Cost Control Factors – A way to go through difficult times

Recently I was consulting for a big project in California, USA and reviewing the costs of the bar program was one of the tasks. I was surprised to discover that one of the owners and the director of the restaurant did not really know the factors that affect cost. I was surprised because this person owns other restaurants, but when he told me one of his projects were bankrupt and had to close down, then my surprise fade away. I thought that writing this post could help a lot of people.

In this (boring but pragmatic) post I will give you a few guidelines on cost control and the factors that affect it, since it seems not everyone is aware of those.

SOME FACTORS THAT INFLUENCE COST

  1. price of the goods bought (“cost of goods” or COGS)
  2. fluctuation in the price of COGS
  3. unrecorded lost, breakage, theft.
  4. unrecorded shift drinks or complementary items
  5. unrecorded spillage or changes
  6. over pouring (this can still happen with jiggers, so jiggers are not the solution, but training. jiggers can also be manipulated allowing bartenders’ theft)
  7. inventory inaccuracies
  8. ordering and deliveries: receiving the wrong item, at the wrong price, the wrong quantity.
  9. Brand  agreements / pricing not followed through the invoices.
  10. POS system (aloha, mycros, etc) not properly set up or reviewed (prices and items not in concordance with what is sold/pour)
  11. Servers/bartenders not trained on how to use the system  properly and ringing in wrong items at the wrong prices. (are your “modifiers” properly set up? and your Manhattans price?)
  12. Pricing is not accurate or up to date
  13. Sales mix. This is a very important and sometimes overlooked factor. Sometimes a higher cost  is not bad when we see the sales mix. Indeed it can be positive (for example if you are selling more premium brands -higher collaboration- over well liquor). Cost control without seeing the Sales mix is just seeing half the information and will lead you to bad decisions.
  14. Does your system to track costs works with the complexity of the bar program? and with what is actually being sold? (again…the Sales mix)
  15. And very important: how did you decide the objective cost (18%, 22%, etc) for your bar program? is it realistic to what is actually being sold (one more time: the sales mix!)? How does it relate to the cost of your competition (pricing?)
  16. Side bar costs? (garnishes, juices, fresh  ingredients, etc)

STEPS TO SOLVE IT,

Identify the source/factor of the problem.
Take action, make a plan to solve it. (it will vary according to your problems and needs)
Evaluate the results, fine tune the plan.
Re-evaluate.

And last one: share your experiences here!

 

Be my guest,

Lucas Ranzuglia

http://www.compassbarsolutions.com

 

 

 

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About lucas Ranzuglia

www.compassbarsolutions.com
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