Q: I’ve recently decided to focus on my beverage program. Where should I focus to run better beverage numbers?
A: Beverages are a significant part of your income statement and your balance sheet. Most full service restaurants sell 20 percent or more of total sales in beverages. A great ratio to drive to is 30 percent or better in beverage sales as these sales are incremental in restaurants and build sales through increased check average. Beverage costs tend to be lower than food costs so you make more on every dollar sold. Additionally, to assemble and serve a drink requires less effort compared to preparing and serving food. If you want to create better results in beverage management, focus on these areas:

Audit pricing in the Point of Sale System (POS). 
It seems obvious to double check the pricing from the menu to the POS. It’s surprising how often there are one or more incorrect prices in the POS compared to the menu. Nearly every restaurant has this problem if prices haven’t been audited in the past 24 months. This is especially true in cocktails and wine. When auditing prices use this opportunity to look for duplicates, misspelled items and inactivate old items no longer used. Check with your gut as to why one drink would be priced higher or lower than another, and check with the market to make sure your prices are competitive.

Engineer your beverage menu. 
Price every liquor, drink, beer and wine. Line costs up against sales volumes and compute the ideal cost. If the gap between ideal cost and actual cost is significant, make sure the loop is tight and secure when protecting your product in ordering, receiving, storage and service. Look for items that are out of line for cost percentages and, more importantly, find those that don’t contribute to profitability. Take a meaningful price increase on these items to get them to an acceptable margin. Isolate the highest volume selling items. These items are the least sensitive to price adjustments. Increase pricing or reduce costs on these items to create a dramatic impact.

Manage inventory actively. 
Too much inventory leads to sloppy portioning, theft and unintended use of capital. Every bottle sitting in storage is cash not in the bank. Keep the inventory in total at 35 days of cost of sales or less, and count it often. Use the same two people to count inventory together each period. Use one to count and the other to record. Keep inventory locked up, and cover open bottles at the end of the night. Place cameras in the inventory area, and make them conspicuous. The idea is to deter not catch theft. With high speed Internet and the invention of Web cameras, it’s more affordable than ever to install additional security deterrents.

Test portioning daily. 
Trust character, but verify results. Begin every shift with bartenders with a pour test. Take the time to explain how easy it is to over portion, and its effect on cost. If an average restaurant sells $200,000 in beverages per million in sales, and the average cost of a drink is $10, there are 20,000 drinks sold. If each drink was off even 0.5 ounces (one tablespoon), there would be 10,000 ounces or 78 gallons or 390 bottles (750ml) in over portioning. If the average bottle costs $15, the total over portioning in dollars would nearly $6,000. Often, portioning variances are higher than this.

Institute bartender blind drops. 
Never let bartenders balance to sales. At the end of the shift, simply have bartenders calculate their drop, separate the bar bank dollars, organize any paperwork and drop in the safe. Have a manager match the drop to sales and compute the over/short for the bartender. It’s easy to “forget” to ring up a drink during a busy shift. If the bartender has the ability to balance to sales, those items that are not rung up are kept as tips. This is an easy way for theft to happen unintentionally or not. Blind drops often save three or more points in beverage cost immediately.

Beverage management is a wonderful, easy way to invigorate the guest and employee experience. Manage the beverage category with the same vigor as food, and you’ll see results that improve the business and the bottom line.

For more information on improving profitability and driving performance, contact AMP Services at [email protected]. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability.