beverage sales control
The Objectives of Beverage Sales Control1. Optimizing the number of sales
2. Maximizing profit
3. Controlling revenue
these objectives may appear to be identical to those of food sales control, there are special considerations in bar operation— some legal, some ethical and moral—that lead to significant differences. For example, in food sales control, one of the means of maximizing profit is to increase sales to individual customers, to
use any of several possible approaches to induce the average customer to purchase greater numbers of products. Obviously, this is an approach that no reasonable beverage manager would ever attempt. At the same time, bar operators who attempt to optimize the number of sales in this way will find their efforts restricted by various local, state, and federal laws and regulations affecting such considerations as customer age, hours of operation, and, perhaps most important, society’s growing concern about those who drive while under the influence of alcohol. A number of other special concerns also give rise to differences in the meanings of sales optimization and profit maximization in beverage sales control.
Optimizing the Number of Beverage SalesIn beverage operations, optimizing the number of sales means engaging in activities that will increase the number of customers to the desired level, as defined by the individual operator. However, anyone seeking to increase beverage sales volume in this way must first understand why people patronize establishments that serve
alcoholic beverages, including both restaurants and bars. At first glance, it may appear that people patronizing these establishments are usually motivated by a desire to consume alcoholic beverages. Although this is true for some customers, it is probably not the principal reason that people buy drinks in establishments serving the public. After all, alcoholic beverages can be obtained for home
consumption in most communities, and drinking at home is considerably cheaper than drinking in a bar. It is necessary, then, to understand some of the many other possible reasons for a customer to decide to patronize bars and restaurants that serve alcoholic beverages:
2. Conducting business
4. Seeking entertainment
5. Killing time
Perhaps the most significant factors motivating those who patronize beverage operations are social: meeting other people and engaging in conversation. There are endless numbers of examples: seeing colleagues after work, meeting neighbors after dinner, making new friends. The alcoholic beverages consumed are almost incidental;
they are simply an accepted and expected element in the social setting. The incidental nature of the drinking may help to explain the trend toward drinks with lower alcohol content, including wines, spritzers, wine coolers, and light beers.
Considerable business is conducted in bars, cocktail lounges, and similar settings. For some people, discussing business in this type of setting is easier than it would be in a formal business office around a conference table. Many find that even the formal cocktail lounge in an elegant center city hotel is more informal than a conventional office. The use of bars and lounges for business discussion is probably most common with sales personnel, who commonly depend on establishing personal relationships with their clients. The bar setting can be an excellent one for the sales representative and the client to get to know one another.
In addition, one should not overlook the many people who frequent beverage establishments to conduct personal business. This type of business ranges from discussion of family problems and situations to a myriad of other important personal discussions among people.
Many customers patronize food and beverage establishments primarily to eat. They order alcoholic beverages as desirable enhancements to their meals. Beverage orders with restaurant meals include cocktails, mixed drinks, aperitifs before meals, beer or wine to accompany meals, and such after-dinner drinks as brandy, liqueurs,
and dessert wines. The primary motivation for patronizing the establishment comes from the desire for food, and the food purchased can range from the hearty fare of pubs to the elegant cuisine of the finest restaurants and hotel dining rooms. The beverage purchases may even be incidental. For some customers, however, the
availability of beverages may be an important factor in selecting one restaurant over another, and most successful restaurants would probably lose considerable business volume if they did not serve alcoholic beverages as accompaniments to luncheon and dinner.
Many people go to bars, clubs, and other establishments offering alcoholic beverages for sale because they seek various forms of entertainment. Many of these people consume alcoholic beverages while enjoying the entertainment offered. In general, there are two types of establishments that offer entertainment: those deriving their primary revenue from beverage sales and providing entertainment
to attract customers to buy the beverages, and those deriving their primary revenue from the entertainment and providing beverages to satisfy the expectations of customers. The former include nightclubs, discos, and piano bars—establishments that offer entertainment to increase the number of customers and thus increase
beverage sales volume. The latter include sports facilities, gaming casinos, many legitimate theaters, and some concert halls—establishments that offer alcoholic beverages as a convenience, albeit a profitable one, to patrons.
There are many occasions when people waste time, either because they choose to or because they have no other useful option. It is common to hear of people doing this described as “killing time.” Many of them are waiting: for boarding time at airports, for train arrivals at rail stations, for the appearance of a friend or business associate for lunch, for curtain time at a theater, and so on. Time
must be passed—some number of hours or minutes must somehow be consumed. For many people, a bar is a suitable place to wait while time passes. So many bars are conveniently located, offering shelter, a place to sit, a television set to watch, and something to do: drink. Bars and cocktails lounges at airports are examples of establishments that cater almost exclusively to those who must pass time while they wait for flights to arrive or depart.
Any customer may be included in one subgroup of the beverage market one day and another subgroup the next. An individual’s reasons for patronizing a beverage establishment may change from day to day. For example, the person who patronizes a neighborhood bar for social reasons one evening may be killing time in an airport bar the following afternoon and then going out to dinner in the evening to celebrate a special occasion.
Each of these subgroups is called a market segment. The owner or manager of a beverage operation must determine which market segment or segments he or she intends to attract, or target. Once the target segments have been identified, numerous decisions must be made as to brands and types of drinks, portion sizes, selling prices, entertainment, lighting, decor, ambiance, dress codes, giveaways, advertising, promotions, hours and days of operation, extent of service, classifications of employees, and suitable uniforms, among others. The decisions made will have significant impact on whether the target market will be attracted to the establishment in sufficient numbers to achieve the desired level of sales.
For example, the owner of a bar attempting to attract a late-afternoon clientele of office workers may decide to offer moderately priced, large drinks made with high-quality liquor, to maintain an informal atmosphere, to provide free hot and cold hors d’oeuvres, to advertise by means of handbills distributed through neighboring
office buildings, and to make a conscious effort to learn and use customers’ names.
Maximizing ProfitsBeverage operators can,adopt various merchandising techniques to influence the customer to select one drink (a drink with a greater contribution margin) rather than another.
In beverage operations, profit maximization is accomplished by:
1. Establishing drink prices that will maximize gross profit
2. Influencing customers’ selections
Establishing Drink Prices
Unlike food sales prices, drink prices are not primarily determined by the costs of ingredients and labor. Beverage ingredient costs and labor costs per dollar sale are both significantly lower than those for food, so they are not as important in establishing sales prices.
This is not to say that labor costs can or should be wholly ignored; in fact, many operators tend to charge more for drinks that require more labor to produce. However, the ingredient and labor costs associated with a particular drink tend to be similar from one operation to another. Other considerations are of greater importance in establishing drink prices. These include overhead costs (occupancy,
insurance, licenses, and entertainment, to name a few) and significant market considerations.
Establishments that offer live entertainment must either charge drink prices that are high enough to cover these costs or cover the cost of entertainment in some other way. There are also market considerations that must be taken into account before setting sales prices for drinks. Chief among these is the clientele targeted.
Many operators rely heavily on regular customers—those who patronize an establishment frequently, often because they live or work close by. Such customers tend to be concerned with the prices charged, and operators serving this kind of clientele are usually careful to charge prices their customers consider reasonable and to avoid price increases unless absolutely necessary.
Other market considerations that a beverage operator must take into account in establishing drink prices include average income in the area served, prices charged by the competition, special advantages offered by a specific location (such as the top floor of the city’s tallest building), and even a manager’s desire to maintain exclusivity through pricing, among others.
No discussion of drink prices can be concluded without a consideration of pricing differences between call brands and pouring brands. Call brands, selected by the customer, are normally considered to be of higher quality. They are typically of higher cost. It is therefore logical that they are given higher sales prices. Pouring brands, selected by the bar operator for the customer who expresses
no preference, are commonly of somewhat lower quality, less costly, and are therefore given lower sales prices. In general, the contribution margins of drinks made with pouring brands are likely to be lower than those of drinks made with call brands. Although it is to the operator’s advantage for customers to request
specific call brands, most customers do not.
Influencing Customer SelectionsAs with food products, contribution margins for beverage products vary greatly from one drink to another. For the bar operator, it is obviously desirable to sell more drinks with high contribution margins and fewer drinks with low contribution margins. If a customer is having difficulty deciding which of two drinks to order, it is clearly to the bar operator’s advantage for the customer to select the one
with the higher contribution margin. In fact, under these circumstances, a bar operator may want the employees to help the customer make a decision in favor of the drink with the higher contribution margin.
Some bar operators attempt to maximize profits by featuring and promoting selected drinks, often drinks specially created for the purpose. These drinks may be given enticing names, be served in unusual ways (in hollowed fruits or with exotic garnishes, for example), or be made from unusual combinations of ingredients.
These special drinks are normally sold for higher-than-average prices, and they normally have higher-than-average contribution margins.
Another technique for influencing customer selections is to produce a carefully designed beverage menu that includes pictures (color photographs or artists’ drawings) of the drinks that management would prefer to sell, along with appropriate descriptive language to entice customers. Customers’ orders would not necessarily be restricted to the listed drinks, but the drink menu would
include only those drinks management prefers to sell.
Controlling RevenueRevenue control consists of those activities established to ensure that each sale to a customer results in appropriate revenue to the operation. In beverage operations, the opportunities for revenue control are often somewhat limited. In general, effective control procedures in business are likely to depend on division of work among several employees, but the possibilities for dividing work in this way do not exist in most bars. In many, one employee—the bartender— is responsible for virtually all of the work: taking orders from customers, filling those orders, recording the sales, and collecting cash or obtaining signatures on charge vouchers. This dependence on one individual tends to minimize the possibilities for instituting and maintaining control. In addition, it often sets the stage for the development of a number of control problems.
A common means for determining whether control problems exist in a particular establishment is to assess the work practices of the bartender. Most of those in the following list are considered unacceptable in most well-managed bars because the owners or managers are aware of the kinds of control problems that are likely to develop.
1. Working with the cash drawer open. This practice makes it possible for dishonest employees to make sales transactions without recording the sales in the register. This is a serious problem if the bartender is held responsible at the end of the shift for only those sales recorded on the register tape.
2. Underringing sales, either as “No Sale” or as an amount less than the actual sale. Doing so enables an employee to steal the difference between the cash in the register drawer and the sales recorded on the tape.
3. Overcharging customers, but ringing correct amounts in the register. This too provides a dishonest employee with a source of cash equal to the difference between the amounts collected and amounts recorded in the register.
4. Undercharging customers. This may be done to accommodate a bartender’s personal friends or to increase tips.
It may be done in various ways, such as by using call brands but charging for pouring brands, or by overpouring.
5. Overpouring. Giving customers more than they pay for, often through failure to measure, typically results in unfavorable cost-to-sales ratios and in reduced profits from operation.
6. Underpouring. This technique is sometimes adopted by bartenders who selectively overpour. If they overpour for some customers (those who tip well, for example), they may be able to avoid being detected by underpouring for
others. One may offset the other. Moreover, the bartender who keeps track of the extent of underpouring may later use the reserved amounts to prepare drinks. These drinks may then be given to friends or sold to customers, with the sales revenue going to the bartender rather than to the bar.
7. Diluting bottle contents. This practice involves pouring out some of a bottle’s contents to reserve for later use and replacing it with an equal amount of water. The liquor poured out and reserved is typically used later to make drinks that are sold to customers. However, the revenue for those drinks goes directly to the bartender’s pocket rather than to bar revenue.
8. Bringing one’s own bottle into the bar. This practice enables a bartender to become a “silent partner” in the bar operation. The bartender can prepare drinks using his or her own liquor and take the sales revenue without his or her
performance being detected through changes in the figures used to monitor bar operations.
9. Charging for drinks not served. By charging a customer or a group of customers for drinks that were never served, a bartender can then serve equivalent drinks to other customers and steal the sales revenue.
10. Drinking on the job. In addition to the unprofessional appearance and performance this practice is likely to cause, an employee who is drinking is more likely to make mistakes in pouring, mixing, and recording sales than one who does not drink on the job.
Guest Checks and Control
Bars Without Guest ChecksMany bars, especially small, owner-operated neighborhood bars, do not use guest checks. Customers pay cash. The bartender is often the owner, who collects all cash personally. This ownerbartender does not perceive any revenue control problem and sees no need for guest checks. Some owner-bartenders require each customer to pay for each drink as it is served; others serve customers more than one drink without requiring payment and somehow remember what each customer has consumed. Cash is collected after each customer has finished his or her last drink. This system
offers the advantage of simplicity, saves time that would be required to prepare guest checks, and is clearly less expensive than alternatives. It works well enough as long as the owner is also the bartender.
If the owner does not tend the bar and collect the cash personally, someone else must be hired to work behind the bar. This individual must do the work that the owner would otherwise do, including making the drinks and collecting the cash. But the hired bartender may be guilty of some or all of the unacceptable work
practices identified earlier. If so, sales revenue will be recorded incorrectly or not recorded at all. To reduce the number of errors, accidental or intentional, the owner will be likely to spend some amount of time at the bar observing the bartender. Someone other than the owner can also be stationed at the bar to monitor the bartender, with or without the bartender’s knowledge. This approach, with some variations, works well in many establishments.
Bars Using Guest Checks
When the aforementioned visual monitoring methods are impossible or impractical, some degree of control is made possible by the use of numbered guest checks. A standard procedure is established that requires that all drink orders be recorded on numbered checks. If all employees follow the procedure, records of all sales are available for daily audit. In its simplest form, such an audit consists of verifying that no numbered checks are missing, that correct prices have been charged for all drinks, and that total sales recorded on the checks equal the total of cash and charge revenues recorded in a register or a sales terminal. With sales records available, it becomes possible for an owner or manager to monitor revenue
by conducting a simple audit.
The system has some disadvantages. Essentially, there are two. First, recording orders on guest checks takes time and tends to make customer service slower than would otherwise be the case. Second, the standard procedures must be followed if the revenue control system is to be effective. However, if there is no one available to monitor the bartender, it is conceivable that he or she will purposely
fail to follow those procedures. Guest checks are used in a variety of ways. Two
of the most common are:
1. Pre-check systems
2. Automated systems
Pre-check SystemsA pre-check system incorporates at least one register that enables bartenders to record sales as drinks are served and to accumulate the sales to any one customer on one check. The use of such registers make it feasible to require that a guest check be placed in front of each customer at the bar. When the customer is ready to
leave, the check is inserted into the register or terminal and the total sales to the customer are recorded as cash or charge, depending on how the customer settles the check. At the end of the day’s operation, the total drink sales recorded in the terminal, plus taxes, should equal the total of cash and charge sales. Readings taken from the terminal at the end of a day would be similar to those illustrated in picture.
|cash register reconciliation|
picture for Cash register reconciliation
A void key is used to record such instances as drinks rejected by customers or unserved because customers walked out. An accountant or bookkeeper reduces the beverage sales figures by the total of the voids before making entries in the accounting records for the day’s sales.
Automated SystemsAnother approach to controlling revenue, used particularly when close supervision by a manager is either impossible or impractical, is to install an automated bar. An automated bar is both an electronic sales terminal and a computerized dispensing device for beverages. The dispensing device is controlled by the sales terminal. Bottles are inverted, with flexible tubing connecting the bottles to the dispensing device. The automated bar apparatus may be in full view of the customers or in some nearby location, out of sight.
In either case, the bartender cannot pour directly from the bottles; their contents may be dispensed only by depressing keys on a sales terminal. When a customer orders a drink, the bartender places the proper glassware under the dispensing device, inserts a guest check in the terminal or in a separate printer controlled by the terminal, and depresses the terminal key with the name of the drink
on it. When the key is depressed, the name of the drink and its preassigned sales price are printed on the check. Simultaneously, the terminal signals the release of the proper quantities of the correct ingredients, which are automatically dispensed. Both the drink and the check are given to the customer or to a server who delivers them to the customer, depending on the type of bar.
At the end of each day, management obtains a report showing the number of each type of drink sold and the total dollar sales recorded in the terminal, as well as other information. With some systems, a type of perpetual inventory is maintained for beverages connected to the system, and the number of ounces in the inventory
is reduced appropriately with each drink order recorded.
Automated systems are available in a variety of sizes and configurations. Some hold a comparatively small number of bottles and can prepare only a limited number of drinks. Others can accommodate many bottles and produce hundreds of different
There are some significant advantages to automated systems over traditional methods of preparing drinks: The proportions of ingredients are exactly the same each time a given drink is pre pared, and the drinks are thus of uniform quality, prepared according to the standard recipes programmed; the quantity of each ingredient is measured exactly, and the sizes of all drinks of any given type are uniform. However, it must be noted that these systems only reduce the possibilities for the development of excessive costs through pilferage, spillage, and various bartender errors. The possibilities for charging incorrect prices are greatly reduced.
There are also some important disadvantages to these systems. Most cannot accommodate customers’ requests for drinks made according to recipes other than the standard recipes programmed.
For this reason, they are more commonly used at service bars than at front bars. At front bars, many customers have negative reactions to automated dispensers. They are accustomed to watching the bartender go through the ritual of drink mixing—many are accomplished artists who enjoy displaying their showmanship. For these customers, having drinks prepared by a machine takes something away from the “atmospherics” of the experience. In addition, traditional methods of drink preparation often give customers the impression that the bartender is giving them more than the standard measure—a dividend, so to speak. This may or may not be
true, depending on the bar and the bartender, but the customer who believes that it is true may not react well to machine-prepared drinks. This customer is likely to think that the measure is miserly.