Six Proven Practices to Control Your Beverage Costs

I have a friend who shared with me a story about a bar owner tenant he once had who wanted to renew his lease. My friend, however, was not interested in renewing the lease because the bar owner, over the course of the original term, had made conceptual changes, which resulted in an image and clientele my friend felt were not appropriate for this particular strip center.

The bar owner, having greatly improved his sales because of those changes, pleaded with my friend to renew, telling him he would pay double, even triple his current rent rate if my friend would reconsider. The bar owner said to him, "You need to understand that I have a very successful business and am making money hand over fist, even after what my bartenders steal from me!"

No Laughing Matter

This bar owner's confession, though funny in the context by which it was conveyed to me, is no laughing matter for most restaurant operators, as it is characteristic of their unending worry to prevent theft and control costs. Restaurants serving liquor, beer or wine typically include a separate bar area and employ bartenders that, unlike servers, which must ring up cocktail orders beforehand, act as their own cashier. They can take a guest's order, make it for them and then collect from them with little or no accountability. Stir in the fact a majority of their income is from tips and you end up with a temptation cocktail that's hard to say no to.

. .The National Restaurant Association reports that 75% of all inventory shrinkage happens as a result of theft. And then, there is the other 25% ..

Bartender theft comes in many flavors. There is outright theft of cash in which a bartender doesn't ring up the drink but pockets the cash. Another is to give "free" alcohol in hopes of getting better tips.

And yet another is to simply steal or consume spirits without paying for them. Given the many ways a bartender can steal from you it's no wonder the National Restaurant Association reports that 75 percent of all inventory shrinkage happens as a result of theft.

So what about the other 25 percent? Theft isn't the only reason for high beverage costs. Overpouring, spills and waste, mistakes and inadequate pricing structures contribute to cost control problems too. No matter the cause, the only way for keeping these costs under control is to have proven systems in place for inventory control, training, strict service and settlement controls, cash monitoring procedures and financial reporting tools that alert you when costs spike.

Regardless of which beverage control system you adopt for your restaurant (see "Beverage Control Systems: Something Established, Something New" below), the pathway to thriving beverage profits begins with setting prices and ends with the financial statement -- and you must have systems in place for each step along the way.