Left unchecked, employee theft can reduce cash flow to a trickle. How extensive is the problem? Working in conjunction with the Sacramento, Calif.-based California Restaurant Association, Bevinco, the international beverage auditing firm based in Toronto, determined that beverage operators on average lose 23 percent of their liquor and draft beer to over-pouring and theft, the combined cost of which is staggering. The very thought is enough to make managers wince and bar owners shudder.
There’s also evidence that theft is considerably higher in the U.S. than other countries. According to Ian Foster, Bevinco regional vice president, the average bar or restaurant in Canada loses 17 percent of its inventory to shrinkage, which is six percent lower than what they’ve uncovered in American operations. Australian and U.K. bars also suffer significantly lower inventory losses, in the 10 to 12 percent range, partially because tipping is not as widespread as it is in the U.S. A bartender in Australia has less financial incentive to pour an extra heavy portion in order to garner a larger gratuity.
But preventing theft from happening is far from easy. Bartenders typically work for long stretches of time without direct supervision, and they often are afforded quite a lot of autonomy. Their position requires them to portion inventory, prepare drinks and collect sales proceeds, and they do it all before recording a single detail of the transaction into the operation’s point-of-sale system. The result is a job laced with opportunities to profit from the house and its clientele.
“Bars and restaurants have a huge amount of exposure,” notes Sean Finter, on-premise veteran and CEO of Baltimore-based Barmetrix, an international consulting concern that specializes in analyzing product variance issues and management effectiveness. “They typically operate with under-paid, transient staff that works under difficult circumstances—loud music, odd hours and intoxicated patrons. It’s not necessarily an environment conducive to tight controls.”
Some operators feel that the current economic conditions are making the problem worse, too. Aidan Demarest, director of spirits and beverages at The Edison in Los Angeles, asserts that the recession is exaggerating the problem of internal theft. “Bartenders become accustomed to making a certain amount of cash every night, and if the cash isn’t walking in the door, they’ll look for it elsewhere,” he says. “This is definitely a time for beverage operators to keep their eyes open, unfortunately.”
The consensus first line of defense against theft is hiring good people and then treating them with respect and dignity, says Michael Waterhouse, managing partner of Drink Tank, Ltd., a New York-based restaurant group and consulting firm that owns and operates restaurants such as Dylan Prime and Devin Tavern TriBeCa.
“Many people in the industry view bartenders as replaceable cogs, and fail to realize the amount of responsibility they have,” notes Waterhouse. “It’s unfortunate, because if you show bartenders the respect they richly deserve, it’s been my experience that they’ll treat you in kind. The reverse also is true, and it leads to employees feeling justified ripping you off. It’s just human nature.”
The Edison’s Demarest points out that in America, bartenders usually are paid little more than minimum wage, receive no benefits and typically aren’t even fed during long shifts. “Whereas in Europe, bartenders are paid salaries and receive health and retirement benefits. I think that establishes a professional relationship, based on mutual respect, in which bartenders have greater incentive to ensure the business flourishes.”
From an operational perspective, protecting profit margins behind the bar begins at the point of pour. There’s no more fundamental form of loss prevention than ensuring portion control. It impacts the consistency of product, drink quality and responsible service of alcohol, as well as maintains the margins necessary to turn a profit.
Precision Pours are bottle-attached devices that limit pour amounts and offer operators a proven alternative to their bartenders free-pouring or measuring with a jigger. “Bars often are nickeled and dimed, and it happens with almost every flick of the wrist,” says Rick Sandvik, president of the Plymouth, Minn.-based Precision Pours. “The culprit is lax or nonexistent portioning controls. The sales price of a drink is hinged to a specified portion of alcohol. If that amount fluctuates, so will the drink’s profit margin.”
In the high-tech arena, liquor and draft control systems extend an operator’s reach behind the bar by monitoring exact usage and regulating how product is dispensed. According to David McCullough, managing partner of Freepour Controls Inc. in Toronto, “technology provides timely metrics that can be used to manage pour costs on a shift-by-shift or even a transaction-by-transaction basis. It’s been my experience that once operators see how microchip technology can help them reach optimum profitability, the prospect of going back to kicking kegs and tenthing liquor bottles seems untenable.”
McCullough says that after 23 years in business, he and partner Harold Kaiser have acquired boatloads of empirical data regarding loss-prevention. They’ve determined that half of the losses from shrinkage result from over-portioning and faulty or poorly maintained dispensing equipment.
Other pour control systems on the market include Suxessbar, which monitors pour amount via scales, bottle tags and tracking software, and Tap Dynamics, which uses flow meters to monitor product usage.
Few managers or bar owners want to acknowledge that their bartenders might be stealing from them. Implementing anti-theft measures behind the bar helps ensure that they don’t need to.