Scott and Jamie recently went to Las Vegas to attend the 2013 Nightclub & Bar Convention & Trade Show. They found the trade show to be a great experience, providing them with valuable insight as to what other liquor inventory services were providing for bar owners. While it was interesting to see all of the competing liquor inventory systems on display at the trade show, Scott and Jamie left the event confident that Bar-i is providing their customers with an excellent product. It was clear that the Bar-i system makes liquor inventory as easy as possible for bar owners, providing our clients with three important benefits:

• Saves time
• Reduces aggravation
• Improves the accuracy of results

Most of the other liquor inventory options at the trade show fell into one of two categories:

• Do-it-yourself systems
• Real-time tracking systems

Each of these options has some flaws which prevent bar owners from getting the most out of the service and maximizing their profitability.

Do-It-Yourself Systems

With the do-it-yourself systems, bar owners buy all the software and hardware, and then run everything themselves. Unfortunately, implementing these systems can be difficult. Measuring what is missing from the bar is an entirely different and unique skill set compared with the other tasks performed at a bar. It is a skill many people struggle with, especially when performing the task alone. There are two complicated aspects to the process:

• You need to know what was delivered in order to accurately determine how much product was used. Accounting for what was delivered is laborious and dull, and it often doesn’t get done.
• You need to use your POS report to determine precisely what was sold. This data analysis can be difficult and complicated, especially if you do not have someone on staff with strong number-crunching skills.

As a result, after investing a considerable sum of money in one these liquor inventory systems, you may still have trouble determining what products were missing (your shrinkage). Unfortunately, the implementation of many do-it-yourself systems makes them difficult to achieve the ultimate goal of a lower liquor cost and more profitable bar. In Part 2 of this blog series, we will discuss the benefits and pitfalls of using real-time tracking systems. If you are interested in learning more about how we can help you maximize the profitability of your bar, please contact Bar-i today to schedule your free consultation.

At Bar-i, we help our clients increase their bar profits in numerous ways. While our liquor inventory system provides detailed data that identifies products which are underperforming, we understand that this is only one component to successfully maximizing your profitability. To complete the job, we also act as consultants to our clients.

Sometimes, our advice might entail investing in improved equipment, such as when your draft beer system is not functioning at optimal levels. But there are also certain actions you can take that don’t involve spending any extra money. Here are 5 simple tips that you can implement right away to boost profits without increasing your costs.

1. Do a better job checking in your inventory. Doing a thorough job checking in your liquor inventory is one of the easiest ways to improve your profitability. This can help you avoid being overcharged when a product on your invoice was not actually delivered, and it can prevent you from being charged for a product you didn’t order.

The following tips will help you avoid these pitfalls:

• - Have delivery drivers place new deliveries in a different location than existing liquor inventory until all products in the shipment are checked against the invoice
• - Try to make sure someone is always available to check in deliveries as they arrive so that you can address any issues immediately
• - Go through each invoice line by line to ensure all quantities, prices and products on the invoice are accurate, and have the employee checking the invoice initial each line to increase accountability
• - Clearly mark any errors when you notice them on the invoice, and communicate these errors to your bookkeeper to avoid overpaying for incorrect products
• - Do not accept any products which were not specifically ordered, unless they are free

2. Program your POS buttons to increase accountability and ensure every drink is priced and portioned correctly.

Many bars have their POS system set up in a way that uses one button to ring in several different types of drinks. A common example would be having one “rocks” modifier button that is used with both well and premium drinks. This creates two problems:

• - Pressing this modifier will add the same cost to all drinks, regardless of the price of the product – this will cause you to lose money when the modifier is used on premium products
• - There is no way to identify exactly how much of each product was sold, as this makes it impossible to measure and manage liquor inventory shrinkage at your bar

To avoid these problems, set up your POS system in a way that gives each drink a specific button. If we return to the “rocks” example, this would involve adding a specific “Rocks” screen to your POS which would have individual buttons for every product that gets poured in a rocks glass. You can do this for every way a drink can be poured, such as martinis, on the rocks, or doubles.

This will add more buttons to your POS, but when organized efficiently, it will enable your bartenders to more accurately identify the product being poured. This will ultimately improve your ability to evaluate the performance of each product and charge appropriately for every drink you sell.

3. Make use of the free products you receive.

Often, liquor distributors will include free bottles with your weekly deliveries in an attempt to convince you to carry their new products. There are several ways you can make use of these free products:

• Create a shot or drink special using the free liquor – This is a win-win for you and your customers – patrons receive a good deal, and you make money on a product that would typically languish on the bottom shelf of your liquor cabinet.
• Give it away – You can give it to one of your customers in a promotion. This may help generate a buzz for your bar and get people in the door. You can also give it away to a staff member as a reward for a job well done, such as having the highest sales for a given day or week.

4. Create a signature drink.

Many people associate the term “signature drink” with a list of overpriced cocktails with fancy names. This strategy is often employed to create the illusion of exclusivity since these signature drinks can only be found at your bar. But are these signature drinks really any good? Sometimes they are, but more often they are not (and they don’t necessarily sell well).

However, a signature drink can also refer to an item that you make very well which becomes associated with your bar.

When deciding on a signature drink for your bar, think about the preferences and buying habits of your regulars. After all, they are the people who will be returning to order your signature drink the most.

If you are known for having a great Sunday brunch, you may want to create a delicious, yet unique Bloody Mary. If you serve Mexican food at your bar, you may want to develop a specialty margarita. Or you may want to develop a unique cocktail by infusing certain herbs, fruits, or flavors with your liquor.

Put some thought into the presentation of this drink. Is it served in a special glass? Is it adorned with colorful fruit? To maximize the value of your signature drink without sacrificing taste, consider using a mid-range liquor instead of a well or premium product.

5. Portion your drinks consistently.

We cannot stress enough the importance of pouring your drinks consistently. Inconsistency in the way drinks are poured creates two problems:

• Drinks that vary in strength vary in how much they cost – A “heavy pour” will use more liquor than a “light pour,” which will cause you to lose money on your products in the long run.
• Drinks that vary in strength also vary in taste – This makes it difficult to ensure that your patrons are always receiving consistently high quality cocktails. By pouring the same amount of liquor in every drink, your customers will always know what to expect. This will make them happier, which will ultimately improve your profits.

We often hear bartenders explain the practice of varying the way drinks are portioned by saying, “We generally pour a little heavier for our regulars.” While it is important to keep your regulars happy, this practice will eat away at your profits in the long run.

A better way to take care of your regulars would be to pour all drinks consistently, and buy them a free drink on occasion. Free drinks are typically noticed and appreciated more than a heavy pour, and this will encourage your regulars to continue coming to your bar. Just make sure your bartenders ring in these free drinks under a comp tab so that you can track how many drinks are being given away.

Please contact Bar-I today to find out how we can help improve the efficiency and profitability of your bar by using our proprietary liquor inventory software. Count your inventory using scales and voice command then get on with your day while we take care of the rest remotely.

If you serve draft beer at your bar, it is important to make sure that your draft system is working properly at all times. This will improve the quality and consistency of the beer you serve to your customers, which will ultimately lead to increased draft beer sales. But having a good draft beer system will also help you reduce the amount of keg beer wasted due to foam, providing you with the additional benefit of achieving any given sales volume with a lower liquor cost.

Beer that is too foamy, flat, warm, or funky-tasting is generally caused by a problem with one of two factors:

• - Beer temperature
• - Pressure of your compressed gas system

By accurately measuring your beer temperature and the pressure of your compressed gas system, you will be 95% of the way to serving consistently good quality beer to your customers and reducing the amount of beer wasted. Taking these simple steps will help ensure you are achieving optimal performance out of your draft beer system.

Measuring your Beer Temperature

It is important to measure the temperature of your beer in two different places:

• - In your keg storage location
• - Right as it comes out of the tap

For the first measurement, take the temperature of a glass of water which has been placed in your keg storage room overnight. This will provide you with a liquid temperature in your beer cooler, telling you whether the room is sufficiently cold to store your beer. For the second measurement, simply take the temperature of a glass of beer right after it comes out of the tap.

Ideally, both temperatures will be the same – between 36-38 degrees Fahrenheit. It is important that your draft beer remain at this temperature all the way from storage to the point of dispensation. Temperatures that are just half a degree warmer than 38 degrees result in beer that is foamy and flat beer.

In a less-than-optimal situation, one of these temperature readings may be warmer than 38 degrees. If the temperature in your storage room is too warm, it is an easy fix. Simply adjust the room temperature to make sure your kegs stay between 36-38 degrees.

If the temperature of the beer as it comes out of the tap is too warm, it is evidence that you have a beer-cooled system. This means that the tubes transporting your beer from the keg to the tap are not being cooled properly. In this scenario, it may take upwards of 10 beer pours until you achieve your ideal temperature, and the only way to get consistently cold beer is to keep pouring them on a regular basis.

There are two types of systems commonly used to cool draft beer dispensing towers:

- Air-cooled dispensing systems – Beer temperature is maintained by having an open space in the tower that circulates cold air from the refrigerated storage room throughout the tower and beer hoses

- Glycol-cooled dispensing systems – Beer temperature is maintained by circulating a mixture of chilled water and glycol solution throughout the beer hoses from the refrigerated storage room all the way to the tap

Glycol-cooled dispensing systems are significantly more effective than air-cooled dispensing systems. If you are currently using an air-cooled dispensing system and you find that the temperature of your beer is not consistently in the 36-38 degree range when it is poured from the tap, we highly recommend switching to a glycol-cooled system. It will vastly improve the performance of your draft beer system.

Measuring the Pressure of your Compressed Gas System

In order to pour consistently good quality draft beer, you also must have a reliable gas regulator. Gas regulators are used to maintain the proper pressure for the dispensing of your beer from keg to faucet.

There are two types of gas regulators commonly used with draft beer systems:

• - Premixed gas system (delivers a fixed blend of CO2 and Nitrogen)
• - Blended gas system (blends pure CO2 and Nitrogen to the desired mix)

In either case you will need to adjust the pressure gauge to make sure you receive the proper pressure based on the specifications of your draft beer system. Factors which impact the pressure necessary for your system include:

• - The type of beer you are serving
• - The diameter of the delivery tubes
• - The distance between the kegs and the taps

Unlike temperature, which you can ‘set and forget’, dialing in the ideal pressure for a specific draft beer system typically requires a little trial and improvement. The important thing here is to regularly check the system pressure and take a little time to get to know what works for your specific system.

How Bar-I Can Help

As part of our services, we will make sure your draft beer system is performing properly by accurately measuring the yield you achieve on each different draft line. This provides a useful flag anytime you are experiencing issues and enables you to address temperature and pressure issues before they affect your customers and profits.

While performing a regular two week liquor inventory audit for one of our clients, we discovered that the bar’s draft beer system was significantly underperforming. Under ideal conditions, a bar should only waste between 2-5% of beer in a keg. Due to the poor draft beer system used at this bar, they were wasting nearly 25% of the beer in each keg. Needless to say, this resulted in a serious reduction in profitability of their draft beer products.

Bar-I conducted the tests discussed above to determine whether the poor performance of draft beer products was due to problems with their system or to bartenders giving away beers. We found out that they had problems with both the temperature and pressure of their draft beer system.

We worked with Draught Prophets, who provide quality draft systems for bars, in order to overhaul our client’s draft beer system. We upgraded their air-cooled dispensing system to a glycol-cooled tower in order to keep their beer cooled to the proper temperature. We also had secondary regulators installed so they can adjust their gas pressure separately for each line. As a result, there has been a significant reduction in the amount of beer wasted per keg, and the bar has seen a substantial improvement in the quality and profitability of their draft beer.

Please contact Bar-I today to find out how we can help improve the efficiency and profitability of your bar.

Let’s be honest: Nobody likes doing their liquor inventory at their bar each period. While liquor inventory an important task to complete, it’s not typically one that owners or manager look forward to. The primary reason people dislike taking liquor inventory is that it’s a time consuming and boring task: Take an hour or so recording inventory levels onto a clipboard followed by another hour or so entering these counts into Excel and running sales reports. The final result should be an accurate liquor cost for the period but often errors create unexpected results which yield the results meaningless. In the best case, an accurate liquor cost is calculated but the lack of detail which liquor cost provides means it’s not easy to understand what caused changes to your liquor cost or how to improve performance.

So let’s imagine a better way. If you were to design a liquor inventory system, making a system which is both fast and accurate would be high on your list of aims. In today’s post I evaluate the different data input methods employed by liquor inventory systems in order to consider their relative strengths and weaknesses.

Option 1: Tenthing

The majority of bars still take liquor inventory by picking up open bottles, estimating how full each bottle is to the nearest tenth, and recording that information onto a clipboard. In step two the counts which were recorded onto the clipboard are entered into excel so that liquor inventory values can be calculated.

Judging by our two metrics of speed and accuracy this method is pretty poor: Users are constrained by having two hands since with a clipboard, a pen and a bottle, you are always one short. The system is slow since counts are entered once onto paper and then a second time into Excel. The additional step of copying inventory counts into Excel also creates further opportunity for errors. There is a reason people don’t use clipboards very much these days!

Option 2: “Tenthing with technology”

One of the liquor inventory systems available on the market basically provides a higher tech way to ‘tenth’ your bottles. After scanning each bottle’s barcode, a picture of the bottle pops up on the screen and allows the user to use a stylus to indicate how much is left in the bottle. The benefit of this system is that since the data is entered into specific liquor inventory software, once you are done counting, there is no need to manually transfer information into Excel. This makes this system quicker but it still suffers from being inaccurate since it still relies on visually estimating how much is in a bottle. The problem is compounded if more than one person takes liquor inventory since there will always be differences in their judgment.

Option 3: Magic labels and scanning

Another liquor inventory system on the market requires that you stick a special label on every bottle in your bar upon arrival. Labels in place, to take inventory you use a special scanner to scan each bottle and the special labels allow the scanner to estimate how much is in each bottle. If this method of taking liquor inventory sounds quirky and cumbersome, you are not alone. The most obvious objection is that sticking labels on the hundreds of bottles which pass through your simply adds a time consuming and boring task to a time consuming and boring task.

Option 4: Weighing liquor bottles

The most popular data input method used by third party liquor inventory software systems is weighing. Weighing your liquor bottles has a number of advantages over other methods with the most obvious being a high level of accuracy and objectivity. The high degree of accuracy is useful since it produces more granular and useful information such as tracking the size of individual pours. Liquor inventory systems based on weighing also remove the second step of transferring counts into excel (though this is true of all liquor inventory software systems). The final advantage of weighing bottles is speed: Modern scales take around two seconds to ‘settle’ which is actually faster than you can ‘tenth’ your bottles and manually record the reading. Our liquor inventory software is based on a mapping system which saves the additional step of having to scan the barcode of each bottle you inventory.

My final point is a reminder that the crucial goal for any liquor inventory system is to move away from measuring your liquor cost and into tracking the performance individual products. Counting your inventory is only part of this process so you’ll also want to consider important elements such as overall ease of use, independence of results and ease of integrating with your POS system. The good news is that it’s worth the effort since when our clients switch over from liquor cost, they typically realize a 3% fall in their liquor cost.

Liquor cost is the most common metric bars use to measure performance alongside total sales volume. Sales volume is fundamental since it represents the total dollars your customers are spending at your business. Obviously the amount of money you actually take home as profit depends on the margin you make on your that revenue. In the bar business this measure is referred to as Liquor Cost. Accountants would call it “cost of goods sold” which makes sense given it measures how much money you spend buying product on average to generate a dollar in sales. A 20% cost of goods sold or liquor cost means you spend 20 cents on average buying liquor inventory in order to get a dollar in sales.

Ever since I began writing my blog about liquor inventory, liquor cost and all things related to bar profits, I’ve argued that the bar industry’s reliance on liquor cost costs most bars thousands of dollars each year. The reasons the industry losses so much money through using liquor cost is that liquor cost is a poor performance measure. It can hide a multitude of evils, even from seasoned managers and owners. The reason liquor cost is (over) used so much is that it is simple to calculate. All you need to know is the value of the liquor inventory you used at cost and divide it by the sales you generated from sales. You pull total sales from your POS, and figure out the value of the inventory used. The value of inventory you used is simply what you spent over the period buying product plus the amount the value of inventory on hand fell by (if inventory on hand went up, you minus the difference).

Simplicity may be the reason so many bars rely on liquor cost but it’s also the problem with the measure. Since many factors are affecting your liquor cost simultaneously, it’s impossible to gain a detailed understanding of those factors from looking at liquor cost alone. An often overlooked factor which is diminishing profits of most bars in the US is liquor inventory shrinkage. That’s the technical name used to describe when you use up your liquor inventory without turning that usage into profits. Overpouring, undercharging, mistakes and theft all contribute to shrinkage but the scale of the problem at most bars is amazing. When you look at hard numbers from the industry it turns out that the average bar looses something in the region of 20% of the product they use to shrinkage. Liquor cost is damaging because it doesn’t allow you to measure the shrinkage level at your bar and when you can’t measure your shrinkage you can’t manage it either.

It’s worth me quickly mentioning here that I’d like to draw a clear distinction between liquor inventory shrinkage and comping drinks for your customers. The first term refers to unplanned loss while robs your profits while the second refers to giving away drinks to customers as a form of marketing. It’s no secret that customers like getting something for nothing and in the bar business, when used effectively, this tactic can be a useful addition to your quiver of promotional activities.
If you own or manage a bar and want to figure out how much liquor inventory shrinkage is costing your bar, do some research and choose one of the many bar inventory systems which are designed exactly for this purpose. In the meantime if you want to use a smarter tool to calculate liquor cost for you whole bar or for a specific drink, you should request our free liquor cost formula tool.

Go back to first half of article...

Third party hardware and software bar inventory systems:
• Setup cost- High. These systems typically start at a few thousand dollars. Ironically one of the worst available on the market costs more than $10,000.
• Overall cost- Medium; over the lifetime of the system, the initial setup cost is shared over the years you use the system. Monthly fees are often another component of the cost but the real cost is spending all that money for a system which isn’t used effectively at your bar.
• Effectiveness- Variable. Some bars had good success with these but for every success story there are three other bars which spent the money and fail to see the potential benefits. The common factor in bars that make these work is often whether there is owner involvement since this addresses concerns of independence and knowledge loss when your manager leaves.
• Speed- Medium to good. Once you learn how to use these systems they tend to be significantly faster than using a clipboard. Be careful which of these systems you use however as some of them are poorly designed. This means that taking inventory of a single bottle requires many steps, pushing many buttons in the correct order and in the worst case sticking labels on every liquor bottle in your bar for the system to work.
• Ease- Poor. Going to the detail of measuring the performance of individual products is relatively complicated. It requires accurate counting, integration to your POS system, management of all your drink recipes, updates to the POS system and detailed error checking.

Full service bar inventory systems:
• Setup cost- Low. Aside for paying for the initial setup (which is complimentary in some cases), since all equipment and expertise is provided, no equipment or software is required aside from a POS system.
• Overall cost- High. There is no getting away from the fact that having a professional come to your bar on a regular basis to perform liquor inventory is the most expensive method.
• Effectiveness- High. This method has been shown to be very effective and the results are worth paying since the benefits of an effective bar inventory system far outweigh the cost.
• Speed- Fast. A professional will be fast and since you are your employees aren’t involved in producing the numbers, their time can be put to better use elsewhere.
• Ease- Very good. Inventory is performed consistently, to a high standard, with minimal time commitment.

Hybrid bar inventory systems:
• Setup cost: Medium. The standard setup cost for Bar-i’s hybrid system is $900. This includes all required equipment, software and one-to-one training.
• Overall cost: Medium. Hybrid systems cost more overall than in-house or DIY bar inventory systems since they include the time of a professional. Conversely they cost significantly less than full service systems since the most time consuming tasks are performed in house. Professionals are involved remotely and are only involved in the high value and technical elements which keeps the cost down.
• Effectiveness- High. While you do the counting on your own, professional help is only ever a phonecall away. Results are essentially the same as full service liquor inventory since reports are independently and professionally prepared.
• Speed- Fast. The speed is dependent on the exact system you use. Bar-i’s hybrid system uses a map system which avoids having to scan every bottle every time, voice command to enable faster counting and without a handheld device tying up one of your hands, you can use two hands.

In summary I’d say that in-house bar inventory systems are ineffective. The availability of reasonably prices, and more effective, alternatives mean you’ll get a positive return on the money you spend implementing a better system. Make your choice of the three other types based on what suits your specific situation best. Ultimately the bar inventory system which is most effective at your bar will be the best value.