“Bar shrink,” an industry term for losing revenue on liquid assets due to bad practices—either inadvertent or deliberate—has been a perennial problem for restaurant operators.
“The bar business is a cash business. It’s too easy and too tempting for dishonest or careless employees to take advantage of that,” says Steve Haas, owner of City Hall the Restaurant in Miami and chairman of the Greater Miami Convention & Visitors Bureau. “The bar is the No. 1 area where theft takes place,” advises the industry veteran.
Theft, by his definition, includes giving away free drinks without authorization, over pouring alcohol, and pocketing some of the cash receipts.
“In the past, we had all of these problems,” Haas notes. “In my business, bar shrink can be in the thousands of dollars by the end of the year—and in a large nightclub it can total in the hundreds of thousands.”
Today, his bar shrink has shrunk, in large part due to the implementation of technology that includes a point-of-sale system integrated with a sophisticated liquor inventory-management system called BarMaxx.
Utilizing RFID (radio frequency identification) technology, BarMaxx tracks every ounce of bottled alcohol from the time it is delivered—and maintains a real-time measure of liquid assets with a scale that precisely monitors beverage inventories to an accuracy of 4/1000th of an ounce.
“You can instantly see any irregularities between sales and inventory,” says John Zevgolis, CEO of Maxx Technologies, developer of BarMaxx. “Inventory reports can be generated from anywhere so a manager doesn’t need to be on site to know what’s happening instantly.”
When a shipment arrives, the bar staff simply attaches an RFID barcode label to each bottle and the information is integrated with the bar’s POS system so that every detail can be tracked—including what was poured, how much liquid remains in the bottle, who rang up an order, and what price was charged.
“We have tight control without having to constantly monitor,” says Haas.
Another Miami restaurant, The Forge, started using the BarMaxx technology in 2010, when it was experiencing an average of 22 percent shrinkage per month at a cost of roughly $10,000. By September of 2010, the restaurant’s bar shrink was reduced to only 2 percent per month, saving about $8,000 in lost revenue.
Shareef Malnik, president and CEO of Shareef Management, which owns and operates The Forge, says the system “helped us achieve our lowest liquor cost in more than 40 years of being in business.”
High-Touch, Low-Tech Business Models
Despite the apparent effectiveness of inventory-management technologies, most restaurants attempt to control bar shrink through bartender-training programs. David Nepove, president of the United States Bartenders Guild, says managers who provide proper training in their bars have fewer issues with bar shrink.
If bartenders aren’t sure how to make a cocktail or how much to charge, they may guess, and often that guess is wrong, says Bob Frederickson, beverage manager of the nine-unit Chancery Pub & Restaurants in Milwaukee.
The Chancery keeps tabs on inventory by exchanging empty bottles for full bottles at the end of each shift, and limiting the number of keys it gives out to the liquor rooms.
Some establishments go even further by allowing only the shift manager to retrieve bottles from the liquor room at the start of each shift. This is the practice at the Italian Village in Chicago, a collection of three restaurants under one roof that rings up 39 percent of its sales in beverage alcohol, says Ian Louisignau, wine director.
The Village’s bartenders measure each pour of wine by the glass, eyeballing a marked glass placed next to the customer’s glass behind the bar, and using jiggers for all hard-liquor pours.
Measuring instead of free pouring is standard practice these days, and at Chicago’s Palmer House Hilton Hotel, managers test all bartenders before each shift to be sure they are following measuring mandates, says Patrick Coyne, beverage director.
Banquets present the biggest challenge to mandatory measuring, Coyne notes, especially at crowded functions like weddings. Although bartenders may be pressured to deliver drinks faster by not measuring, they are required to follow the same measuring procedures as they do in the hotel’s restaurant and lounges.
Each bar keeps a “waste sheet” to record any drinks that are dumped, usually because they aren’t made right.
Waste can also occur as a result of opening too many wine bottles in advance for pours by the glass that don’t materialize. “I’ve seen bartenders open five bottles for glass pours and not sell them. They should open them as they need them,” advises Jimmy Bannos, partner in three Heaven on Seven restaurants and The Purple Pig in Chicago.