OPERATIONS | Reduce Costs & Preserve Quality

OK, here we go again. There are only two ways to make money: increase your sales by charging more, selling more, increasing guest count, etc., or reduce your costs by cutting portion size, reducing raw material costs, lowering your labor, etc. If anyone has figured out a third way, please, patent it and retire.

But assuming you haven’t, let’s address the latter: reducing your costs. This is the least complicated way for you to see results quickly. It also is the potential “slippery slope” that will cut into your existing sales and customer base if you go about it recklessly and without regard to your product’s quality and your guest’s sense of value. So you need to proceed with caution when taking on the task of cutting costs.

The first step is to know your true costs. Too often, we on the beverage side of the business do not know the true cost of goods sold. Oh sure, we know the final beverage cost line on the P&L, but do we know the true costs of, say, the top 10 drinks we serve? These 10 probably constitute 70 to 80 percent of your total beverage sales.

Think about this: Your counterparts in the kitchen know their true food costs. They cost out every menu item to determine what price to print on the menu, while we in the bar often simply throw the drink into whatever pre-established “category” or “tier” we think it fits into without regard to its true cost. Stop doing that! Get a product mix off your register and cost out your top 10 drinks based on their recipes, and be sure to include garnish. For beer, make certain you know the true yield, in ounces, of the beer glass you serve (be sure to let the head go down before you take the measurement). Once the cost is determined for each, you can establish what price to charge the guest based on your budgeted beverage cost. There is no way around it; you have to do the math.

Garnish truly is the “low hanging fruit” in beverage cost reduction. Garnishes fall into two categories: functional and visual. Functional garnishes actually enhance the flavor and taste of the drink — the salted rim of a Margarita, the muddled cherry and orange in an Old Fashioned. A visual garnish enhances the appearance of the drink but does not actually affect the taste — a cherry and orange wheel on the rim of a Sour or a lime wheel on the rim of a Daiquiri. Do not try to reduce costs by ditching the functional garnish.

Visual garnish, however, offers real cost-cutting opportunities. If you use orange, lemon and lime wheels, go to half moons. If you cut your lime wedges in sixths, cut them in eighths. Count how much garnish you are throwing away each day for a week and establish the correct par levels for each item. You will be surprised by the amount of waste you eliminate. Paying attention to your garnish will reduce costs without adversely affecting your guest’s sense of value.

Selecting efficient glassware for your operation and concept also is a great opportunity to reduce costs. We drink not only with our mouths and palates but also with our eyes. Tall, top-flaring glassware (where most of the ounces are at the top of the glass) offers the most profitable glass to serve in, while at the same time, it gives the guest a visually satisfying sense of value. Example: A traditional pint glass (16 ounces) with a 1-inch head yields 12.5 ounces of beer, while a straight cylindrical 16-ounce beer mug with a 1-inch head yields 14.5 ounces of beer. The difference is two ounces of beer profit to you for every beer served.

Speaking of beer, your draft system has some easy cost-cutting possibilities. Check the temperature of your beer by pouring a normal beer into a chilled (not frozen) glass and inserting a standard foodservice stem thermometer. The temperature should be between 35° and 37° F. If it is above that, you need some maintenance. Check that your compressor coils are clean and that air can flow freely between the coils. If the coils are dusty and have dirt between them, clean with compressed air; do not use a fork or knife, as this will bend the coils and make the compressor less efficient. If the glycol system is working properly, there will be considerably less waste (foam) at the tap head. If the temperature still is too high, you may need a glycol recharge. Be certain to “temp” each tap head and handle. Your draft system is too valuable to your operation; make certain it is in proper working order and check it often.

We haven’t even discussed labor, energy, employee theft, breakage, brands, bartender pour tests or the hundreds of other cost-reducing programs that might work for your concept, but hopefully we’ve started you thinking about them. So, get behind the bar. You’ll be surprised where you see places to cut costs that only you will know about. NCB

Tim Johnson is president of Tim Johnson & Associates, a beverage training, operations, marketing, purchasing and sales consulting firm servicing hospitality and supplier companies. His 30 years of experience in the on-premise industry includes beverage management positions with Houlihan’s, Applebee’s and Champps Entertainment. He is based in Larkspur, Colo. and can be reached at [email protected].

Suggested Articles

Governor Gavin Newsom issued the order earlier this afternoon.

General Counsel, Jessica Shraybman, shares her advice for clients looking to negotiate terms with their landlords.

More than ever, we need Congress to help our independent restaurants which are proven to be a foundation of the U.S. economy.