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6 ways to maximize bar profitability

Manage your labor, control your ingredients and measure everything

The romance of running a bar can have a real draw on people — who among us hasn’t imagined running away to a tropical destination to open a cabana that serves rum-soaked slushies? Couldn’t be easier, right? Well, for those who truly know the nuts and bolts of the business, that perspective is a fantasy.

Running a bar is hard, and if you’re not taking every opportunity to maximize profits, then you are leaving money on the table, and hamstringing your ability to grow, evolve, and attract new talent.

The key to running a profitable bar is to look at it as a cold science: Each factor of the business, from products to labor, must be analyzed and critically assessed constantly. New perspectives and solutions must be a constant goal for operators looking for longevity in what is, in reality, a brutally tough business. 

“Theoretically a person could run a bar by breaking even,” said Anu Apte, owner of Rob Roy, an award-winning cocktail bar in downtown Seattle, as well as co-owner of Canoe Ventures, which operates a variety of bars in the area. “A lot of people do this for passion projects, but that’s not sustainable. Obviously, there is no retirement plan with this model. For us, maximizing our profits means we can look at increasing benefits and pay for our employees, as well as using those profits to dream up more businesses.”

Manage your labor

One of the first, and biggest, areas for an operator to begin an in-depth analysis is labor costs.

Sother Teague 3 (Cred-Eric Medsker).jpg“Labor will sneak up on you,” said Sother Teague, left,, partner, beverage consultant and culinary advisor for Overthrow Hospitality, which has 10 properties in New York City, as well as one that just opened in Los Angeles. “Be tenacious regarding scheduling. Make sure that you are adjusting the schedule to ensure that your employees are always moving. If you’ve got staff standing around, they’ll begin to feel like their time is being wasted, which can breed dissatisfaction and turnover. I try to make sure we’re at a breaking point of not being able to keep up with business before adding a staff member, and I talk at length with my teams to determine when that point arises. Because tips are a big part of their compensation, you’ll often find they’re more willing to work a bit harder during that rush period than wanting to add a team member for the entire evening.”

Ensuring staffing levels are appropriate during service is a must, but so is thinking about how they are setting up the bar for future services. Bar teams that have been given specific production tasks to execute during their shifts are helping to ensure hands aren’t going idle, but they’re also setting up the next shift for success.

Batch your cocktails

One of the biggest cost-saving measures available that comes from advance prep is cocktail batching. Pre-mixing cocktail ingredients allows for better consistency of product and for speedier service of drinks, meaning more time for your staff to spend with guests.

Fred Jones.jpg“In terms of a bar program, I cannot emphasize enough how important batching is,” said Fred Jones, left, bar manager at Barano Restaurant in Brooklyn, N.Y., as well as at Bluebird Kitchen in Bellmore, N.Y. “So long as you have a deep freeze, you can batch all of your cocktails at the beginning of the week and store the rest — a deep freeze is a time capsule. From the moment you batch a cocktail recipe, you can regulate your stock and control your purchases. The goal is to cut down on human error and make everything an assembly line, akin to manufacturing the same car at a Ford plant repeatedly, every day, the same way. And if you are lucky, you can even start kegging cocktails 20 quarts at a time using citric acid because that will never spoil.”

Learn about ‘super juice’

One of the biggest innovations in the bar industry over the past few years has been the idea of using citric and malic acid to preserve juices. While everyone knows that fresh juices are paramount to making delicious cocktails, few are aware how much of this juice gets tossed out due to spoilage.

“Citrus costs fluctuate weekly, and you can’t be expected to adjust the menu prices that often to reflect those changes,” Teague said. “I’m totally on board with ‘super juice,’ which is a method of acid-adjusting fresh juice and adding water that both stretches the volume — thus lowering the cost — and gives greater shelf stability, lowering the labor hours along with cost. Really genius.”

Borrow from the kitchen

Analyzing each product you have at the bar (and kitchen) critically, can also lead to one of the biggest cost-savings an operator can take advantage of: cross-utilization.

“Being able to cross-utilize every aspect of a product helps tremendously,” Apte said. “Let’s take rice as an example. We use cooked rice for a plated dish, and then the rice water [the water left after rinsing the rice] can be turned into a syrup by simply adding sugar to inject a lovely umami flavor into a drink. Then, any leftover rice can be dehydrated, ground up, mixed with a natural coloring agent, and used as a gorgeous dust garnish. Day-old rice can be turned into congee or puréed and made into rice sheets ... the options are endless.”

You can’t fix what you don’t measure

At the heart of everything is ensuring that systems are set up to efficiently track the numbers for all aspects of your bar. Without that, an operator is blind to how each and every penny spent leads to either a profit or a loss over time.

“You have got to devote the time and resources needed to create proper spreadsheets that track inventory and costs,” Jones said. “If you do not have the skillset to do so in-house, it is worth it to outsource. Otherwise, you'll never get a sound number for your product flows or your true costs. My advice is to create a system that you are comfortable updating regularly, and that ultimately tells the truth. In 90 days, you will have a true perspective on what is happening with your [bar] program.”

Listen to your team

AnuApte_CocktailsHeadShot.jpgAnu Apte, left, agrees and has seen a lot of success by bringing in the broader team to review those nitty gritty details as well.

“I advise that you have more than one set of eyes on the numbers,” Apte said. “Have a good tax accountant, use a good accounting program, and talk about finances with your management team monthly. Talk about the cost of waste, labor, food, and beverage, and go through it with a fine-tooth comb. Every single time we do this someone has a creative idea on how we can make things better.”

David Flaherty has more than 20 years of experience in the hospitality industry. He is a certified specialist of wine, a certified cicerone and a former operations manager and beer and spirits director for Hearth restaurant and the Terroir wine bars in New York City. He is currently marketing director for the Washington State Wine Commission and writes about wine, beer and spirits in his blog, Grapes and Grains.

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