It goes without saying that the restaurant industry has been hit extremely hard by the COVID-19 pandemic. Across the country, most bars and restaurants were forced to shut down for close to two months, causing revenue to disappear entirely during this time. Since reopening, lower capacity has forced revenue to remain well below the levels experienced prior to the pandemic. Many bars and restaurants have also faced additional unforeseen costs during these difficult times, and there doesn’t seem to be an end in sight.
On a fundamental level, bars and restaurants provide a way for people to meet and socialize. The pandemic has severely limited our ability to gather in public places and socialize with friends. As a result, the bar industry is being forced to adapt on the fly, and it has not been easy.
Unfortunately, the future remains full of uncertainty and challenge. There is no easy solution until we address the health side of the pandemic and begin preventing the rapid spread of COVID-19. This means that bars and restaurants are most likely facing a long road before seeing their business begin to truly thrive again.
Surviving the Pandemic Requires an Opportunistic Mentality
We’re not trying to paint a picture of doom and gloom here. This is simply the reality bars and restaurants are facing during one of the most challenging times of our life. This forces bar owners to take a pragmatic approach during a time of crisis. In the short and medium term, bars and restaurants will be in survival mode in order to make it through the pandemic with such a significantly reduced sales volume.
Remaining successful during the pandemic requires an opportunistic mentality. If we can’t fix the reduced sales volume, we need to find places to cut costs. Fortunately, there are ways to use this downtime productively. One of the easiest steps you can take right now to help your business stay afloat is to upgrade your bar inventory system.
Upgrading your bar inventory system won’t be a magic fix for all of the problems bars and restaurants are facing due to the pandemic. However, it can help you reduce your costs and capture as much profit as possible during a time when every extra dollar is crucial to the success of your business.
How Will Investing in a New Inventory System Help During the Pandemic?
On first glance, this argument may seem counterintuitive. After all, we’re trying to cut costs to offset this lost revenue. Most establishments aren’t in a financial position to be investing in new technology when they’re not making a lot of money. But when you look at the idea more closely, a relatively moderate upfront expenditure in a new inventory system can help you maximize your profits for the next year or two while we try to navigate through a global health crisis.
We operate in a low margin industry. Most bars and restaurants typically experience 5% gross profits. This means your average bar only generates $5 in profit for every $100 in sales. With such a low profit margin, every action you take to improve your revenue is crucial, and effective bar inventory is one of the easiest ways to boost profits.
Bar-i provides Level 3 inventory services which precisely compare every item that was poured vs. sold in order to identify how much product you’re missing. We then provide you with a detailed inventory report that includes recommendations on steps you can take to improve the performance of products that experience a high degree of shrinkage. We’ve found that when our clients take the actions we recommend, they are able to reduce their liquor cost by 3%.
In most bars, alcohol usually comprises 50% of sales. As a result, decreasing your liquor cost by 3% will increase your overall profitability to 6.5%. Here is how we arrived at this new figure:
- Lowering your liquor cost will boost your profit margin on alcohol to 8%, while food profits remain at 5%
- Since there is roughly a 50/50 split between food and alcohol sales, this averages out to 6.5% profit margin on total sales
Effective bar inventory efforts can have a significant impact on your overall profitability. The specific increase will be dependent on the exact balance between your food and alcohol sales, but we’ve consistently seen our clients reduce their liquor cost by 3%. Sadly, this increased margin is most likely unable to make up for missing sales volume, but during tough financial times, this will still make a difference.
Increased Downtime Presents a Great Opportunity to Upgrade Your Systems
Reduced business and lower sales volume provide your staff with more downtime. You can take advantage of this downtime to strengthen your systems.
Upgrading to more sophisticated bar inventory software involves an adjustment period as your staff takes the time to set up the system and learn how to use it properly. In our experience, we’ve found that it normally takes about a month to get a Level 3 inventory system fully implemented and integrated with your operations. This is due to the fact that there are many tasks that must be completed when you upgrade your inventory system:
- Any hardware used with the system must be purchased and set up
- Software must be installed, and your staff will need to spend time learning how to use it
- Recipes must be written for every drink you serve
- Your POS system must be optimized to ensure every drink served has its own button
This is a perfect time to put in the work integrating a new inventory system with your bar’s operations. The reduction in volume will give your managers more time to focus on getting your new system up and running. It’s also easier to get your staff used to the new counting process while there is a lower sales volume since there will be less to count each week.
Capitalize on Discounted Bar-i Setup Costs
Bar-i recognizes that this is a tough time for bars and restaurants to invest in processes behind the scenes, so we’re offering 50% off a complete setup of our pro version system through the month of August. Just mention this post and you’ll receive your new inventory setup for just $500. We’re confident that you’ll recoup this upfront cost in savings experienced from a lower liquor cost pretty quickly.
If you’d like to learn more about the ways our inventory system can help you improve your profitability, we recommend that you speak with one of our dedicated inventory experts. Once we understand the unique needs of your bar, we can recommend the ideal inventory option for your business.
Please contact us to schedule a free consultation and get the process started. Bar-i serves bars and restaurants nationwide from our offices in Denver, Colorado.