Average Loss, Theft, Giveaways

[Newbei]

What does everyone accept (or expect) to loose in the way of theft or giveaways in this cash business.

% of bottle beer lost?
% of tap beer lost?
% of liqour lost?
% of food lost?
% of supplies lost?

I know, ideally none, but realistically what is acceptable if close attention is paid to inventory on a daily or at least weekly basis?

Thanks in advance.

[David]

I have always said:

Out of 100% of your staff, 25 % are mostly honest, 25% are stealing almost ever shift and the remaining 50% can go either way depending on their situation.

[ministry]

i heard it was 10 %, 80 %, 10%

[krwell]

I'll put my vote to 25%, 25%, 50%.

[Razor Lounge]

Every single member of your staff is honest.... Unless you give them the opportunity to steal.... If they have an opportunity to steal, you have done something wrong that needs to be fixed or have missed something that needs to be fixed.

[intensity]

Thieves and liars, all of them!!

[beach1]

Every single member of your staff is honest....
Don't we wish.....

[allanjustallan]

One out of three people will steal,

I have a feeling that this average will go way up if they see others getting away with it, unfortunately it only takes one or two bartenders who steal to really have a major impact on profits, a reason I suspect why many bars are not all that profitable,

Allan.

[Rainee]

Any bartender who really wants to can figure out a way to steal from you; you're fooling yourself if you think they can't. That doesn't mean you won't catch them, though.
I think if you make it difficult for people to get away with, and make sure they know they are being monitored, you will discourage most of your staff from stealing (or at least from stealing anything significant. An overpour or extra shot will slip out from time to time no matter what you do.)
If people think it's easy to get away with, eventually most people will be tempted.
The most important thing is to avoid hiring untrustworthy people, and get rid of any that you happen to uncover. After that, you do the best you can to avoid tempting the staff and you should avoid any major problems.

Regarding the original question, I think it's tough to put exact numbers since it varies so much by the type of venue and the amount of oversight and other specifics. You can back into the maximum loss % that you can tolerate and still preserve your profit margin, and figure out how difficult it would be to keep your actual loss % below that number.

[Michael Black]

Some quick thoughts....

You can't put numbers on it,it all depends again on many factors.

In a tight large corporate controlled environment, theft can be extremely low.

In a lose young high volume club or bar, not controlled well, it can be very high.

The first rule of business? Protect the investment,protect the business. This includes many things, theft being one of them especially in nc&b's.

You will never be 100% loss free,but that should be your goal. If not, you will be far less if you do not aim for 100%.

Very few intentionally want to steal going into a new job. A small % will steal no matter what, many just for the thrill or greed, and so you must understand EVERY way possible that they can steal that we have discussed many times. You have to be smarter and better.

You have to work hard to get a huge majority of workers who understand where you are coming from and are there to do their jobs and back you and the business. They will help sort out the bad apples. Unfortunately, in today's world, it's usually the other way around.

I was once very against big brother cameras and no trust, but I would recommend them, putting them in with live feeds and/or tied to the net as web cams using interactive technology with your guests and safety reasons too, but using them to deter theft. Really, in the long run, only those not doing there jobs properly will worry or complain.

You need your security, spot inventory, spotters, money markers, etc. and a change in your monetary control system every so often to put bugs in those criminal minds.

Put all new hires on 90-180 day trial basis. There's no way to know 100% which ones will turn out to be great and worth keeping- only time and good management will tell.

Most bartenders do not consider over pouring theft.

You need to train them on the business side of things - an overwhelming majority of managers do not do this.

You need to make them understand what even an 1/4 ounce over pour adds up to on every drink all year and show them how to correctly pour for your place.

You need to give them real life examples. Would they giveaway a pair of jeans if they worked at the gap for extra money? What if they ran a gas station and they gave away gas? Would they expect to get fired in these types of situations? So, why not a nc&b?

You need to have a clear comp policy. Make them understand that they can come to you and should come to you first if they feel something extra should be done for regulars or those prime customers spending big. All comps all drinks get accounted for just like on the door if you have a cover charge.

Lead by example. Managers and owners should pay for drinks even if it's just $1 to cover costs instead of just telling them to give you or someone a drink. Have them account for each of these drinks as well to show everything is tracked paid or accounted.Consider one spot, one bar, or a separate liquor bank for those comps be it spills, breakage, spoil,goodwill, charity, promotions,etc..

You need to be very hard, but fair and lay down the law and apply it equally to everyone.

You should also have some sort of incentive plan be it a bonus for high sales and low pour costs or small profit sharing showing that they are only stealing from themselves and each other. Make them care about the business and you and that you care about them. It's a two-sided street.

We know they will steal. The question is why? You need a truly open door policy and should be very concerned with the ones who will not steal, but are moved to do so after hired. The same applies to wanting to do their jobs, but later stop doing everything expected. Why are or would they steal from you? Because the majority of the other workers are getting away with it and not doing their jobs to the fullest and making more money? Not satisfied with the tips or money they are making? Are you overstaffing? Are you not rotating fairly? Are you playing favorites? Are you treating your poor workers great and your relatively few really good workers badly where there is great resentment because they are doing all the work no one wants to do while the others get rewarded? Because they worked for other idiotic places that allowed them to giveaway the house and was a free for all? Know your staff and what is really going on. Really talk to each one to understand where they are coming from and make sure they really do feel that they can come to you. Can you help them with extra work there for more money? Can they all help you promoting and bringing in sales to help themselves and each other and the whole place? Fair, but hard. Once you have explained, educated, and have been down with them one on one and made them understand where you are coming from, then and only then, have you done your job as a manager and leader. Now, you should have no remorse firing them and even help those few bad apples to find a job with your competition.

Most importantly, most managers take a short cut to thinking and managing fairly and correctly. It's so easy to take the path of least resistance and point the finger at the bad employees as most managers do.Don't confuse exercising power with leadership in your position. I suggest to all managers and supposedly leaders, to fire themselves. By that, I mean learn to be open minded and point the finger at yourself and the management team below you first before acting on an employee. It's your ball game. Most problems begin on top and not the bottom of an organization. Managers don't do their jobs. They don't ask the hard questions to start, they don't communicate properly to the workers under their direction and explain things well, they don't really have an open door policy, they don't take the proper prevention nor the proper action. In short they don't lead properly and they need to fire themselves. Nothing causes more financial loss than poor management.

Sorry for the long post, one could go on forever on this topic.

[arm_4016]

Your business is as successful as you make it. Here are some realistic numbers based on experience:

Average Hosp. Industry losses range between 20-30% on Alcohol (I can't quote food)

Bottle beer: 10-12% (you can't overpour a bottle of beer - we try for 1%)
Draft beer: 15-20% (1/2 of this goes down the drain....literally - 3-5%)
Liquor: 25-35% (this may be a little conservative - <5%)
Wine: 10-15% (tough because of spoilage - 3-5%)

These are my best estimates based on my experiences with dozens of bars and restaurants, as well as data from 22 years of worldwide experience from my company. The 20-30% loss is an "accepted industry standard" as confirmed by all the comments on this thread. I don't need to prove that.

We have to treat alcohol like money. Drawers are always counted and reconciled by employees and managers every shift. So why don't owners reconcile their inventory? It's because money is money and everything else is attainable with money. You can't buy more liquor with liquor. Yet you can make more money if you didn't allow so many liquor losses!!?!?! Owners must empower themselves and put in place the necessary tools to keep their livelihood most profitable. 3-5% losses are very attainable, yet owners still accept 7-8 times that. The choice is yours. Read "How To Burn Down The House." That should be enough to get you motivated.

[Newbei]

Thanks everyone for the replys. Just what I was figuring to be the average losses, 20-30%. I think this is all to do with what you're willing to consider "acceptable". If you let things go without any checks and balances, you will be out of business in a hurry. I just wonder how many bars actaully do consistant inventory control and actually know their PC?

[rootsreality]

The method and frequency of inventory counts can make a difference. I know of a couple of large very well run nightclubs where the backbar is fully inventoried at every shift change. I have also run into a bar owner who proudly told me that he had never done a full inventory in the 12 years he had owned the business. Those are the extremes. For my small bar we do a full physical inventory once a month with spot counts as needed is something seems to be off. I would like to do it more often but haven't got the process down well enough to make that a reality. Someday......

[Havensloft]

we do a weekly inventory.

[arm_4016]

We do a weekly inventory for our clients, and we measure to the accuracy of 1 gram (roughly 1/30 of an ounce). We are able to find thousands of dollars falling through the cracks. Many owners want to maximize every dollar so they hire us and keep us for a long time. Others are happy if they can maintain a specific PC even if they're losing 1k a week. I don't know how any bar owner can be proud of the fact that they don't do inventory and never have. It makes me wonder if he counts the drawer at the end of the night or just takes the bartender's word for it.

Product mix changes every shift. That's why pour costs allow 20-30% losses to happen without much notice. If you are worried about the losses, then focus on them. Eliminate them. Maintain a 3-5% loss instead of 20-30%. We make it happen every day so don't let anyone tell you it can't be done.

[Newbei]

Is there any 1 way to take inventory that simply works? Something that doesn't require a massive investment? At least until we understand the "manual" way? What doesn't work?

[Rainee]

Taking inventory is easy, it's just counting. I think it should be a manual process for any small to medium sized place, as the equipment for automated inventory isn't worth the investment at that level of sales. Manual inventory also has the advantage of making you actually pay attention to what products you are moving.

You just need to know how much of each item you had in the beginning (of the shift, day, week, etc . . .), how much you have now, and how much came in from new deliveries/purchases. Then you know how much product was used, which you can compare to your sales records.
Keg beer is a little tougher to measure as it is hard to know exactly how much is left inside. Someone should invent kegs with a meter that tells you how full it is.

In my bar, about half my sales are from beer. Of the remaining half, about a half-dozen products account for the majority. I take frequent inventory of the items I sell a lot of, and a full inventory less frequently.

[rootsreality]

Taking inventory is easy, it's just counting.

Keep inventory tracking in mind when you set up your place.

The back bar inventory is pretty straight forward. Be sure to control access to bulk liquor storage. (We have backbar storage for a few backup bottles for the well liquors and a single backup bottle of volume call liquors. Everything else is in a locked storage area that only two people can access.)

Bottled beer can be a hassle depending on how it is stocked. Emptying beer coolers is a pain. I have seen places that leave the bottles in 6pack holders just so it is easier to take out for counting. We added a false bottom to our coolers so we could reach the stuff in the bottom easier. Inventory ease outweighed loss of capacity.

The physical inventory is just one part of the process. You should also value the inventory. You can compare what's on hand to what you have purchased (after subtracting 'breakage'). You can also compare what was used to actual sales (less comps and waste) to determine 'shrinkage'. Another spin is to calculate what revenue you might have realized if all the liquor used was properly paid for, then subtract your actual sales to determine what you missed out on. You'll ultimately come up with a suite of reports that you will rely on to track your business.

I think it is beneficial to share the numbers with staff, particularly if there is high shrinkage. Offer a perk or bonus for improvement. Get them involved!

[Rainee]

Agree with rootsreality, valuation of inventory is a good way to track your shrinkage.

However, I do not like to calculate theoretical revenue if all product was paid for at full price. I think this number can create unrealistic expectations for you as an owner. You can stop people from giving away or overpouring, but you are unlikely to transform much of that into actual sales.

Also, I agree that it is good to share this info, at least in some way, with staff. Most staff will consider the occasional overpour or extra drink on the house to be harmless, but showing them how it adds up can be instructive. Also, it reminds everyone that you are paying attention and they are less likely to think they can get away with theft in general.

[casabar]

Let them hate; so long as they fear...Cicero

This is a loose money business and micromanagement and tight inventory is effective; it is not 100%. I could rob ( to various extremes ) just about any bar/club blind and win employee of the month. It takes a thief or one that thinks like one to catch one.

I am of the opinion of the posters here that believe in the lower percentages of trustworthy workers. People are funny and opportunities to prosper will almost always circumvent the moral and ethical line.

Minimize the opportunities as best you can. Have the crime and the punishment written in stone and enforce it. What is best in life is not always to expect the worst, but to really appreciate that one in a million workers that truly turns out to be a gem that you know will one day enter your place. Then you have another person looking out for your investment. In the mean time be mean in business, but fair in practice.


Last note: IMO it will be your venues target clientele, occupancy and spending demograph ( and many other variables ) that will assist you in putting together a favorable formula for keeping people honest and to insure that the monies goes in your pocket ( or at least most of it ).

Well liquor and draft beer makes you the most profit, is a bigger seller, is better for promotions and in the end you can still profit on over pouring or comps. This is based on volume sales. This point could be discussed in depth and I will leave it at that. I have a zero pilfering policy and that is not subject to discussion and for me is effective; though still not perfect. Sometimes people need an ass beating and being a proactive and concerned Owner this option is available 24/7. One of the good things about not operating in the States whee is you accidentally bump into your waitress' ass she sues you for sexual harassment. Oh and last last note: Have 28 cameras with audio and recording capabilities. 10 phoney cameras and then again 8 strategically placed high end Hubble telescope capable ones that can only be seen from space. This is aside from physical security ( people ) that make everyone feel comfortable.

Suerte

B

[Newbei]

Hey Casabar,

Do you really benefit from having audio along with your video? Normally it's really loud in the bar. Can you distinguish the audio portion? What kind of camera system do you have? I would imagine the fear of "ass beatings" is enough to deter most! Ha!

[casabar]

i apologize for most of my incoherent post since they have been and are normally posted hours after i am closed and usually when i am half in the bag. i did not read the previous posts and only the initial post and it is reviewing this thread that i read mr. blacks post. the guy appears to know his shit and his post hit this bitch on the head. again my finesse has been dulled by third world swords.

contact the tech heads on this site for info. on surveillance. i will not post my system except to say that i can watch my place from anyplace. number one conern for me is not theft from within; but the safety of my staff and patrons.

as for ass beatings the most common and severe are verbally. the most fatal are physical; which is bad for everyone and everything and a last resort.

this topic as pointed out can be discussed and debated for ages. my only suggestion is that you always keep a professional distance. what does this men? don't screw your staff physically, mentally, spiritually or sexually. this may prevent a financial back screwing for you.

suerte
cb

ps excellent post mr. black

[Kepi]

It's a shame that we have to consider our staff to be dishonest..... of course most people are opportunist, find a $20 bill on the dance floor, do you pocket it or put it behind the bar in case someone comes to report their loss?

The issue is to whether you are controlling your stock in such a way to minimize theft, and what do staff consider theft? A drink? a bag of crisps (chips)? they all come from your profit if that's what they do.

Here we have a very strict control system in place and should we even find a single drink lost we take from staff wages - harsh? I think so too, we inherited this from the previous owner and the staff accept it to the point of 'paranoia' they keep such tight control of servings that we only 'lose' two or three drinks a week, maximum.

What we have done to compensate is to give staff generous discounts (50%) and, most weekends we stay back till late and party with them, throwing in a couple of bottles of Asti (all our staff, except security are female) and at cost of less than $6 a bottle its not expensive. Security have the benefit of helping us finish half empty barrels of beer (the beer of choice has a life of 7 days once the barrel is open - at a $1 a litre we still break even on cost)

The result, the staff are honest - feel well rewarded and we get to make sure that we have no half empty barrels of bad beer :) Would we lose less than we spend on the party? Possibly, but the benefits in moral and team building far outweigh that, plus its giving the guys (gals) chance to get to know the new owners and we are identifying potential high flyers to help improve the club.