The American Mixologist Online® Newsletter Vol. 15, No. 19 All Rights Reserved
Management

My grandfather once told me, "If you want to be successful, watch carefully what the majority of people do, then do the opposite." I confess it had little meaning to me at the time. Fortunately for me, I remembered his advice, and I've made it the cornerstone of my professional career ever since.

How can you benefit from this same wisdom? Ours is a highly competitive industry, with a failure rate that exceeds the norm. It’s a demanding business, in which you have to work harder than most and keep mistakes to a minimum. It’s this last part that seems to trip most people up.

Back to my grandfather’s advice. While avoiding the mistakes of others and steering clear of the pitfalls might not necessarily lead you on a straight-line toward success, it may very well lead you away from failure.

So to a number of industry professionals, people who have been around the block, the question was posed: Why do bad things happen to good bars?

• Liquid Assets — Tracy Finklang has been the corporate beverage manager for the Rock Bottom Brewery for numerous years. She contends the most critical mistake most beverage operators make is not paying close enough attention to their inventory. "We invest a great deal of working capital into purchasing and replenishing our beverage inventory. From a business standpoint, it’s imperative that we track the flow of inventory through the operation to make sure we’re getting the return we need on that investment."
  
  After years spent behind the bar, Finklang knows what fate awaits many products. "It seems it’s always open hunting season on alcohol. Your inventory can get ripped off even before you put it into the storeroom. I think tight inventory controls are an effective deterrent—people know that any losses will be detected quickly. I can only imagine the losses beverage operators must suffer without these systems in place."
  
  General manager of the North Star Pub in New York City, Deven Black agrees that lack of adequate inventory control is a major source of problems. "For example, several years ago I found some considerable discrepancies between the number of bottled beers our registers said we sold, and the amount of beers we actually depleted from inventory. So I started to count all the bottled beer at the end of every day. You know, the problem all but disappeared."
  
  
• Learning Curves — As the labor pool continues to shrink and the number of qualified job applicants diminish, employee training will have an increasingly more significant impact on day-to-day operations. "There’s no question in my mind that the number one challenge facing beverage operators today is training," states Al Ferrone, food and beverage director for the Hilton Hotels. "Allowing uninformed, marginally trained employees behind the bar, or on the floor, is the ultimate in mismanagement. Essentially you’re putting people in pressure situations that they’re totally unprepared to handle. The only possible eventual outcome is financial failure."
  
  Ferrone contends employee training provides the bridge between concept and execution. Few managerial strategies can be effectively implemented if the staff lacks the tools and knowledge to execute the program. Training encompasses everything from product knowledge, sanitation procedures and alcohol awareness to menu familiarity, handling guest complaints and rendering proper customer service. If it’s crucial to maintaining established professional standards of the business, Ferrone stresses it should be incorporated into an ongoing training program.
  
  
• Black Holes — In industry parlance it’s referred to as shrinkage, an innocuous sounding word with dire ramifications for a bar. Shrinkage refers to losses due to over-pouring and theft.
  "Just because you purchase a bottle of liquor doesn’t mean you’re going to get any where near its potential sales value," says Finklang. "The liquor can get stolen, spilled, wasted, given away or drunk by employees. Theft and over-pouring alone can chew up between 10%-20% of your bottom line, and that’s in operations with good controls and managers who know what to look for."
  
  While the Rock Bottom Brewery allows its bartenders to free pour liquor, they are tested for accuracy on a regular basis. Those who don’t measure up must use a jigger until they are capable of pouring with precision. Being a former bartender, Finklang entertains no illusions that testing alone will curb over-pouring, "but it does convey to our staff that we’re aware of the problem and taking reasonable precautions to deal with it."
  
  "Most bartenders think that when they give away a free drink all the bar is losing out on is the cost of the liquor," observes Steve Goumas, owner of the Rula Bula Irish Pub, a landmark bar located in Tempe near the Arizona State University campus. "It wasn’t until I took over this place that I realized there’s a hidden opportunity cost tacked on as well. If a customer’s personal limit is four drinks, for example, and the bartender gives away one, for whatever reason, I’m potentially out 25% of my sales. Either that, or the person will consume five drinks and now we’re looking at an over-service situation."
  
  Another insidious problem is theft. Bartenders control both ends of every transaction at the bar. They portion and prepare product, as well as handle all sales proceeds. Goumas, like many, has been burned. "I’ve learned the hard way that some bartenders operate with a hidden agenda. It’s been an expensive lesson, but now I’ve implemented solid cash controls. I randomly pull cash drawers and take mid-shift readings of the registers. I think these types of security measure help keep the honest bartenders honest."
  
  
• Batting Averages — Business is challenging enough without flying blind. Sophisticated registers and point of sale systems are capable of generating a wealth of operational data, which if analyzed correctly, can provide invaluable insights into what is transpiring behind the bar.
  
  "Because we have tight inventory controls, I’m reasonably confident that our cost of goods figures are accurate," states Deven Black. "As a result, I use the pub’s pour cost percentages as reliable indicators of our profitability. They’re remarkably consistent, so if one of the percentages slips out of variance, my curiosity is piqued and I look for the explanation. I even post the percentages for my staff to see. They take pride in hitting our target cost percentages."
  
  At a high volume bar like Rula Bula, speed of service and theft are constantly on Goumas’ mind. "When I learned about tracking bartender productivity, the idea just clicked with me. So now I calculate their sales per hour for every shift and use that as a running basis for comparison."
  
  According to Goumas, it didn’t take long for some interesting patterns to develop. The figures showed which bartenders consistently registered the highest sales per hour, and cast suspicion on several individuals who regularly fell short of the staff average. "Once I saw those patterns, we started to watch a few of the bartenders more closely, and it became apparent why their sales figures were so low. They were ripping us off."
  
  Al Ferrone also believes in tracking staff productivity, but he focuses on sales per hour during peak hours. "I think analyzing staff performance during prime hours is a highly revealing statistic. That critical period of time affords us an opportunity to analyze employee performance on a level playing field. It reveals volumes about their level of technical proficiency, their sales abilities, and their cash handling propriety."
  
  
• Revamped Programs — "We see so many operations, chains included, that haven’t updated their beverage programs in 15 years," says Rick Fogel of Bar Starz. "Their bar menus and specialty drinks are old and tired. Drinking trends change. New, interesting products enter the market, others drop out of fashion. It’s vital in this industry to stay fresh and keep pace of what people want. Innovation is the key to developing a dynamic beverage program."
  
  Beverage innovations are Mac Gregory’s stock and trade. The assistant director of operations of the upscale Grand Hyatt in Seattle, Gregory is responsible for, among other things, developing seasonal specialties for the resort’s numerous outlets. "We cater to a discriminating clientele from around the world, so our signature drinks must be enticing and truly unique."
  
  Creativity alone is not necessarily enough to breathe life into a beverage program. Once you create outstanding signature drinks, make sure you announce your success. Gregory is an advocate of stimulating sales through on-premise marketing. He frequently changes the look of the back bar displays to keep things interesting, and insists that bartenders keep all of the bottles’ labels facing the guests.
  
  "We’ve also had particular success promoting our business from within. We use table menus in the various lounges to market our specialty drinks, top-end spirits and varietal wines by-the-glass. The menus are seasonally oriented and in keeping with the decor and motif of the outlet." explains Gregory.
  
  "The sales of whatever we actively promote increases sometimes over 100%. Not marketing from within is like leaving money on the table, and in this business, that’s a serious mistake."