ALERTS

The Myths Of Alcohol Beverage Cost

for Restaurants, Bars, Nightclubs



The Myths Of Alcohol Beverage Cost

Keeping accurate control of your bars profits is affected due to the industries leading loss of revenue.... shrinkage. All bar operations that do not practice proper inventory control procedures, leave themselves vulnerable to losing a large percentage of profits to bartenders over-pouring drinks, free give-aways, cash skimming and product stealing. Bar Cop studies have found that most bars are maintaining an average 20% shrinkage, which adds up to 00's of lost retail profits each month.

The most common mistake that bars make when calculating profits is basing numbers on their "cost of goods" percentage — more commonly referred to as pour costs. Traditionally, the industry has determined these percentages by adding up the cost of the product used and dividing it by the cost of the product sold.

The main problem with pour cost is deciding what to compare it against. How do you know if your percentages are in line? Most bar owners or managers simply look at the average pour cost in the industry or at their previous pour cost percentages. By using these techniques there is no-way to measure the true amount of your profit and loss.

Owners and managers need to compare their ACTUAL cost percentages to their POTENTIAL (or optimal) cost percentages. Potential cost percentages are determined by taking into account an operation's selling prices, purchasing costs, and sales mix.

When calculating a potential liquor cost percentage, the desired liquor shot size needs to be considered. When determining potential draft beer cost percentages, the sales mix of each draft beer container (mugs, glasses, pitchers) needs to be figured into the calculation.

Bar inventory control software helps you bring your pour costs to a true value by allowing you to implement an inventory control program designed to virtually eliminate over pouring, free give-aways and theft while taking an accurate measurement of alcohol inventory using state of the art digital equipment and software.