Archive for the ‘ Beverage, Bars & Lounges ’ Category

Time to Lose (Inventory) Weight?

Well, this IS the month to trim fat, right? Every fitness center is filled, this is the number one month for fitness center enrollments, etc. But I’m not concerned here about body fat. Not that I don’t have plenty to be concerned about. The topic today is inventory fat. That’s right: inventory fat – otherwise known as dead inventory – is bad for you. 

What is dead inventory? Usually I think of beverage inventory. Mostly wine. Food inventory is easy to work out: banquet menus, employee feeding and systems for daily specials enable us to do this with some ease. We’ve gotten good at it because it’s perishable, and because storage space is limited. Dead beer inventory happens – hard to sell that summer seasonal in December. But in my experience it doesn’t represent a lot of dollars. Spirits can be a problem if you let distributors make your inventory decisions for you by giving you “free” sample products you wouldn’t otherwise order. How’s that banana-lime tequila cordial working for you, the one your distributor swore was the hottest thing going in (name any trendy area in California)?

So, we’re back to wine. I’ve seen dead inventories as high as $100,000. I’ve seen dead inventories that increase year after year after year with no movement. Does your bar accounting team wear dust masks when they do your beverage inventory? Like those extra pounds you want to shed, you know the risks of too much dead wine inventory:

  • Ties up cash
  • Perishable – it goes bad eventually
  • Takes up valuable storage space
  • Discourages you from updating your lists with the latest products

The most commonly used methods for reducing old inventory still work. “Selling” it to the kitchen and “selling” it to your sales and marketing department for VIP amenities, sales gifts, etc.

Here are some additional ideas:

  • Have a “Wine Sale” – Use this to build business on slower nights by offering it on those nights only. Example:  Sunday & Monday half-price bottles
  • Or, make a separate half-price wine list, noting that these are available until sold out
  • Or, where legal regulations allows this, prepare a half-price “to take home after dinner” list (unopened by you, of course)
  • Or, a variation – a BOGO. Buy a bottle from our “special” list for dinner, get a second bottle “free” to take home. (Promotional wording and procedures subject to your local regulations, of course.)
  • Pour off as a special BTG Happy Hour promotion
  • Create a “special” list with lucrative employee incentives for selling these itrems. Increase the value of the incentive with each sale. $2 for selling the first bottle. $3 for the second. Up to $5 per bottle. In other words, “give” the discount to your employee instead of the guest (or price it so the discount is “shared”).
  • Create the world’s best Sangria, and promote it

Those are my thoughts, let me know yours.

 

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Trends & Tealeaves

I think I’m going to start publishing my own trends list, and here’s why: how could I be wrong? If my forecasted trend happens, I’m smart, if it doesn’t, I’m just “ahead of the curve”, right? Or, maybe it’s not that simple. Turns out there’s are fine lines between “best” and “worst”, data and tealeaves, trends and fads, opinion and fact.

By now you’ve mulled over the 2011 trends. Among the best and smartest prognosticators:

Baum & Whiteman

The annual NRA poll of 1,500 Chefs

And of course Technomic

These are well thought out and always interesting. Many trends are mentioned multiple times by multiple sources (examples include: sustainability, small or mini plates, more sophistication/culinary emphasis on cocktails, and my pick for the most interesting, the “celebrity farmer”.)

But what about last year’s trends? Did they pan out? [I know the pun police are coming to get me.] Who looks back to see which of the forecasted trends evolved? Is there a scorecard? Nope.

Reading Tealeaves

Which do YOU prefer, computer or tealeaves?

I pasted a few groups of projected trends for 2010 and 2011, even some from 2009, to compare them. Then I searched for a kind of reverse or negative trend, and here are some of my observations, not rocket science but possibly worthy of your consideration:

  • A real trend is a multi-year evolution, never a single-year instance (for that we have another name, “fad”), so it should show up on lists for a few years at least as it evolves or emerges
  • The lists that differ every year are thought-provoking and informative. But if a “trend” wasn’t on someone’s list last year, it is at the birth or discovery stage. Let’s call it an early-stage trend.
  • Then we have the emerging trends, they didn’t start last month or maybe even last year, but they’re expanding at a consistent or even rapid pace over an extended period of time
  • Trends end when they become mainstream; if they never evolve in some way into a broader consumer application or acceptance they weren’t trends in the first place
  • It can be just as informative, and more fun, to view “negative” or “worst” trends
  • What about “trends” – found on both emerging and “worst” lists? A cursory look of items found on both include cupcakes, iPad wine lists, bacon and its variations, culinary “dirt”…
  • No “Best Worst” lists here, but a couple of my recent favorites are by: John Mariani, Trends We’d Like to Call a Thousand-Year Ban On, and David Zinczenko, the author of Eat This Not That. It’s also interesting to see Esquire’s list for “tired” restaurant trends for 2009 – are they asleep now?
  • Most ubiquitous prediction: the gourmet/upscale/celebrity-chef burger concept is now over done. Well done? Well, maybe.

Those are my thoughts, let me know yours.

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Method to the Madness, Part II, Hotel Eating & Drinking Concepts

Great restaurants and bars are about passion and joy and excitement and culinary wonder. Right? But that’s after they open. Getting there? Another matter.

In March, Part I of this series about developing hotel restaurant and bar concepts discussed determining the criteria that a new concept must meet in order to be successful. At GVC we use a 7-part “methodology” to create a concept. It’s not rocket science, right? Or maybe it’s more difficult than rocket science, since thousands upon thousands of very experienced and bright folks have failed at it, one time or another. An outline of the seven steps methodology can be found at the GVC web site. Here I’ll go into a bit more detail.

The Second Step of this Methodology is Anything but a Tea Party!

While Part I is largely strategic, Part II gets into the “hard work” – it’s certainly no “tea party”. A thorough exploration of the “internal” side of the status quo is required. This includes an examination of the hotel brand, the hotel customer, the facility and its operations. While this blog pertains to a hotel that is already operating, much of what follows would apply to a new-build as well. Mostly the sources for the information would differ.

Let’s begin with the hotel’s brand. Learn what you can about the Brand and Brand image. What types and categories of restaurants and bars fit? Corporate Brand “owners” can help here, as they have usually thought this through. Get an answer to this question and you’ll be headed in the right direction, Brand-wise: “place any existing restaurant or bar in your prototype hotel – what would it be?”

Also essential: know the Brand Standards. And try to learn the demographic and lifestyle habits of the Brand customer. This will be different in some ways at the local level, but it’s a good starting point.

Next, and far more challenging: learn about the hotel guests and customers. Determine the answer to these and other questions:  Who is the guest, and why are they here? Where do they come from? Business, leisure? What type of business? Traveling alone or as part of a group? How did they book? What is their average rate? If part of a group, what is their group’s policy about charging restaurant and bar charges to the room? How did they arrive at the hotel? What is their average length of stay? I like to study a hotel’s segmentation analysis and then extend it to eating and drinking occasions. Hotels are amazing when it comes to tracking rooms. But rooms don’t eat in restaurants or drink in bars. People do.

Yes, Madness does have a Method

Simple? Maybe. If we were done. But what about the meeting and banquet guests who are not also staying at the hotel? I like taking a hard look at this category of customer, because it’s a little easier to nail down, even quantify, the eating and drinking potential. Let’s take meeting guests. Usually these potential customers eat lunch during their visit to the hotel. So, if we can determine how many such guests we have each year, what percentage have a banquet luncheon vs. eating “on their own”, we have a good starting point. While we’re at it, let’s find out how long the average break is. Hotel restaurants often close at lunch. The information provided here will factor into a decision whether or not to do this.

Now let’s look at the hotel facility. Access, parking, signage, visibility, and location within the hotel, for example.

Access alone generates a number of routes of inquiry. Access from the outside: car, bus, taxi, limo and walking. Now let’s go inside. Access to the restaurant and bar areas from the lobby, from the banquet areas, from the elevators, from the stairwells. Visibility, signage and wayfinding indicators are just some of the things to look for. During access what is the flow, especially when busy? What does the customer see as they enter, the “sense of entry”. What is possible? And since we’re assessing the facility, what about the employee flow, from the kitchen? And what about the attributes that aren’t readily apparent: sound system, lighting, Wi-Fi, natural light control and HVAC to name a few.

Finally, operations. What is the restaurant’s and/or bar’s performance? This requires a detailed analysis of revenues and costs. And sales patterns must be divined, which is possible if the POS system is current and is functioning well. Don’t forget a close look at menus and all marketing collateral of the existing concept.

Finally – or maybe first? – talk with people. Executive people. Guest people. Employee people. Owner people. Even competitors. Or nearby restaurants and bars – they’ll almost always offer their impressions of the facility you’re working to improve.

Next time – Part III, a thorough external analysis.

These are my thoughts, let me know yours.

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When Selling the Right Thing is the Wrong Thing

Once last month I was thinking too hard and managed to work myself right into a contradiction. I was at a property roughly 75 miles from Wine Country.  I was congratulating management on their wine promotion, a simple but effective Best Practice, how I reported it. I was also congratulating myself on congratulating management as this would reinforce the Company’s excellent wine sales culture that I had supported in previous reports and meetings.

Regrettably, while compiling the report I encountered a sinister force trying to destroy the superb writing and brilliant conclusions of my masterful report: data. Oops. 

Turns out, the customer didn’t follow the well-merchandised direction: “drink more wine…drink more wine…” This is the thing about customers, that just when you expect them to do just one simple thing…well, you know.

Previously I had looked at sales, or the beverage mix. So, the spirits-beer-wine mix might be 30% – 32% – 38%. Great, we’re selling more wine. Keep it up. Promote wine. Good job. Report emailed.

Then I stumbled across some additional information. By “stumbled across” I mean I decided to look at the other data contained in the sales mix report. The other data was “number of items sold” though it wasn’t labeled clearly and this will continue to be my excuse for missing it first time around.

So, it turns out, incidents of beer sales surpass, significantly, incidents of spirits or wine sales in the lounge. Of course spirits and wine sales are critical and must be promoted, but promoted strategically. In fact wine sales and incidents of wine sales dominate room service beverage, for example.

But back to beer. Digging some more. Beer at this location wasn’t discounted significantly. Craft and imports were popular. The beer selection paled (pun?) next to the wine selection. There is a wine list but no beer list. There was excess capacity in the beer cooler. Management is smart and open minded. In other words, all of the usual obstacles were gone, and opportunities abound.

The hotel is adjusting inventories, re-writing beverage menus and developing new promotions. Adding some taps in the Lounge. Ratcheting up room service wine promos. All because of some data.

Six months from now I’ll request an updated mix and overall sales analysis,  and we’ll see happened. We’ll see together – I’ll share it here.

Those are my thoughts, let me know yours.

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My Banana Has a Web Site

Yup. It does. See for yourself: www.ChiquitaChampions.com. Chiquita is working to associate – to make you associate their product with sports achievement.

My question is, hotel restaurant managers, GM’s, F&B Directors, et al: do you? Have a web site? For your restaurant? And for your bar if it’s a separate concept?

Many have “preached” for years that to be successful, a hotel restaurant must be deemed separate from the hotel, an independent entity. In fact many hotels have a truly independent restaurant operated by a separate company, sometimes a high-profile brand or chef, and to me that seems to work well. Most hotels don’t have the right location or the ability to invest in a high profile third party operation, and/or they prefer to operate F&B themselves for sound reasons. In these cases, the majority of hotel restaurants and bars make attempts to separate their concept(s) visually or functionally: individual name, logo, trade dress; separate entrance; separate phone number; reservations through OpenTable, etc.

So, why not create separate identity in the easiest of all ways: through an independent web site? The data on this is compelling.

As far back as 2007 AIS Media reported that more than half of American consumers look at a restaurant’s web site prior to dining. I’ve seen research more recently suggesting that two-thirds of consumers look at restaurant or bar web sites before they visit. Perhaps surprisingly, the numbers are similar for Boomers and Millennials. Most-often looked at? Menus. At the NRA show in May, Yelp!’s VP for business development stated that the average Yelp! user looks at three sites before selecting a restaurant.

I should mention that there is no data on the percentage of Millennials or Boomers checking the internet prior to purchasing bananas.

And now for a little GVC “research”. Not enough for statistical validity perhaps, but maybe interesting? During a virtual visit to a medium-sized market I looked at the top ten (of 415 reviewed) restaurants on Yelp! Nine had web sites. Then I looked at the bottom ten: only 5 had web sites. Maybe part of the formula for being a top restaurant is maintaining contact with your customer?

OK, more. All ten of the top ten had pictures posted on Yelp!, while half of the bottom ten had posted pictures. Of those who had pictures: top ten restaurants averaged 3 pictures per store, bottom ten 1.2.

And now for hotels. Same market. Eight hotels had 17 different restaurants or bars. Only 3 of the 17 had independent sites.  To their credit, more than a third of the hotel sites had their menus posted.

So, now what? Well, the cost of creating a dedicated restaurant web site is lower than ever. A company at the NRA was charging $1,200. Four others I’ve spoken with will create one for $1,000 – $3,000. These lower-cost sites use templates, but can be made to look fine and serve you well. A few more dollars for SEO accompanied by some strategic social media activity and supported by a social media “champion” within your hotel will get you in the game.

Oh, and we need more research on banana-buying and the Internet.

Those are my thoughts, let me know yours.

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Lobby Wars: Clash of the Titans

A note to F&B Directors:

For years I’ve wondered about the Clash. No, not the legendary punk group from London. I mean, I’ve wondered about them too but that isn’t germane to today’s topic. I’m talking about hotel Titans: the General Manager and the F&B Director. From my F&B point of view, it’s quite simple: the Lobby is the entry point to the hotel, often the only entry point. Therefore it should both inform the incoming guest and excite them. And encourage them to spend money. 

By “excite them” I mean “drive them to the F&B outlets”. With respect, “try our new (pick a scent) amenity toiletries” may not excite the guest. On the other hand, for example, a description and picture of something like the remarkable Beet Berry Pop I enjoyed at the even more remarkable Holeman & Finch Public House last weekend would, let’s just say, pique my interest (cazadores blanco, la muse verte absinthe, beet berry soda + fresh lime juice).

So what is the clash? Let me illustrate with my own story: yes, I am a veteran of Lobby Wars, 1988. I was a Food & Beverage Director, and we had a bar that spilled out into the lobby, or came close to doing so. I wanted to put a small $2 chef-served buffet in the lobby to attract passers by, as the lobby was a walk-through for many office workers in the connected office building. The Titan GM, a great manager and even greater person, said no. It would wreak havoc with the lobby (which of course was my intent: mix things up with a little chaos, generate excitement). A short time after he said “no”, guess who went to Europe for two weeks? Cutting to the chase: we erected a buffet, put up a sign, and when the GM came back there was a line of 25 patrons going through the $2 buffet, bar sales were up 38% and I had added seating in the bar as we were now at overflow. After he fired me (this happened more than once) we compromised on a location at the “edge” of the lobby and I know that the promotion was going strong a decade later.

So, are GM’s too touchy about their lobbies? Do they not “get it”? If only our business challenges could be met with such easy answers. No, GM’s are not the problem, their focus is and should be the “big picture”. But there IS a conflict. I think a designer’s and GM’s perspective is that a lobby must first and foremost drive the hotel’s image (and indirectly ADR). Whether the desired impression is one of “elegance” or “class” or “professionalism” or “at your service”…that impression may not be one of excitement.

Over in F&B however, excitement is the name of the game. Especially where bars are concerned. We (and by this I mean “you”) work hard to create an environment that fosters  a certain feeling – maybe fun or  mystery or adventure or curiosity? A nicely done poster in the lobby might help convey this feeling. But I recommend doing something that will GRAB the guest’s attention.. Can this be done without a clash? Is a clash really a bad thing?

If you would like to create an attention-getting promotion, think outside of the box (poster). Project a movie of your bar scene on the lobby floor (or wall or ceiling). B&W works fine. Spray water-color stenciled images (foot prints?) on the lobby floor, that lead to the bar (check out: www.gogorillamedia.com). Get a brightly colored light-rope and string it from a point in the lobby (“start here”) to the bar (run it along the ceiling, or along the walls, etc. – and don’t go in a perfectly straight line).

Finally, my all time favorite combines wayfinding, humor and mystery. If you’re old enough to remember Burma Shave you should be fishing, not reading this. Regardless, construct a small humorous story, put a piece of the story on each of several signs, and let the signs lead your guests where they want to go. Change the signs/story often. Try a 4-day rotation. Like this. You travel too much | You work too hard | When is it time? | To let down your guard? | (name of lounge) | One hour, two hours, | Even three | Happy they are | Come at 5 and see! | (name of lounge) See also:  www.burma-shave.org.

By the way: you might want to wait for the GM to go on vacation.

Those are my thoughts, let me know yours.

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How to Manage a Light Bulb

Let’s get this out right now: this is not “how many _______ does it take to screw in a light bulb” or anything like that. I’m not good at screwing in light bulbs. My wife will ask her seven-year-old daughter to replace a bulb, before she’ll ask me. Sure, I’m exaggerating. Sometimes she asks the ten-year-old.

But once that bulb is in, I can manage it as well as anyone. No so at some bars and restaurants I’ve seen in hotels. Bright lights in the bar. Bright lights at dinner. Lighting levels that change dramatically for no apparent reason. Lighting levels that differ from area to area within a restaurant or lounge, for no apparent reason.

Light Bulb Energy

We often overlook the importance of managing lighting levels. Lighting levels? How about music levels? Type of music? And TV’s. What’s showing – and why? It’s 9 o’clock, do you know where your mute button is? Do your guests like the cacophony of three separate programs blaring in your bar? We don’t understand why our places are sometimes empty, yet we’ve effectively killed any and every opportunity for energy.

How do you fix this? Sure, sometimes a better speaker or two and an additional dimmer switch might be required. But mostly it’s about strategy and scheduling.

We schedule our teams to service the guest. Every week. No problem. So why can’t we schedule the environment in which the guest will be served as well? The answer is, we can. Here’s one way to do it.

Make a grid for each outlet, with the hours of operation in columns, an hour for each column. TIP: if the outlet is open to or visible from a public area when closed, it’s just as important to manage its look and “feel” for that time period as well.

First, The FORECAST

At the top row, write “customer” – who is the customer you are targeting each hour the outlet is open?

Next row, write “occasion” – what is the occasion of their visit? Breakfast (re-fueling)? Meeting? Unwind after work? Unwind after meetings? Returning from dinner outside the hotel? Etc.

Finally, third row, write “energy level” or “mood” or whatever best sets the tone for the “feel” you want to support.

Now, the SCHEDULE

Record the appropriate level or channel or number for each hour, for each of the managed ambience items, including:

  • Lighting level #
  • Music volume
  • Music channel
  • TV station (mute except for scheduled “events”)

You will have multiple light controls, multiple TV’s, etc. And you can add items – maybe how the bar looks (“meal set” for certain hours, for example).

Recently I was at a smartly managed hotel in the New York area and the Lobby Lizard – here known as a Lobby Ambassador – has a checklist that includes six items that influence bar atmosphere, and they are checked multiple times each evening. I like that.

Teach your lizard how to manage that light bulb.

Those are my thoughts, let me know yours.

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Method to the Madness: Part I, Hotel F&B Concepts

So, “Why is a raven like a writing desk?” What is the right concept for our hotel restaurant? And, do either of these questions have a definitive answer?

Maybe. At GVC we use a 7-part “methodology” to create a concept. It’s not rocket science, right? Perhaps it’s more difficult than rocket science, since thousands upon thousands of very experienced and bright folks have failed at it, one time or another. An outline of the seven steps methodology can be found at the GVC web site. Here I’ll go into a bit more detail.

Stephen R. Covey’s seminal The 7 Habits of Highly Effective People says (habit 2), “Begin with the end in mind”. https://www.stephencovey.com/7habits/7habits.php. Well, if I knew exactly what the final concept should look like, I could skip the methodology. But Covey is right – let’s figure out what it has to be like, let’s begin by determining the criteria by which success will be judged. What must the concept achieve to be called successful?  If the concept doesn’t meet the criteria, then it won’t work.

In general, a concept within a hotel should support the hotel’s brand image. For example, a concept for a Holiday Inn hotel could be too upscale, while the reverse holds true for a Ritz Carlton. I recall having to convince a senior hotel executive that he should abandon his plans to make a Waffle House (albeit a successful company and brand) the exclusive restaurant for a Crowne Plaza hotel (another successful brand).

A second criterion concerns the hotel’s functional needs. How must the concept “serve” the hotel? Which meal periods must be offered? Which services (food, beverage, to-go, room delivery?). What are the hours of operation that a successful operation must serve the hotel? And what is the expected profit contribution to the hotel?

Next, what is the restaurant’s role? Is it to be a destination or an amenity? In other words, is its purpose to draw local guests or to service the hotel guest? Most often the answer is a complicated combination of these two perspectives, but the discussion needs to occur early in the process.

A fourth criterion requires a primary Unique Selling Proposition – a feature that differentiates it – and the hotel – from the competition. A final concept will have many special attributes, but it should have a prime USP that defines it, enables us – and our customers – to talk about it. But it’s too soon to say what that should be – that comes with ideation.

Chains will sometimes add that they should be able to duplicate the concept in other hotels. This will spread the development costs and will serve to give the hotel brand a talking point as well. It will further help optimize the company’s resources, and support its development team.

The test of these and other criteria is this: if the concept fails to meet one of the criteria, can it still be judged a success?

Perhaps you can think of additional criteria. I’d love to hear from you. In the meantime, how about the answer to that riddle?

“Have you guessed the riddle yet?” the Hatter said, turning to Alice again.
“No, I give it up,” Alice replied. “What’s the answer?”
“I haven’t the slightest idea,” said the Hatter.
“Nor I,” said the March Hare.
Alice sighed wearily. “I think you might do something better with the time,” she said, “than wasting it in asking riddles that have no answers.”

These are my thoughts, let me know yours.

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RFID Beverage Controls: a New Paradigm?

Heads up: you may think this blog is about RFID technology (it is not). Or, you may think it’s about beverage controls (it is not). It is about using technology to unleash practices that change behavior and enhance the guest experience.

RFID – Radio Frequency IDentification – is among the latest and most sophisticated technologies to be applied to beverage cost control.

Are you familiar with the technology? Does an image of Mel Gibson with a tin foil skullcap pop into your head when you hear “information through radio frequency”? If this is news to you, take a quick peak at the sites of some of the companies that offer these systems (Capton, www.captoninc.com, Beverage Metrics, www.beveragemetrics.com, and Liquor Monitor, www.liquormonitor.com are three that come to mind).

"Signs" 2002

In short, a bottle’s pour spout (or collar) contains an RFID chip and battery, and by measuring the tilt of the bottle along with other information such as the bottle’s contents, size and initial volume, the system measures amounts poured with remarkable accuracy, and reports data via radio frequency to a pre-specified program which may be accessed later or even in real time by a computer. They provide best results when interfaced with the POS, which enables management to learn, for example, if a specific recipe was executed properly.

Cool. But how do you “control” beverage costs? Historically we control costs by restricting access to the raw materials, or restricting output. Locks & keys are a timeworn technology for restricting access.

Mechanical and electronic devices have been in place for decades: mechanical portion-pourers like Posi-Pour (http://www.posi-pour.com) and electronic pour restriction systems like Berg Company’s (http://www.berg-controls.com) have been industry standards for years and continue to have relevance today.

But this is an age-old paradigm: control through constraint. Now let’s look at the RFID model again: there is no restriction of pouring or access, there is only information. THIS is the “paradigm shift”: controlling through information rather than restriction. How do you “control through information”? The answer: by changing employee behavior.

That’s right. Results are achieved when these time-honored practices are employed:

  • Measurement & analysis
  • Training & teaching
  • Feedback (two-way!) & recognition
  • Re-training as needed, more teaching
  • Recognition & reward

Restrictions, though sometimes necessary (I’m not advocating open storerooms, for example) don’t “stick” without help. The locked liquor storeroom requires a second lock, perpetual inventory, broken-empty requisition procedure, marked bottles and cameras in the hallway. This might be OK – but all of it adds little value to the customer experience.

On the other hand, behaviors changed through training, teaching, measurement, recognition and reward will “stick”. And they will impact the customer experience in a positive way.

And THAT is why this blog is not about RFID or beverage control. It’s about combining the measurement systems you have (RFID, POS, Guest Survey System, P&L) with training, teaching, analysis, feedback, recognition and reward to achieve the results you are after.

Those are my thoughts, let me hear yours.

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The Purpose of Beverage-Cost Control Is Not Lower Cost

The purpose of controlling beverage cost is to increase your sales. I’ll explain.

First, let’s digress. You are an F&B Director, or perhaps Beverage Manager or Bar Manager. You work hard to keep your beverage costs in line. If your cost margin is over budget you are “challenged” by your boss. If the cost is better than budget you are praised in the short term (but sometimes “punished” by future budgets that will now set this lower number as the new expectation).

Here is the typical scenario: 

But if the current economic environment teaches us anything it’s this: the model above isn’t sustainable. And here’s why – eventually the never-ending demand for lower cost will create pressure to raise prices, and this could threaten your business. 

 

So, what should your bar cost be – what is a “good” bar cost? I’ve seen everything from 14% to 35%. BTW both numbers might be “good”, because a “good” cost is any cost within acceptable variance to the theoretical (or “potential”) cost. That’s right: 14% might be good, and 35% might be good.

Then what should your theoretical cost be? That’s a strategic decision, and the tactics that will fulfill your cost strategy begin with your target market and include pricing, purchasing, promoting, merchandising, inventory and accounting practices, recipes, menu engineering, equipment selection and more. Controlling costs is about meeting your cost strategy targets – 14%, or 35%, or somewhere in between – and is success measured by the variance between your theoretical and actual costs. Ideally your budget is based upon this “cost strategy”.

Your cost strategy should allow for “targeted pricing”, i.e. pricing (supported by promotions and merchandising) that will promote sales. I’m not saying lower prices across the board, rather consider the category of products favored by the primary customer target, and then find ways to add value to select offerings in that category. Incorporate this into your cost strategy, factor it into your theoretical cost analysis, support it with a special program or promotion with merchandising and marketing: and now you have a sustainable process. You are controlling your costs strategically so that you can increase sales.

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