Giving Away the House: Finding Your Lost Profits
Most bars should be able to maintain close to 21% liquor costs. Inability to do so can typically be traced back to inadequate ordering and pricing strategies, theft, or malfunctioning equipment. If your costs are out of control, our consultants can help you identify areas where you can tighten your belt without sacrificing the quality of your product.
#1 - Rail spirit profit margins are paramount
Profit margins on rail spirits should far surpass 21%. By selling your most commonly used spirits at 15% or better the bar can afford to take a small hit on more expensive items as well as compensate for other losses of profit due to shrinkage, buybacks, breakage, and comps.
#2 - Look beyond the percentages
Though liquor costs are important, good percentages alone don’t necessarily indicate whether your beverage program is living up to its full potential. In certain situations, taking a small hit on percentage in exchange for increased sales or increased profit per transaction can actually be more profitable.
#3- Record everything
Controlling costs and making informed decisions about your beverage program requires accurate data. Whether your bar has very tight inventory controls or gives away lots of ‘buybacks’ and shift drinks, recording every drink that crosses your bar will allow you to accurately manage your pricing and costing.
#4 - Don't sacrifice quality for margins
Sacrificing quality for margins leads to decreased spirit sales. While using a low-quality, inexpensive bourbon in your well might temporarily increase margins, any positive effect is negated as your customers move on to other products or worse, other bars. There’s no need to sacrifice quality in order to get affordable spirits behind your bar. Our consultants know which brands and distributors can work with you to get their prices in a range that makes sense for your bar, allowing you to utilize spirits you might have thought were price prohibitive.
#5 - Choose the right equipment and take care of it
Choosing quality equipment and keeping it properly maintained pays for itself. Improperly installed draft and refrigeration systems can devastate yields and margins from beer program. Small equipment choices can have huge impact on labor costs and staffing issues down the road. From the risk of injury to the loss of product, the potential costs of not choosing the right equipment and tools for your bar can be immense.