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Bar Management: Is Shrinkage Really that Big of a Deal?

Bar Management - November 30, 2016 Written By: Sculpture Hospitality

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One of the key principles of successful bar management is reducing shrinkage. Inventory sitting on the shelves represents money that has been invested as is now waiting to be turned into a profit. If some of that inventory goes missing, that means that the bar's profit margin has just taken a direct hit. Fortunately, there are some effective bar management strategies that you can put into practice in order to reduce shrinkage and maximize your inventory.

Is Shrinkage Really that Big of a Deal?

Before we get into the nuts and bolts of how to decrease shrinkage, you may be wondering whether it is even really worth worrying. You might assume that a few over pours and a couple of broken bottles won't add up to much in the grand scheme of things. The reality is that the average bar loses 25% of their bottom line due to shrinkage. Now that we have your attention, we can start looking at causes and solutions.

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Main Causes of Shrinkage

Unfortunately, the number one cause of shrinkage is theft. In fact, about 75% of it can be traced back to employees stealing inventory. As a bar owner or manager, you don't want to make your team feel like they are under constant surveillance, but there are certain steps you can take to discourage theft and create a system where it's easier to notice missing bottles.

Other primary causes of shrinkage include:

  • Over pours
  • Bottles and glasses that get broken during the shuffle of a busy night
  • Drinks that are rejected by customers due to poor taste or dirty glassware
  • Too many free drinks
  • Ineffective inventory system

How to Reduce Shrinkage

When it comes to deterring theft, your ordering and inventory management practices can make a significant difference. Vendors will often offer discounts if you purchase a higher volume of product, but having an excess of inventory can leave you open to theft. Depending on how quickly you anticipate using up that inventory, you may want to pass on these types of deals in favor of limiting your inventory.

Reducing shrinkage due to over pours comes down to creating a standard for drinks, using jiggers to measure out liquor and attaching spouts to bottles to slow the flow of liquid. These bar management tips will also work to create better quality drinks. Any experienced bartender will tell you that a good drink creates the perfect blend and balance of ingredients. An over pour will not only reduce profits, but result in inconsistent cocktails.

If you find that your bar profits simply aren't what they should be, you have two choices: reduce shrinkage and waste or increase prices. While charging more for drinks is the easier option, your client base will take notice, and you risk alienating customers who will be more than happy to walk a few doors down for a cheaper drink.

The best choice is to take clear and definitive steps to reduce shrinkage. If you tighten the ship and implement some good bar management practices when it comes to ordering and managing inventory, you can significantly reduce waste and run a more efficient bar. Take the time to set some standards of operation and you can make more money without having to make major changes.