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How to Set up an Inventory-Based Bar or Restaurant Manager Incentive Plan

Bar Management, motivating staff, Restaurant Operations - August 31, 2020 Written By: Krista Dinsmore

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The manager of your restaurant or bar plays an essential role in the success of your business. They ensure you don’t overspend, that food and beverage inventory is managed properly and they come up with ideas that bring in new revenue streams.

That’s why it’s important to implement a performance based incentive plan for your restaurant or bar manager.

An incentive plan will ensure your manager is not only motivated, but that they consistently perform their duties at a high level. Over time, this will improve your businesses’ bottom line and increase your profits.

Since inventory management has the biggest impact on your restaurant’s bottom line, one of the most beneficial strategies you can implement for your business is an inventory-based incentive plan for your restaurant or bar manager.

What is an inventory-based incentive plan?

Food and beverage inventory costs are one of the biggest issues for the bottom line of restaurants and bars. Issues such as overpouring, overserving, poor stock taking, the buildup of dead stock and employees eating or drinking stock can all have a significant impact on your company’s profits.

By tying the performance of your food or beverage inventory management program to your manager’s performance, however, will ensure that you see instant improvements to your bottom line.

That’s because small incentives can lead to huge behaviour changes. When managers know they have a financial incentive to perform high-quality work, they will be more motivated to take the necessary actions that maximize your restaurant or bar’s profits.

Why you should provide your bar or restaurant manager with an incentive program

There’s no doubt about it, restaurants and bars that tie their manager bonuses directly to their inventory management are able to avoid the costly inventory and revenue losses from overpouring, unused stock and other issues.

On the other hand, many bars and restaurants that do not track inventory variances and include that in their management incentive programs find that they lose between 15-30 percent of their inventory and sales.

Here are just a couple, of the many reasons, why your restaurant or bar will benefit greatly from an inventory-based incentive program for managers.

It’s a valuable recruitment tool: Employees want the opportunity to earn more money, and giving them that opportunity allows you to compete against some of the best restaurants and bars in your local area. By offering an incentive program that’s based on performance, you can attract and retain the best talent available to you.

It will improve the bottom line of your business: By ensuring your managers are focused on both beverage and food inventory management by making this a part of their incentive plan, you will ensure that your management team is focused on the most valuable, controllable and profit-enhancing elements of your business. Once your manager is focused on improving inventory management, your restaurant or bar profits will begin to increase.

4 steps for creating an incentive plan for your bar or restaurant manager

Now you know what an inventory-based incentive program is and why it’s important for the success of your business, you now need to create it. Thankfully, this is pretty easy. Here are four steps that will get you started:

#1 - Choose your targets

Your bonus plan should have clear targets and expectations of what you want your restaurant/bar managers to achieve, and those goals should be realistic. The most important aspect of this incentive is that it should focus on limiting inventory loss and other controllable expenses.

These costs directly impact the profitability of your business, and they are an aspect of your restaurant or bar that a manager has direct influence over. The more money saved here, the more profitable your business is.

#2 - Work out how to structure your bonus plan

The next step is to work out how you want to structure your bonus plan. You can either incentivize your managers with a bonus expressed as a percentage of profits from the profit and loss (P&L) goals, or you can set a specific bonus amount.

Download Our Bonus Plan Template Here!

Make it clear how much money the manager can make if they hit their targets. Incentives work best when employees know exactly how much money is at stake and that they have a realistic chance of achieving it if they perform well.

#3 - Choose your budget before you get started

Just like inventory management, manager bonuses are all about budgeting. You need to maximize your return on investment if you truly want to improve your company’s profits at the same time as rewarding your employees. That’s why it’s important to work out how much you can actually afford to pay your managers as part of the incentive.

For example, an inventory-based incentive program may see you spend 10 percent of the additional profits captured by a manager as an incentive for them to keep those results up.

#4 - Make sure you get the buy-in from your staff

Once you have your inventory-based incentive program in place for your managers, it’s important you get the buy-in from those staff members before it’s launched. Make sure they agree with the terms of the program and that they believe the results are achievable.

An incentive program that managers aren’t happy with and that they believe has unrealistic targets will only serve to demoralize your employees, not motivate them to perform better.

Are you looking for more information on the importance of an inventory-based incentive program and how to set one up? Please contact Sculpture Hospitality today. Our team of beverage and food inventory management experts would love to answer any questions that you may have.

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