Ed Randow-Stone, Director of Customers at Lightspeed & alumnus of Dead Ringer, Restaurant Hubert, Rockpool Bar & Grill (not to mention Shooters), shares his insights on how you can conquer your COGS, and pump up your profits.
Picture the scene: it’s a busy Saturday night in a small cocktail bar in Christchurch. A stranger walks in, takes a seat at the bar, and strikes up a conversation with the young bartender. They exchange the usual pleasantries, and chat for a while about life and what it means to each of them, before eventually the bartender gets to the business of asking what the stranger wants to drink.
“Surprise me,” he says, probably the last two words you want to hear on a busy shift, but the bartender is a professional, and he prepares the stranger a drink he’s been practicing for the last few weeks, and one that he’s quite proud of: a classic Tom Collins.
He gathers his ingredients (the finest money can buy), and begins crafting his masterpiece. Now remember, this was a busy night, so this bartender had no time to measure everything with precision. No, instead he relied on his gut, eyeballing and tasting as he went before finally presenting his finished cocktail.
The stranger takes a sip, and a smile appears on his face.
“Not bad, kid,” he says. “What would you think about coming to work for me in a far-off place called ‘Australia’?”
And that’s the story of how I came to land a gig behind the bar of Rockpool Bar & Grill, ensuring my boss was left without his only employee, and securing the job with one of the highest COGS, and lowest profit margin drinks on the menu.
Had I known how much that cocktail was costing my boss, I’d have probably chosen something a little less painful to the pocket.
And that got me thinking about an issue within the beverage industry that’s as rampant today as it was back in 2010, namely how difficult it is to keep track of your COGS in an industry that’s very good at clouding them.
The cost of human error
Think about it, any job that you’ve worked behind a bar has the same glaring issue when it comes to your COGS. The product has the uncanny ability to simply go missing. And this can happen in a number of ways.
It’s busy, you’re 4-deep at the bar, and everybody’s ordering vodka, lime & sodas. Your motivation as a bartender is always going to be getting as many drinks made, and as much cash in the till, right? So it makes sense that when you’re getting slammed you’re not really concerned with how much vodka is actually going into the glass. It’s all about ‘made’, ‘paid’, and ‘next’. Pretty soon, for every 30ml nip of vodka you’re selling, you’re pouring closer to 35, and next thing a whole 1L bottle of Smirnoff’s vanished.
How about something a little more primal, and more deeply tied to the human experience?
We’ve all been guilty of seeing a pretty girl (or guy) walk into the bar, and in the interest of making ourselves more favourable in their eyes, thrown them a drink or two on the house. And what about your mates? We see them pile in through the door and see no harm in chucking them a freebie. After all, don’t we all just want people to like us?
Is it something more sinister?
In every bar there’s a room where there’ll be some booze stored, and maybe this room has no cameras? Say it’s the cloakroom, and in this cloakroom is a chest freezer full of pre-made martinis, each in their own individual bottle, their ingredients measured to perfection. A perfect example of keeping track of your COGS (down to the glassware), and keeping product consistency for a best-selling drink.
Suddenly, the cloakroom becomes a very popular place for employees to visit, and your exercise in COGS perfection is ruined by your team. But it’s okay, it’s just bartenders being bartenders. You did it yourself, after all, so you can’t get too mad.
Or maybe the bartender’s ego is to blame?
My mojito is the best, and there’s nothing you can say or do that will change my mind. Now, multiply that mentality across all of your drinks, and all of your bartenders and a problem emerges.
The recipe you’ve entered into your system to keep track of COGS and maintain consistency is crushed by a hundred differing recipes. Sure, the drinks are still delicious, but at what cost? I don’t know, because half of my team didn’t follow the instructions!
Is your pricing too lazy?
Ever been in a place and read the drinks menu, only to see that every beer is a flat 10 bucks? Or two cocktails with wildly different COGS are both priced at $20.
If you do this, you’re losing money. It’s that simple.
What can you do?
Tracking COGS and GP used to be the domain of only the biggest businesses who had access to expensive technology or external services. But now that’s no longer the case. The explosion of cloud-based tech, and bar POS systems, makes these solutions available to even the smallest businesses.
That vodka that goes missing during the busy times? With Lightspeed Purchase you can track it. And it doesn’t stop there.
Pair this with Lightspeed Insights and you can train your staff to pour correctly, incentivise them to buy into your variance number, and help them to understand how their actions influence it. In a high volume bar I managed, we were quietly proud as a team to maintain a negative shrinkage every month, netting an average of $1.02 for every dollar we spent.
And you know your staff are going to give away free drinks, it’s part of being a bartender, but it’s something that the customers enjoy too. So why not budget for it? Set aside a bottle each shift, and tell your team that they’re expected to give x amount of shots away that night. Track this number each night, and record it. It’s a part of your strategy to have the kind of vibe you want, and attract the right crowd.
Create a culture of excellence
Your systems are worth nothing if your team doesn’t use them. In order to create that culture of excellence that all of the best bars have, you need to be able to hold them accountable for the standards you expect. Incentivise your team and watch them find ways to use their creativity to grow your business.
Pre-batching to the rescue
In my experience, one of the best trends to hit bars is the most game-changing. Nothing helps more with COGS, consistency, and speed of service like pre batching. Not only is the guesswork removed (cutting down drastically on your wastage), but it’s a lot quicker to grab a bottle from a fridge than it is to make something from scratch.
With Lightspeed Produce you can have all of your recipes in one place, with links to your inventory, and accurate COGS. Bottle up your best-sellers, slap your branding on there, and even sell it for take away, creating another stream of revenue.
Putting APAC on the map
My story is so similar to a lot of bartenders.
Where previously there was always a feeling in the industry that if you wanted to make it, you had to get out and hone your craft in some faraway place, like London, or Europe, or New York, is not the case anymore.
We’re now seeing bars within our borders being ranked amongst the best in the world, and with these high standards we can proudly proclaim our very own as leaders in the industry.
The recent digital transformation has levelled the playing field, placing affordable products like Lightspeed Produce within reach of everybody. Paired with the production of so many skilled workers, this could push our region to the top of the bartending world, where we belong. Our free restaurant profit and loss template can also help you understand the financial health of your business.