Value Proposition canvas- Customer needs and pains
Science of finding hidden losses ian foster from sculpture hospitality
1. The Science (and art) of finding hidden losses and lost sales
Presented by: Ian Foster
2. How much of your inventory is lost every day?
20% To 30%
20%
30%
Sources: “Beverage Institute”; California Restaurant Association; Bevinco
3. How do these losses occur?
Cause:
Loss at cost
Loss at retail
Spillage/waste
100%
Missing inventory
100%
Free Drinks
100%
Missing revenue
100%
Over-pouring
50%
50%
4. •Shrinkage losses under 2%
•Average shrinkage of 20+%
•Spend $billions to control shrinkage
•Inventory control compares units sold to units used
•Majority of owners don’t think they have a problem
•Inventory control cost of goods sold as % of sales
Retail vs Bars
5. Why does our industry have such high losses?
•Bartenders control both liquor AND cash
•Bartenders main source of remuneration: tips
•Operators use outdated and misleading methods to analyze bar profitability (pour cost)
6. The Problem with Pour Cost
…what do you compare it to?
Prior Months?
7. 22% pour cost looks good here:
What do you compare it to?
17%
18%
19%
20%
21%
22%
23%
24%
25%
Jan Feb March April May June July August
22% pour cost =
happy bar owner
8. 17%
18%
19%
20%
21%
22%
23%
24%
25%
Jan Feb March April May June July August
But not when you look at the ideal pour cost!
PC doesn’t measure
bar performance
Knowing you
should be at
17% changes
everything!
9. You cannot rely on pour cost to tell you if you have a problem
For two reasons…
Why Pour cost hides losses
10. 1) Every drink has a different pour cost
Product Drink Cost Price Pour Cost
Vodka & Tonic .19¢ $3.50 5.4%
Margarita .35¢ $4.50 7.8%
Grey Goose $1.34 $6.50 20.6%
Glenfiddich $1.50 $7.00 21.4%
Baileys & Coffee $1.00 $4.50 22.2%
Grand Marnier $1.64 $6.50 25.2%
Goose Martini $2.68 $9.00 29.8%
Bud draft .64¢ $3.00 21.3%
Bud bottle .76¢ $3.25 23.4%
Heineken bottle $1.11 $3.75 29.6%
Guinness draft $1.29 $4.00 32.3%
Gls House Cab $1.01 $3.50 28.9%
Btl Stags Leap Cab $22 $58 37.9%
Dom Perignon $110 $195 56.4%
When pour costs range
from 5% to as high as
56%, how do you pick a
target pour cost?
Even bars happy with their
pour costs invariably find
that their p.c. should be
two to four points lower
16. #1 measure efficiency
20% Ideal Pour Cost
÷ 24% Actual Pour Cost
= 83% Bevinco Efficiency Rating
Measure the right thing
17. #2 institute controls that deter shrinkage
Cash controls
•Monitor and track void, spillage and comp reports
•Question no-sale transactions
•Blind cash drops
•Cash drawers should remain closed between transactions
“trust, but verify”
18. #2 Controls (continued)
Other controls
•Inventory counts and controls should not be performed by staff
•Check deliveries
•No staff drinks/staff need to drink at table, not bar
22. Oversight and coaching
•10-minute “stop and stare”
•Testing: recipes/portion-control
•Coaching
23. #3 Hold Management Accountable
•More efficient than trying to hold every bartender accountable
•More effective
•Managers are paid to do exactly that, manage
•Most can do a great job if they are motivated
Bonus on the right thing
24. Management Bonus Program
•Bonus is more effective than straight salary
•But a bonus based on efficiency,
not on a pour cost target
25. Management Bonus Program
•Example: manager making $50,000/year:
•Pay $40k base salary with a weekly bonus every week based on the Bevinco Efficiency Rating:
•95% - $200/week
•96% - $230/week
•97% - $260/week
•98% - $290/week
•99% - $320/week
•Over 100%, drops $60/week each point over 100
26. Management Bonus Program
•Manager hitting 95 would make his old salary
$40,000 + (52 x $200) = $50,400
•Hitting 98 every week = $5,080 extra income
31. Track losses in real-time using flow meters
16.98oz pour =
2-½ oz over-pour
Pint not rung up
Get text alerts in real-time:
• If beer isn’t rung up
• If beer is poured after-hours
• If cooler temperature rises
38. How are you looking after your regulars?
•Over-pouring
•Impossible to manage
•Who gets over-pour?
•How big a portion?
•Taken for granted by your guests
•Very expensive:
•Over-poured drink becomes the new “normal”
39. •Comping
•Easily managed
•Who is being comped?; by whom?; how often?
•Highly valued by your guests
•Much cheaper Best practice: Manager must sign off on comp
How are you looking after your regulars?
41. Inefficient Ordering
•Why are you “out-of-stock” so often when you have $8,000 too much inventory?
•How come we have 2 full bottles of Galliano but we haven’t sold a Harvey Wallbanger since 1974?
42. Inefficient Ordering
•Liquor Salesman
•Empty Bottle > Full Bottle
•Bar Manager’s experience & intuition
•Historical Pars
44. Ordering with InteliPar
1) Calculate peak weekly usage 2) Add a safety margin/”buffer” 3) Adjust for changing usage patterns 4) Accounts for lag time until delivery
46. What is Turnover Ratio?
Cost of Goods Sold during the Past 12 Months
Current Inventory Value
= 35
÷
47. Eliminate Excess Inventory
•Pour as well liquor
•Drink Specials
•Use it in the kitchen
•Sell it to your staff at cost
•Give it away – sales contest
52. Martini bump keys = lost profits
Drink
Price
Profit
Up-sell Profit
5.50
Drink
Price
Profit
Up-sell Profit
Well vodka
$3.50
$3.20
Grey Goose
$6.50
$5.00
$1.80
Martini “bump” key adds $2.50 to price
Well martini
$6.00
$5.40
Goose martini
$9.00
$6.00
60¢
Martini “bump” key adds $2.50 to price
53. Every drink at optimal price
Drink
Price
Profit
Up-sell Profit
Well vodka
$3.50
$3.20
Grey Goose
$6.50
$5.00
$1.80
Well martini
$5.50
$4.90
Goose martini
$10.50
$7.00
$2.10
54.
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