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
- price of the goods bought (“cost of goods” or COGS)
- fluctuation in the price of COGS
- unrecorded lost, breakage, theft.
- unrecorded shift drinks or complementary items
- unrecorded spillage or changes
- over pouring (this can still happen with jiggers, so jiggers are not the solution, but training. jiggers can also be manipulated allowing bartenders’ theft)
- inventory inaccuracies
- ordering and deliveries: receiving the wrong item, at the wrong price, the wrong quantity.
- Brand agreements / pricing not followed through the invoices.
- POS system (aloha, mycros, etc) not properly set up or reviewed (prices and items not in concordance with what is sold/pour)
- 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?)
- Pricing is not accurate or up to date
- 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.
- 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)
- 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?)
- 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.
And last one: share your experiences here!
Be my guest,