Bar Revenue Management: Proven Ways to Increase Your Sales 3% to 5%
Most bars do not operate at peak efficiency during their busiest times. They employ the same method of handling the flow of customers as they do when traffic is slower. This results in additional sales and profits being lost each day due to the failure to follow a few key revenue management strategies.
The good news is that once you have a firm understanding of the opportunities in your bar that can use an improvement in efficiency, you will be able to maximize your sales during your busiest times without turning away or giving improper service to your customers.
Traditional Methods of Revenue Measurement
Industries with perishable inventory such as hotel rooms or airline seats have a precise, time specific way of measuring revenue.
For hotels, it's RevPAR (Revenue Per Available Room).
For the airline industry it's RevPSM (Revenue Per Seat Mile).
For bars and restaurants, the traditional way of measuring revenue has been to look at a combination of the following: average check, food and beverage costs, and labor costs.
Unfortunately these measurements in themselves do not give a precise measure of how well your operation is doing, as you could have a high average check, or low labor costs, or low food and beverage costs and still be unprofitable.
Based on the work done by Sheryl Kimes of Cornell University, bars and restaurants now have a more precise, time specific means of measuring revenue - RevPASH (Revenue Per Available Seat Hour).
Let's delve into RevPASH in a little more detail and see how this measurement can help you make your bar more efficient and generate more revenue.
Using RevPASH to Make Your Bar More Efficient
As an example, using figures easy to understand for example clarity, let's take a 100 seat restaurant and bar that generates $500 at full capacity in one hour, giving it a RevPASH of $5.00, or $500/(100 seats x 1 hour).
If during this peak time the restaurant and bar was able to turn the tables over quicker without sacrificing service or experience and handle more customers and increase revenue to $600, its RevPASH jumps up to $6.00, or $600/(100 seats x 1 hour).
Take this same restaurant and bar on the same day, but in a slower hour where capacity is 60% and sales total $300. You still have an average check of $5 as you did when running at full capacity, yet the RevPASH drops to $3.00, or $300/(100 seats x 1 hour).
If you use average check as your basis of measurement, you would conclude that each time frame did equally well. Using RevPASH, you have a more precise revenue measurement that also takes into account total revenue and time duration.
In order to be able to reach any solid conclusions about your RevPASH performance, you need a large sample size of 30 to 60 days of performance broken down by the hour. While it makes sense for the large multi-unit operator to acquire and calculate these numbers, for the small independent operator you likely will not require this level of detail.
Instead, you want to focus on the lessons other operators have learned from those who have run their RevPASH numbers.
If you wish to calculate your own RevPASH numbers, see the
RevPASH calculator download which has the formulas already plugged in.
Benefits of Better Bar Revenue ManagementBeing more precise in how you measure your revenue and the actions you then take allows you to create:
more revenue
run a more efficient operation
offer a more consistent experience for customersBest of all, to get these benefits, you likely will have zero or low out-of-pocket costs.
You can gain an increase in sales of 3% to 5% during peak times through quicker table turns and during slower times by increasing the amount spent per customer simply by implementing some or all of the below strategies.
Specific Revenue Enhancing Strategies You Can Take to Earn More
By plugging different revenue scenarios into the RevPASH calculator, you will see that you make more money during your busiest times by turning seats quicker and handling more customers than by working to increase the average check size per guest.
During your busiest hour(s) when you are close to capacity, your goal is to get your customers to turn over quicker without sacrificing the quality of their experience.
During your slowest hours, your goal is to increase the average check size through suggestive selling.
Peak Time Strategies
If you have a wait during peak times, you need to work on being more time efficient in seating your customers to avoid having some potential customers leaving because they did not want to wait any longer.
Use a Quicker Greeting and Seating
You want to greet and then seat your customers in a quick time frame. Check to see where you have room for improvement in this area.
Suggest Items That Take Less Time to Prepare and Have Higher Margins
Items with longer cook or preparation times should not be the specials your staff suggests during your peak times. Instead have your staff suggest items that can be prepared and served more quickly.
Minimize Trips by Waitstaff by Using the Right Sized Trays
Take a look at the type and size of trays your servers are using and determine if you need to make adjustments here in order to serve orders in one trip. Wasted time going back and forth to the kitchen or bar delays your ability to turn the table quicker.
Better Server Training
Do you have a server who is not as efficient as their co-workers? Determine if more training on working smarter should be done. You may want to have you most efficient servers lead this training and share their tips and techniques.
Faster Bar Service
If there is hold up in getting drinks from the bar, find out why. It could be you are understaffed, or less efficient procedures are being used, or your bartenders don't make it a priority to work fast when needed.
Better Bussing and Table Setting Procedures
Look any ways you can clear and reset tables quicker. This area if often where many bars and restaurants have significant room for improvement. You can't afford to have your least paid and least skilled position determining how many customers you can handle during peak times.
Move Equipment Closer to Job to Reduce Time Wastage
Is your bar optimally organized so that your bartenders have everything they need within one step? Look to see what needs to be moved closer to where your staff needs it to be in order to work more efficiently.
Have Proper Table Sizes for Your Bar's Customer Mix
Run a report from your POS that shows the average table size during your peak times. Be sure to look for any split checks that were closed for the same table about the same time, which can otherwise skew your results.
Run this data over at least a 3 week time frame to see how well your mix compared to what your customers actually use. Based on your results, you may need to change your table mix if your data proves conclusive.
Better Table Management
Analyze your seating procedures. Are parties of two being seated at four tops during peak times, leaving two seats unoccupied for the duration of the stay? You should go over with your staff to insure that small parties are not sat at larger tables during your rush.
Table management is a major determinant in how many customers you can handle during peak time frames. Fix any problems with this area right away.
Schedule Groups For Non-Peak Times
If you accept reservations, schedule groups of six or more for non-peak times. Groups take longer to serve and usually turn-over much slower, affecting how many customers you can handle during your busiest times.
Non-Peak Time Strategies
Your focus during your slower times is to get your customers to spend as much time as possible in your establishment, ordering high margin items.
This requires suggestive selling on the part of your staff to describe and suggest the specials, to recommend specialty drinks, appetizers, desserts, and after dinner drinks.
Try to limit your price promotions to your slower times of the day, when you need business the most.
You can use the RevPASH calculator to help determine the affect on overall revenue during specific time frames if you were to run an earlier or reverse happy hour in order to drive additional traffic.
Plug in the numbers to see how many more customers at a reduced price you need to sell in order to come out ahead of not discounting.
What Are Your Bar's Areas Needing Improvement?
As you can see, rolling out some or all of these strategies will make your bar more efficient and allow you handle more customers during peak times without sacrificing a quality customer experience.
Solicit feedback from your managers and key staff members about every step of how your customers are served. Because they are in front of customers every day and see first hand what's working and can be done better, they are an excellent source of ways to make your bar more efficient.
Once you determine where you can improve, put together an action plan, from the highest leverage task with the most impact to the least and roll out these strategies to make more money as you make your bar more efficient.
