Why is Bar Inventory SO Important? 3 Hard Truths You Need to Look at
I know you really don’t want to open up and read this article, because if you find out just HOW important your bar inventory is, it means you won’t be able to ignore it anymore. And yes, you’ve been ignoring it. That lazy count you do once per month on your clipboard is having the same impact as those shoes you buy that are supposed to shape your butt.
Problem is, everyone thinks that their business is failing for a variety of reasons, and while that is sort of true, there is really only one real reason, and it’s because they choose to ignore the issues that need to most attention.
Neglecting to monitor your inventory will have the same result as leaving your dog in the car with the windows rolled up in July.
Yes, I’m aware that is a very graphic metaphor, and despite the angry PETA emails I will receive, I need this to sink in.
Did you know at 7-Eleven stores that the franchisees are personally responsible for all of their inventory? The franchise head-honchos come in once per month and count everything, and whatever is missing, the franchisee owner has to pay for it out of his/her own pocket. Do you know why?
BECAUSE THEY UNDERSTAND HOW IMPORTANT INVENTORY IS.
In fact, the average losses in the retail industry due to theft and losses is 1 – 2%.
Bar industry? Yep, you already know it. Or you’d better. 25%. You already pay the government 30% in taxes. Why are you allowing your bartenders to bleed another 25%?
I call it the Truffula Tree epidemic. The bartenders keep chopping your profits down until one day you look up and there’s no more green. Instead, your bar is a desolate wasteland of Gluppity-Glup and Schloppity-Schlopp and everyone packs up and goes home because you’re out of business.
HARD TRUTH #1: THE POUR COST PERCENTAGE METHOD SUCKS
I’ve said it time and time again, but let’s quickly acknowledge again that pour cost % measures your gross profit. That’s it. It does not show what’s missing. With pour cost as your major method of monitoring your bar inventory, it’s like you are looking through a keyhole when it comes to seeing how much your bartenders are raping you.
Bartenders LOVE pour cost % because they can do whatever they want and you won’t be able to pinpoint where the losses are coming from.
HARD TRUTH #2: THE AVERAGE BAR WILL MAKE 2 – 6% OF TOTAL REVENUE
This is before taxes. That means if your bar brings in $1 Million in sales, you will clear $20,000 – $60,000, and THEN you’ll have to pay taxes. Hell, your bartenders are making $60,000, and 25% of that is supposed to be yours.
HARD TRUTH #3: THE BAR INDUSTRY LOSES $10 BILLION PER YEAR
Yep, since the bartenders are making the rules they’re making the money. If you’re not paying attention to your bar inventory, you can kiss one-fourth of it good-bye. Basically you’re the franchisee guy at 7-Eleven: you too are paying for your lost inventory every month. The only difference is, you don’t have someone coming in and holding your hand out to collect.
Instead, your bartenders are collecting thousands extra per month and pulling up to work in a new Acura.
Yes, I know I’m preaching like a Baptist minister. But the point of this rant is that I know that deep in your soul, you KNOW that tracking your bar inventory is important, and yet you slack on it because it’s a pain-in-the-ass and you don’t want to manage and confront your staff.
So you make excuses that you don’t want to get a better bar inventory system because it’s another expense. But your biggest expense is the money you don’t make. Your current bar inventory system is costing you $50,000 because it doesn’t track what your bartenders are doing, which is ridiculous when you can find a good system for $1,200 – $1,500 per year. That’s ROI you can’t ignore anymore.
What it comes down to is: you can make money or you can make excuses, but you can’t make both.
Cheers, until next time
Dave, The RB