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August 7, 2019 Ask the Experts: Where is My Bar Losing Money…How Can I Stop It?

loss prevention

Are you a bar or restaurant owner who’s active on Facebook? Chances are you’ve watched one of Mitchal Majors’ short videos where he serves up useful facts and fast tips. If not, prepare to be enlightened.

As the owner of Sculpture Hospitality of Missouri, Mitchal has built a well-deserved reputation as a management mastermind and inventory guru. So we went to him for the scoop on how bar owners can uncover hidden losses…and stop revenue leaks.

We weren’t surprised when Mitchal responded with – what else – a short but informative video! Check it out…

Buzztime) In your opinion, how important is loss prevention?

Mitchal) To me, this is akin to asking how important is the guest experience, or menu pricing, or marketing?

All four – loss prevention included – are critical to operations as they directly impact your revenue and profitability.

Buzztime) Do you think bars and restaurants are doing enough to prevent loss?

Mitchal) In my experience, many bars and restaurants are doing the bare minimum.

But it’s not like businesses are making this decision on purpose. Instead, we find slow, inaccurate and outdated methods are to blame.

And with so many tasks to juggle, loss prevention is simply put on the back burner.

That’s exactly why industry bar losses hover between 20-25%.

Buzztime) Aside from sharing that (scary) statistic, what else do you say to a bar or restaurant owner who doesn’t think loss prevention is a big deal?

Mitchal) I’d ask them a simple question: how do you measure your transactions?

They always point directly at their POS system. Every transaction is accounted for, down to the cent. You have methods to balance cash owed at the end of the night…right?

Then, I explain that tracking cash via your POS is only one half of the equation. The other half?

Distribution of product. You must be measuring both the cash AND the product – to be successful in loss prevention. 

Take the average well vodka liter you bought for $6. It holds about $100 in revenue, (assuming you’ve created a profitable drink menu). Are you tracking that vodka?

You should be. It’s at the core of loss prevention.

You want to measure how much vodka was used, against how much is weighing in – just as you would balance out the POS at the day’s end!  

When we start doing that? Hidden losses often reveal themselves.

Buzztime) What are the different ways bars can experience
losses?

Mitchal) Well, theft is the most obvious answer and it comes in many forms.

If you think you’ve got the most trustworthy team, loss prevention statistics might make you think twice:

According to the California Restaurant Association, 75% of employees steal from their employer at least once.

Many times, employees don’t think what they’re doing is stealing, especially when it comes to making “generous pours.” However, in terms of loss prevention, overpouring will slowly but surely eat into your margin. And yes, that’s theft. So is not entering in a pour…or taking a shot with a patron, but not tracking it.

Overall, I think the tendency to relate theft to “a cost of doing business” is where things get dangerous – and loss prevention becomes critical for today’s bars and restaurants. 

That’s because we’re finding more issues occurring at the POS on a transactional level.

Not only are those forms of theft harder to track-down without modern inventory management, the losses are more focused towards revenue…as opposed to product.

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Buzztime) Are there common things that managers are doing
incorrectly related to loss prevention?

Mitchal) There are about 17 things managers do incorrectly (see how to fix them, here).

But when it comes to loss prevention, the number one shortcoming is accountability.

When you can hold staff accountable, you can clearly communicate improvements to be made for specific individuals.  

And accountability isn’t focused on losses alone – the same info can identify your top performers.

When managers couple communication with accountability, they can shift staff culture towards consistency and excellence.

I’ll also reiterate here what I said earlier: you watch your cash transactions like a hawk, now shift that mentality towards your product. Track it. Measure it. Compare it. Repeat!

Buzztime) How does measuring pour cost factor into loss
prevention?

Mitchal) Unfortunately calculating pour cost is a “poor” solution.

It offers no insight into what brands are being overpoured, not rang in, or outright stolen.  

Pour cost is a quick metric that offers the most basic information. It’s truly a “poor” guide for making business decisions and an even worse strategy to rely on for loss prevention.

That’s not to say that pour cost isn’t important. But don’t make the mistake of assuming that by calculating pour cost, you’re taking steps towards loss prevention.

Buzztime) What method do you recommend for measuring pour cost?

Mitchal) Each brand’s usage should be measured on a frequent basis and compared to exactly what’s rang into the POS

That will give you the Ideal Pour Cost and each brand’s performance.  

That information helps you eliminate hidden losses and drop your Pour Cost 2-4 points on average.

Buzztime) What is the strategy that you recommend for taking inventory?

Mitchal) Simple.  Go digital.  

One app. One barcode scanner. One scale. That’s all you need to ramp up your loss prevention efforts, and save serious cash in the process. The data is then captured by the leading cloud-based inventory software. I’d be happy to share more information about this effective method, just holler at me…here.

Whether you tackle this inventory and loss prevention process in-house, or hand it off to a local inventory company Sculpture Hospitality, you’re doing the best thing for your business.

You’re going to save time, eliminate worries, and have more info at your fingertips.

That frees up time for management to focus on what really matters – your guests, your staff and your profits.

Thank you so much for sharing your insights on loss prevention, Mitchal! We’d like to recommend that folks out there check out your weekly videos released on Facebook. Again, thanks for your words of wisdom!

2 Comments

  • Nick Aug 27, 2019 8:31 am

    What is the app, barcode scanner and scale that you recommend?

    • wfoody Aug 28, 2019 4:08 pm

      You can reach out to Mitch via LinkedIn: https://www.linkedin.com/in/mitchalmajors

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