Generally speaking, profitability is the number one reason for engaging in business. In the hospitality industry, it is easy for profitability to erode if operational standards are not kept. Listed below are some strategies and tactics that may help improve profitability in your venue:
- If you offer meals in your establishment, instruct your waitstaff to offer before and after meal drinks. This could mean suggesting an aperitif cocktail before dinner, or a cognac/fortified wine after or during dessert. Make this process part of your service procedure and make it happen every time. If this is done for each table sitting during a shift, the extra income is certainly worth the effort. And, you are adding an extra positive element to your customer service standards.
- If you wish to sign off a staff member early, give them a number of closing tasks to complete before they finish. Tell them they can finish their shift as soon as they have completed their tasks. If you have made a reasonable request, your staff member will complete their tasks quickly (make sure you check the jobs are completed to your satisfaction) and you’ll save on wage costs. Every bit counts.
- Make upselling a part of your internal culture. Integrate upselling into your induction process, and upselling and sales training into your regular staff meetings. Don’t forget that your frontline staff are your most powerful and influential sales machines.
- Etch your wine glasses with plimsoll lines (lines to indicate one standard serve), to prevent over pouring. The cost of etching your glassware will very quickly pay itself off (compare how much extra your staff may have been pouring – the results may shock you! Imagine how much money you could have made from wasted stock).
- Enforce your inventory control systems, even if they are minimal. Make sure you closely monitor and enforce inventory procedures like invoice entry, spillage entry, wastage entry etc. If you have a relaxed approach to stock control, it’s probably not a good idea to show it to your staff.
- Buy as much as you can on the internet. Use online shopping channels whenever you can. You may save an incredible amount of money on certain items.
- Develop accurate portion control techniques for non-alcoholic stock. This includes anything you use to create your products (even the smallest items). Make sure your staff aren’t wasting stock unnecessarily (by putting too much into drink/food recipes or throwing too much out).
- Keep an eye out for slow moving stock. If you find a slow moving line, do something to promote it. After it sells sufficiently, either stop ordering the product or order less. Think of stock as tied up money.
- Aim to keep as little stock on hand as possible (without running out, or course). Like I said above, think of stock as money tied up as product. Excess stock doesn’t earn interest in a bank account.
- If you need to sell a large volume of a certain product, stock an entire shelf full of that product in your display fridges. Your guests will take more notice of the product if it takes up a larger share of your display fridge ‘real estate’.
- Maintain a strict ‘First In, First Out’ (FIFO) policy. Basically, FIFO means ‘use your oldest stock first’ so you don’t have to discard any items that are past their ‘best before’ or expiry date. An effective way of doing this is to record the date you received any perishable stock (write it on the packaging of the stock, so it’s easy to access) and always use the oldest
- Ask existing stock suppliers to ‘sharpen’ (lower) their prices. Give potential stock suppliers your stock order sheet, and see if they can give you a better price. If their prices are lower (for identical stock), use this as the perfect bargaining chip for lowering prices with your existing suppliers.
- Try offering a ‘loss leader’, which evokes a ‘wow’ response from your guests. A ‘loss leader’ is a product which you sell at a reduced price (at a lower profit), but entices customers to visit. Choose a discounted product that will attract your target market – there is no point offering cheaper Champagne if you are trying to attract students with limited budgets (a loss leader could be an item/items of food or a popular drink/cocktail in the culture in your local area). Although your profit will be reduced on your loss leader, it will attract customers to your venue and is great fodder for word-of-mouth marketing.
- A sanitised rubber band or fishing line wrapped around a free pourer will stop it from leaking and wasting excess stock.
- A useful metric to track is ‘customer money spent on food versus customer money spent on drink’. You can establish the way customers perceive your venue by analysing this metric. If your customers spend more money on food, they perceive your venue as more of a restaurant and vice versa. You can use this information to tailor your specials and promotions accordingly.
- If you have the ability to do so, arrange a ‘first pour’ agreement with a spirits supplier. A ‘first pour’ agreement is a conditional agreement where you offer a single supplier’s products as your first pour vodka, scotch, rum etc. Organising a ‘first pour’ agreement generally locks in a cheaper price for each of the products you choose to pour as ‘first’. Suppliers like to secure this type of agreement as it guarantees exposure for their brands, and at the same time you can serve their product with a greater profit margin.
- Find a product you sell lots of, and find a way of buying it cheaply. I understand this is easier said than done, but if done correctly has the ability to generate strong profit. If possible, try ‘group buying’ with other venues. You may be able to negotiate a cheaper price if buying in bulk.
- Research ‘consumer behaviour’ and demographic patterns in your target geographical area. Visit your local statistics bureau website and research the demographic in your target area. You might uncover an interesting fact or trend which can be exploited to generate higher sales.
- If you sell large volumes of premium wine, invest in wine saving equipment like vacuum pumps and chilled wine cupboards. A vacuum pump can either be a machine or a hand-operated device which removes air from an open wine bottle (slowing down the oxidization process and therefore extending the life of the wine). A wine cupboard emulates the temperature (and humidity in more expensive models) of a traditional underground cellar, which aids in the maturing process of wine. They will also be great to look at (increasing the ‘wow’ factor with your customers) and will certainly demonstrate your commitment to becoming an industry leader.