Before we dive into these powerfully effective methods to help skyrocket your monthly bar profits, I want to clarify the difference between “cost control” and “frugality”, to the point that quality suffers.
Sending out a Cosmo to a table with a shriveled lime, crusty from age and dehydration, because you want to save 3 cents is hardly the magic recipe for boosting sales and growing repeat customers.
We want to be smart and cost-conscious, but we don’t want to take on the qualities of George Costanza fishing a chocolate éclair from the trash. Adopting that reputation will eventually destroy everything you’re working towards and any chance of increasing your profits.
In other words, you cannot sacrifice quality for the purpose of cutting costs.
So the focus is: quality without unnecessary extravagance.
With that said, here are the 10 most effective methods we use to increase bar profits:
1. Up-Sell and Guide The Guests
Of course up-selling is not some new fad or ancient secret buried in the hallowed tombs of Egypt. But let me ask you this: do you have up-selling built-in as a system? In other words, are your servers and bartenders REQUIRED to up-sell every single time? Or do you casually holler it from your office once per month as you’re playing computer solitaire, “Don’t forget to up-sell”?
If you make it a rule to have your staff up-sell on every single order, the results will astound you. It’s so simple a drunken squirrel could do it. It goes something like this:
“I’ll have a vodka/tonic.”
“Would you like Grey Goose or Belvedere?”
Or if that’s too brazen for you, simply:
“What’s your favorite vodka?”
8 times out of 10 they will choose a premium brand that has a higher profit margin than the well liquors. It’s the easiest way ever to get an instant profit-boost.
In addition, your staff should be guiding them to the cocktail menu, which should have your highest profit menu items as well (or it had better, because you built it) and making suggestions. More on menu item costing coming up.
2. Track Your Bar & Liquor Inventory
Inventory management is my bread and butter for a reason: because there is no faster and more clear-cut path to increase your bar profits immediately than to stop the bleeding, and by that I mean stop your bartenders for giving away your profits like those people during time-outs at basketball games shooting cylinder-shaped t-shirts into the crowd out of hand-held cannons.
If you’re using outdated inventory methods (clipboard with pen and paper), you’ll keep getting the same mediocre results. It’s the same reason nobody uses dial-up internet anymore: because it sucks. Just like your inventory system.
As a comparison, the retail business has been tracking their inventory for years and their losses are 1 – 2%. Do you know what the bar industry losses are? 20 – 25%. Why are we so afraid to stop our bartenders from stealing from us?
Find a system that is able to track variance, which is defined as”the difference between what your bartenders ring into the POS vs. what they actually pour”. This knowledge alone will save the average mid-sized bar $5,000 per month. Easily.
3. Increase Your Traffic to Increase Your Sales
This is an obvious one, but it’s also much less cut-and-dry than tracking your inventory. The best way to increase traffic (besides word-of-mouth because your staff gives such remarkable experiences) is marketing and promotions, but these can be much more subjective and overwhelming because there are so many options, and most of them, if not executed properly, don’t work very well.
I can’t possibly include everything about marketing and promotions in this little paragraph, but I can point you in the right direction. To get you jump-started with some ideas, you can download The Big Book of Bar Promotions here for free on my other site TheRealBarman.com, and for marketing, there is no better system than Nick Fosberg’s, and I say this because not only will he skyrocket your traffic and sales, he tells you how to do it for free in his book at almost no cost and no risk to you.
You can get his book for free by clicking here:
Bar & Restaurant Success Free Book
You only pay for the shipping so Nick doesn’t go broke. You won’t be sorry. Not only does he show you how to get new customers, he tells you how to get them to keep coming back again and again.
4. Item Cost Your Entire Menu
If you’re just throwing cocktails on your menu because you think they’re cool or they taste totally awesome, I want you to take a rubber band, put it around your wrist, pull it back as far as you can, and let go.
Feel that pain from the snap? That’s the pain I feel when I see owners and managers putting tasty drinks on their menu instead of profitable drinks. The truth is, you can have both.
If you know nothing about item costing, it’s basically determining which ingredients to put into your menu items that will bring you the most profit, as well as how much to price each drink at so it’s fair to the guests but profitable to the business.
For example, you might put a Cosmopolitan on the menu for $9 made with 2 oz. Grey Goose Citron, 1 oz. Cointreau, ½ oz. cranberry juice and fresh lime juice (1/2 lime).
This is a common drink recipe for many cocktail menus I see.
You can see by this example from the Bar Patrol Dashboard Recipe section that the total cost of this drink is $3.33, the cost % is 37% and the total profit is $5.67.
So by using these insights, you determine that one of three things you can adjust: you can either raise the price of the drink, use different ingredients and/or alter the portion size.
If you are a high-end, fancy-schmancy bar, raising the price isn’t a problem. You could easily charge $11 or $12 and lower the cost % and raise the profit margin. But what if you’re a simple sports bar or pub or bar/restaurant? People aren’t going to pay $12 for a Cosmo, but clientele in these types of establishments also don’t need the highest-end products either. Let’s look what happens when we alter the ingredients and portion sizes.
First, you don’t need 3 oz. of liquor in a Cosmo. 2.25 will do nicely.
Second, let’s change Grey Goose Citron to Absolut Citron and Cointreau to triple sec. After all, Absolut is still a reputable brand name, and most people at a mid-level bar/restaurant could care less if you use a basic triple sec instead of Cointreau.
As you can see, the results are dramatic:
The cost is now $1.49 (was $3.33), the cost % is 16.56% (was 37%) and the profit is $7.51 (was $5.67). And we didn’t even change the price!
You are now making $1.84 more per Cosmo. And that’s just one drink on the menu. When you do it to all of them, your profits will soar.
And as a final note, you’ll notice that we included every ingredient that goes into the drink, not just the alcohol. This is a big rookie mistake made by amateur managers.
5. Check Your Portions
Do you know what your portions your bartenders are pouring for shots, mixed drinks, martinis and wine? If you do, that’s good. But do you know what they SHOULD be?
And do you know if they’re actually pouring the amount they’re supposed to be pouring?
Martinis are the worst. Based on all the years of inventory and consulting I’ve done, the average martini going out contains about 3 ½ oz. of liquor. That’s average. Sometimes it’s worse.
Hopefully I don’t need to explain why portioning is so important. If you don’t know, you can send me an email and ask, but first slap yourself in the face and wake the f*#k up.
If you are perfectly aware of why it’s so important, I apologize for censor-swearing…and congratulations!
Here’s a portioning guide for you to follow:
Shots & Mixed drinks (i.e. Jack & Coke): 1.5 oz.
Martinis: 2.5 oz.
Wine: 6 oz.
6. Beware the Glassware
Glass is sort of the sister of portion size. I have spoken about this in other venues online, and I keep bringing it up because it’s often overlooked when it comes to increasing bar profits.
If you have giant glassware, you might as well set your cash on fire because your profits are turning to ashes before your very eyes, and the reason is because your bartenders feel constant pressure from your guests to fill the liquid to (or at least near) the top of the glass.
It doesn’t matter if you tell them how high to fill it. The guests will bitch and the bartenders will accommodate. So again, unless you’re a high-end place who can charge more for drinks and can afford to have big glassware, here are my suggestions for glassware size:
Shot Glasses: 1.5 oz.
Rocks Glasses: 8 oz.
Bucket Glasses (Highball): 10 oz.
Martini Glasses: 6 oz.
Wine Glasses: (Varies on style, but only pour 6 oz., which should come up to just below the half-way point on glass to make guests happy)
7. Set Pars and Eliminate Dead Stock
Nine out of ten bars I walk into have way too much stock on-hand, tying up chunks of capital. You are wasting money by over-ordering. In addition, your storage spaces are littered with dead stock that will never move because it’s experimental crap unloaded by vendors. Nobody is going to order a bacon vodka and Sprite, so stop saying yes to vendors offering to give you a case of it for free.
If you’re unsure on how to set your pars for optimal ordering check out my video here on How to Set Your Pars.
With that said, since you undoubtedly have a surplus of aforementioned dead-stock, you can increase your profits by creating drink and shot specials and fire-sell them for $2 or $3. It’s never going to move anyway, so you might as well clear it out and make some profit at the same time.
8. Accept PLAIN Free Liquor From Vendors
Haha! Your face is hilarious right now. I can hear you right through the screen, “WTF! You just said not to take free stuff from the vendors. Make up your mind, Dave!”
The difference here is that we will take any plain (and by plain I mean no flavored crap) liquor that we can pour off in the well. Any plain vodka, gin, rum, whiskey, scotch or tequila that is given to the bar for free, take it and put it in the well and pour it off for profit. Easiest way ever to instantly boost profits in the bar.
9. Say Yes to Brand Promotions
Another great way to make instant profits is to allow brands (Guinness, Bacardi, etc.) to come in and do a promo, meaning brand girls will come in and offer samples to the guests. They will usually ask you to offer their brand for a discount that night which is fine because they will be purchasing a bottle/keg/case of whatever they’re pushing. At retail. Or at least they’d better offer that deal or you say no to the promotion.
What that means is if you sell Bacardi for $7 per shot and you get 22.5 shots out of a bottle (based on a 1.5 oz. portion size), then they had better give you at least $150 for that bottle. And THEN you get to pour it and charge for it as well, doubling the profits for a bottle that was given for free anyway.
Seems too good to be true, I know, but it’s like printing money baby! Ethically.
10. Create a Sales Competition
There’s nothing like competition to drive people to excel and reach their potential. There are many different ways to go about this. Tracking individual sales is tough because some work on busier nights than others, and some work longer hours than others, but if you have them all sell an individual product, like a brand of wine, you can base it on how many bottles they’ve sold divided by the number of hours worked.
Or you can do it for whoever sells the most seafood platters (make sure you make the contest for your most profitable menu item).
The winner gets a $100 gift card or a trip for two to a local distillery tour. Get creative. Whatever you’re paying out is going to be miniscule compared to the sales and profits you get from the contest.
11. *Bonus Tip: Launch a Bar Catering Business on the Side
This one is has MASSIVE potential beyond what you can even imagine inside that beautifully shaped skull of yours. I have worked with one of the most successful bar catering owners this side of Las Vegas and his profit margins and revenue are insane. His bar earns $500,000 per year in sales and the catering side brings in $400,000. He increased his sales by 80% just by adding bar catering (no food).
I have a mini-course coming out on this soon, so send me via email (email@example.com) if you’re interested in learning how you can do this to increase profits by 70% or more in your bar, and I’ll get you on the list when it comes out.
Thanks for being here. See you next time,
Tags:bar profitsincrease bar profitsincrease restaurant profitsincrease bar salescost controlbar inventory