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5 Steps to Finding hidden Profits
9/12/2014
By Peter Nelson
There is a wide range of factors that shrink the profit margin in hospitality establishments, it might shock you to find out what is uncovered in a lot of venues, here are some ideas you can implement very easily. All will help you to increase sales, reduce usage of product, and ultimately fatten your profit margins.
1) “OPEN LIQUOR” KEY:
This is a bartender’s best friend, an owner’s worst enemy, here is why: The bartender charges the customer $16 for a round of drinks. He goes to the cash register and rings up $13 on the open key. He gives the customer the proper change, but takes the “skimmed” amount and puts in his tip jar. If he does this enough during a shift he could net an extra $50 or more in “tips”.
In another scenario the honest staffer charges the customer $15 for a round that should have been $17 in reality. He simply made an error when he added up the round in his head. That error just cost the owner almost 12% in operating revenue on one transaction.
What is the solution? YOU MUST, REPEAT, MUST all but eliminate the Open Liquor/Beverage key. If you do not have a system with pre-set keys, to track at the very least by quality level (wells, calls, bottle beer, etc.), get one TODAY. You will pay for it in less than a month, believe me.
2) CASE DEALS, “FREE GOODS”:
A trap many “savvy” buyers fall into. Your reps will tell you all the reasons it is smarter to buy liquor in case quantities. Or if you buy a case of this Vodka, we will give you a free bottle of this new flavored vodka, “your customers will love this product”. Often I find my clients have way too much inventory on hand to support their sales.
The free goods are only good if you can turn them into sales. This ploy is used to introduce new products to the market. How often do you find these items sitting on your shelf gathering dust? Make sure that rep will come in and aid in promoting that item and if they don’t, make them take it back. Also consider the more inventory you carry the harder it is to keep track of, the more potential for internal theft.
Next time do the math before you commit to these types of buying practices. It is important to track your usage on key products and only buy in volume when merited by inventory turns, not price.
4) RECEIVING OF ORDERS:
How often do you go to the stock room to stock that premium liquor you just bought; only to find out it is not there. You know you just ordered it so did it come in?
You would be shocked to find out just how poor some receiving procedures are. You may have a process in place but have you trained your staff in that process? Here are some guidelines to follow:
- Receive your orders when you want them coming in, not what is convenient for your vendor, after all you are the customer.
- Schedule your staff properly. Have a staff member that is rostered on in the morning come in an hour earlier on the days your heavy orders hit. Also make sure they are properly trained to read and check in product the correct way.
- Never have the driver put the product away without checking it in. Once you sign the invoice, you are stuck paying for it, whether it was delivered or not. I see a lot of vendor discrepancies in my travels.
- Make sure shortages/damaged items are clearly noted on the invoices and verified with a driver’s signature.
5) OVER-POURING:
How often do you say its ok to give that regular a little more because he is such a “good customer”? How about that table that complained their drinks are really weak compared to what they usually get? These scenarios hurt your business in ways you may have not thought of.
The big issue in overpouring however is in draught beer and wine glass sales. these account for thousands of dollars of sales over the course of a year. 5 to 10 mils of overpour might not seem much in isolation but start multiplying that b the number of sales that you have of draught beer and wine and then tell me how comfortable you are feeling!