Breakage is the loss of products by destruction after you’ve purchased them. This can occur because of poor training, mishandling, or negligence.
3. Theft is not always as obvious as some would think. Most often staff members don’t even realize that they are committing theft. But when they overpour a customer’s drink, or when they are using up spirits for experimental new cocktails -, or even when they’re giving away free shots to cute girls/guys at the bar – they are basically committing theft. This kind of activity cuts deeply into your bottom line.
Train your Bar Staff for Efficiency
One way to keep inventory systems in peak shape is to train the people that are in charge of them. It’s not enough to train your management, you need to make sure that your bar staff is also well prepared to efficiently handle your inventory.
Free Pouring Should not be Free
Do your bartenders free pour? If they do, do you test their free pouring abilities frequently? Because this is where a lot of mistakes are made. Many bartenders think they are experts at free pouring and love putting on a show, but their skills are lacking. When this happens, they are prone to over pour. The best way to eliminate this problem is to pour test your staff – if you need to be using the free pouring method at all.
Also, liqueurs should not be free poured, ever! They have a different viscosity because of all the added sugar; the counts just don’t work in this case.
You will very often find that untested and untrained bar staff will over pour by as much as 25% when using the free pour method! If you have a very busy bar and need your staff to free pour, then definitely implement rigorous training for this, and pour test frequently.
When your bartender is pouring out 2 oz of spirit instead of 1.5 oz, they are seriously damaging your bottom line. So either train your staff to free pour accurately or make them use a jigger.
Another way you could involve your staff for better results is to let them know how much their negligence can cost you. You would be surprised how unaware most people are about the damage they are doing by just being negligent.
Keep an Eye on Comped and Returned Drinks
If drinks are comped often, you might have a theft situation on your hands, and you need to look into it. Comping drinks is OK as long as it is happening for a very good reason – but if your staff is giving away drinks without a very good explanation, you should step up and put a stop to it.
If drinks are being sent back often, however, it’s time to look at how those drinks are being prepared, and maybe review the menu as well. But if most of the drinks have been selling well in the past, you most likely have a preparation problem and not a menu problem.
In this case, you will need to ask yourself if your bartenders are preparing drinks the exact same way or not? Many bartenders pride themselves on the fact that they have “their own way” of preparing a certain drink. This is unacceptable, all bar staff should be trained to prepare and serve drinks the exact same way.
Another question you could ask yourself if you have a lot of returned drinks is: did you change any ingredients lately? This can also be a cause of why patrons are returning their beverages. Many bar managers are constantly looking to cut costs, and are tempted to buy cheaper ingredients for certain drinks, but sometimes this can backfire.
While many bars have both cheaper and premium spirits at hand, you need to make sure you are not cutting corners just for the sake of profits. You can create amazing drinks even without premium spirits, so don’t go overboard with this.
Enjoyed this article? Head on over to our Resources section for more articles on bar and inventory management.
Why not give BarKontrol a try?
Looking to improve the way you take physical inventory in your bar? Why not give the BarKontrol app a try?