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What Is A Good Pour Cost?

Posted by Ian Foster on Dec 1, 2015 11:26:40 PM

In Bar Management

 
I get asked this question all the time.

The fact is that there is no such thing as a “good pour cost” that every bar should shoot for. When a consultant or writer says that bars should shoot for a target of around 20%, they are spouting nonsense.


Your bar pour cost (PC%) depends on your pricing and what drinks your customers order. And both factors vary greatly from bar to bar.

When an American Legion recently hired me to help them with their bar profitability, they had very high costs. Using our Bevinco bar control system, we were able to reduce their PC% by about 5 percentage points, however, their PC% remain higher than any sports bars we audit. The fact is that A. Legion is competing in a quite different market than the average sports bar and has a higher cost structure. A. Legion has to have higher costs than, say, a sports bar because their members would stop coming (or come less often) if they raised their prices to match the other bars in the area.

On the opposite end of the spectrum, a nightclub has lower PC% than other types of bars partly because they can get away with it (people come to nightclubs to meet people and to dance, not for the drink prices) and partly because they have to (they have to make all their money in a 5-hour period, three nights a week).

You can’t really compare the PC% in one establishment to that of another because they have different pricing and a different sales mix. I’ve seen very profitable restaurants with PC% of 30% but no losses. And I’ve seen a hotel with a 14% PC despite enormous (hidden) losses. In fact, that hotel should have been running a 10% PC; which might sound impossible, but consider that this was a hotel in Hawaii where more than half their sales were poolside Mai Tais with a 37¢ cost that sold at $8 (which is about a 5% ideal pour cost)

Geography is another factor. You can charge higher prices (and, hence, have lower pour costs) in, say, Manhattan, than in Iowa. In fact, your prices must be higher because your labor costs and rent is higher.

 

Is your pour cost too high?

 

Yes, here is why. Most operators tell us that they their PC% are fine. The truth of the matter is that they are wrong because virtually every bar has hidden losses. Owner’s are usually happy with their PC% only because they don’t know that their PC% should be a lot lower.

The problem with PC% is that most operators compare their current PC% to their PC% with that of previous months.

Let’s say a bar owner ran a 19% PC%  in September. Most operators would be very pleased with 19% if this was their recent history:

 

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The thinking here is that theirPC% bounces around between 19% and 21%. And since it is currently 19% and in the lower end of that range, they are doing fine. And that seems logical. But it is dangerous.

In my 25-year history I have audited tens of thousands of bars. I have seen that 99 out of 100 bars are missing about a quarter of their alcohol because of over-pouring and lost sales that go undetected.

In fact, this is what their business should have looked like – the red line is their actual PC%, the blue line is what their PC% really should have been if they had not had the over-pouring and lost sales (which is their “ideal PC%”):

 

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To determine what your pour cost should be compared to your actual pour cost, have Bevinco come to your bar to do confidential inventory discovery audits.

Schedule a Bevinco Bar Inventory Discovery Audit