Is My Pour Cost Good??

I get asked this question everyday…..

And I reply – Compared to what??

There is no one right answer to this question –

The fact is that there is no such thing as a “good pour cost” that every bar should shoot for.  

Bar Operators want to compare their pour cost results to previous months – or to competing operations – or even different operations within their own organizations –

BUT that comparison is not generally relevant……

You can’t really compare the Pour Cost in one establishment to that of another because they have different products – different pricing & a different sales mix.

I’ve seen Dinner Houses, heavy on wine sales, with a 35% Pour Cost – and almost no losses, …and I’ve seen Tex-Mex Bar operations with a 25% Pour cost, despite enormous losses – They should have been running a 20% Pour Cost!

 

Running a bar where there is no shrinkage involves your bartenders pouring exactly what they’re supposed to be pouring into every drink they make. There are no giveaways and no theft. Without a doubt, it’s the ideal situation to which every bar should strive (provided that everyone involved knows that the “ideal” is virtually unattainable).

Bar owners measure their shrinkage in terms of “pour cost”. And when you dig a little deeper about how they calculate their pour cost, it’s apparent that there’s a huge disconnect in people’s minds about what they think their pour cost number represents and what their pour cost number actually reflects

The traditional calculation of pour cost looks sound, but is actually an inefficient, inaccurate means of measuring a bar’s performance

While it is a very important number to know (and one that can only be determined by taking a complete physical inventory) it IS NOT a good measure of efficiency – in other words it does not reveal anything about how well you run your bar!

The only true measure of Bar Cost Efficiency is Variance

Not Pour Cost!

The usual pour cost number is calculated using the traditional formula:

Pour Cost = Cost of ALL Alcohol Sold / Revenue Generated by ALL Alcohol

But actually, a lot of factors go into calculating the pour cost, ideal cost & variance….

    -The brand of liquors served at your bar

    -The cost of each type of liquor

    -The serving size of liquor in your bar

    -The price charged for every drink, cocktail and shot made with each product

    -The number of each product sold

So, unless your pour size is exactly the same as the bars that you’re comparing your pour cost to – and you stock the exact same lineup of products, and they sell exactly the same product mix, then your pour costs are going to be different – maybe dramatically so.

Which is to say that even if your bartenders are pouring with absolute, 100% accuracy, your pour cost across all of your products is going to vary – radically – from the pour cost of the bar next door or across the street.

Your expensive liquors generate a great deal of profit, but also raise the overall pour cost for your bar. Your well liquors are less expensive, and while they don’t generate as much profit, they lower the overall pour cost.

Ask any bar owner and he’ll tell you that it’s the profit dollars that keeps the bar in business – not achieving some mysteriously-fluctuating “lowest possible pour cost”. To aspire to the lowest possible pour cost may in fact be aspiring to the lowest possible profit for your bar.

So, what is needed is for Bars & Restaurants to employ a system that not only measures Pour Cost – but also Ideal Cost – and then produces a Variance Report to detail the difference between the two –

A report based on efficiency in terms of inventory shrinkage.

A system that determines pour cost on a product-by-product basis, and then compares the “actual” pour cost for each product with each item’s “ideal” cost.

The “actual” pour cost is calculated as usual but also for each individual product, and as an overall cost per category ie Liquor – Wine – Bottled Beer – Draft Beer – and as an overall total.

The “Ideal Pour Cost” is calculated according to what the pour cost would have been had the bartender served every drink and shot with the product with absolute accuracy.

Only by comparing these two values – on a product-by-product basis – can a bar’s owner determine how their bartender’s accuracy impacted their bar’s performance.

Yes, determining “actual” and “ideal” pour cost for each of the products behind your bar is a huge pain the butt to calculate, but it’s the only way to arrive at a pour cost number that’s even remotely relevant for your bar’s shrinkage. Unless you’re using Hospitality Solutions \ Accardis Liquor Control System or Service in your bar, because with Accardis, the calculation is automatic

For every inventory that you (or we) perform at your bar – Accardis automatically calculates – the “actual” and “ideal” pour cost and provides it to you on a product-by-product basis, with “Variance” so you can see not just how accurately your bartenders are pouring behind the bar, but how that accuracy impacts your bar’s real pour cost.

So, instead of fretting about a meaningless, almost arbitrary number, what you really should be comparing is the Variance between your Ideal Pour Cost and your Actual Pour Cost, because the difference between those two numbers is the only number that really matters.

For more information about the Accardis Liquor Control System, or the Bar Inventory Service that we provide here at Hospitality Solutions – Please call or email us today for a totally free evaluation of your current system or situation – and to see how we can help put more of your hard earned dollars back into your pocket – where they belong!

Rick Parks

Cell 613 551 2866

Office 613 936 8741

Parks@hospitalitysolutions.ca

 

Providing Cost Reduction Inventory Services to Bars & Restaurants

In Eastern Ontario since 1998

 

Locally Owned & Operated!