You could be making an additional $4,000 to $10,000 in your bar every month by uncovering and eliminating hidden shrinkage – despite a pour cost that might look pretty good.“Shrinkage” refers to the amount of alcohol lost in your bar due to over-pouring, mis-ringing, theft and waste. A 2000 study found that almost every bar or restaurant too much shrinkage; the average loss is more than 20% - one drink in five.That, of course, is the bad news. The good news? Well, if you tighten up your controls, you can increase your sales and decrease your costs without bringing in any new customers.
Why is shrinkage so high?
Most operators have a hard time believing that they could be living with losses of this magnitude without knowing it. And that is the main reason why these problems persist. The problem is not exactly denial; rather that shrinkage has traditionally been “controlled” by carefully monitoring pour cost. This is not only inadequate; it actually works to hide shrinkage problems.
A pour cost of 20% sounds impressive - but not if it should have been 17%. You have to calculate what your pour cost should be. This ideal, or theoretical, pour cost will vary depending on all kinds of factors such as the price of your drinks, your pour sizes and, notably, your sales mix.
Every drink you sell has a different pour cost. Some, such as a vodka and tonic might be as low as 10% while others, like a Grey Goose martini or a Baileys & Coffee, are usually well over 30%. You have little control over what your customers are going to drink. Some months you will sell more vodka tonics, and your pour cost will go down. Other months you will sell more coffee drinks and martinis, and your pour cost will go up. So why do most operators target the same, static pour cost every month?
And the fact is pour cost swings do not tell you anything at all about shrinkage levels.
Over-pouring is a difficult habit to break
Another reason for 20% shrinkage is simple: virtually all bartenders over-pour. Since they think that a larger pour is going to lead to a larger tip, and tipping comprises the lion’s share of their income, almost every drink is over-portioned. An extra half-ounce might not sound like a big deal, but five hundred over-pours is equivalent to giving away 150+ drinks.
Although it sounds counter-intuitive, over-pouring usually results in lower sales. The reason is that most of your customers are only going to consume drinks until they reach a “comfort level.” That level depends on the circumstances. For example, if I have to drive home, I stop ordering when I get the first little “buzz” from the alcohol. That is usually on my third drink. But if my first two drinks are over-poured, I will feel the buzz before I order the third drink and the bar loses a sale.
A profit increase of $4,000 to $10,000 a month is certainly a good incentive to take a careful look at your bar profitability, but where should you start?
*Understand that a “good” pour cost may not necessarily be all that good
*Calculate your ideal or theoretical pour cost every week. You should be within ½ of 1% of your ideal. For example, if your ideal pour cost is 18%, your actual pour cost should be 18.5% or better.
*Don’t assume that your bartenders know how to pour liquor and draft beer correctly. Purchase a liquor pour-training device and test frequently. And invite your beer vendor to run a draft pouring seminar for your bartenders
*Hold your bar-staff accountable by matching your inventory depletion to your sales reports. You can start by counting your beer and wine bottles every week and comparing them to your sales tapes
*Auditing draft and liquor is much more difficult. Consider using an alcohol auditing company – they will weigh all the tapped kegs and open liquor bottles to compare with your sales. Your increased profits will pay their fee many times over.