Purchasing Controls √ 115
• distribute copies of the weekly audit forms to the receiving clerk and chef as part of con-
ducting, documenting, and monitoring receiving procedures.
• continuously monitor all high-cost items in order to readjust selling prices and/or food
recipes if costs get too high.
• ensure that standing orders are not commonly used to purchase products other than milk,
eggs, and breads.
Receiving Controls
Whoever is receiving deliveries has a unique perspective on a food-service operation, as well as credit memo Used to
an important responsibility in ensuring that the company is obtaining the quality and quan- record a credit due from
tity of merchandise ordered at the quoted price. He or she helps to provide crucial receiving a supplier when the
controls. It may be the purchaser who receives deliveries, or there may be a staff of receiving merchandise received does
clerks; in either case, the person in this role is responsible for accurately noting the status of all not conform to what was
orders received. We’ll use the term clerk here, though the person who actually receives ship- ordered. The discrepancy
ments may have a different title. could be in terms of quality,
quantity, specification, and/
The clerk should verify the supplier, quality, quantity, and price of products delivered before or price.
signing any receipt. The receiving clerk needs to ensure that a prenumbered, three-part credit
memo is issued. Whenever the weight or product count varies from what was ordered, one memo invoice A list of all
copy of the credit memo should be forwarded to the vendor; the second copy should be items received.
attached to a daily record of all receipts; and the third copy should be sent to accounts payable.
In general, a credit memo is used to record a credit due from a supplier when the merchan-
dise received does not conform to what was ordered. The discrepancy could involve quality,
quantity, specification, or price. The clerk should also notify the chef or manager immediately
when such discrepancies occur, since production needs may be affected right away.
At times a delivery will arrive without an invoice. The receiving clerk should write what is called
a memo invoice when this happens. A memo invoice is simply a list of all items received. This
documentation is critical for accrual and end-of-month cut-off totaling to ensure accuracy of
the accrual.
The clerk acts as the eyes and ears of the purchaser. The person receiving deliveries must make
sure that all invoices are marked with a receiving stamp that includes when and by whom the
order was received. The receiving clerk signs and dates the invoices and verifies quantities, unit
prices, and price extensions. Each item must have been ordered using a prenumbered purchase
order, and its number must be verified before delivery is accepted. This is the only way to
ensure that the items were approved before they were ordered.
The clerk must also bring issues to the attention of the purchasing manager—for example,
when a vendor consistently delivers products early or late. The purchaser can then inform
the vendor to ensure that it adheres to posted delivery hours. Similarly, the purchaser should
be notified when a supplier repeatedly provides merchandise that is substandard in quality or
quantity. The clerk should review the product specifications for quality indicators. The follow-
ing are some examples of quality problems associated with prepared produce products:
• Cauliflower or broccoli with dark spots and wet florets
• Shredded cabbage, diced bell peppers, sliced or diced onions, or carrots that are wet and
viscous or have excess liquid in the bottom of the bag
• Sliced radishes that are turning brown or are dry and cracked
• Salad mix or prepared lettuce that is brown or reddish-pink
• Sliced mushrooms that are brown and slimy.
116 √ Chapter 6
tare weight The weight of Auditing the Receiving Function
various empty containers
used to determine the net As the purchaser, you are responsible for proper receiving procedures. Management should
weight of perishables in also verify that proper receiving procedures are in effect. A random audit of the actual receiv-
these containers. ing process will help to ensure that all prescribed procedures, as listed below, are followed.
This audit should be performed regularly to ensure that all staff members involved are carrying
out the functions properly.
• The quantity of merchandise delivered should be compared to the quantity ordered
(weight, volume, and/or unit count).
• All goods purchased by weight must be weighed without wrapping, ice, containers, or
packaging materials. The receiving department should keep a record of the weight of vari-
ous empty containers in order to determine the net weight of perishables in these contain-
ers. This is called tare weight. If you use a printing scale, receiving clerks won’t need to
empty any containers, so they won’t risk endangering the contents.
• Products bought by count and by containers should be counted individually when
received.
• Goods that are purchased in cases should be examined to ascertain that the entire con-
tents of the case are present and of the specified quality.
• In a manual purchasing system, all cases should be marked with price per unit.
• Perishable goods are to be stored promptly and properly using appropriate rotation
procedures.
• Clerks should inspect all items for quality, uniformity, and adherence to specifications.
The receiving clerk should notify the purchasing manager of discrepancies.
• Perishable goods should be dated and priced on the container, or tagged or labeled if they
lack suitable surfaces for direct marking.
• Delivery documents or invoices should be stamped with a receiving stamp and appropri-
ately noted. All food and beverage merchandise is classified as direct or storeroom issue
by the purchasing manager or receiving personnel. (See below for a discussion of direct
versus storeroom issue items.)
• The accountant should compare the price on the invoice against the price on the purchase
order before processing the invoice for payment.
• The accountant should verify that receiving personnel complete credit memos and memo
invoices not requiring a specific form when appropriate.
Figure 6-1 is an example of a credit memo.
The credit memo form is used to record a credit due from a supplier. The receiving clerk
completes this form when the merchandise received does not conform to what was ordered in
terms of quality, quantity, specification, or price. Be sure to train the receiving clerk to have the
delivery person sign this form as well. This form may be prepared in triplicate. The original is
sent to the vendor to alert them of the discrepancy. The duplicate is sent to the accounts pay-
able department for payable verification. The triplicate is filed in the receiving department.
Random Audit of Receiving Procedures
Use the form in Figure 6-2 to audit the procedures of the receiving department randomly
and frequently. In Column 1, describe the item. Note the vendor and the invoice number
Purchasing Controls √ 117
Figure 6-1 Credit Memo
CREDIT MEMO
To:________________ No:_______________ Date:______________
Please IssueYour Credit Memo For Items Listed Below
Quantity Unit Item Unit Cost Total
Reasons: Party to whom delivered: By:
Acct. Department: Yellow: Purchasing Pink: Vendor
White: Accounting
Figure 6-2 Weekly Audit Form
Date: ________________ Receiving Personnel: ________________ Prepared By: ________________
1 23 4 5 67 8 9
Item Vendor Invoice Does a Is this the Was the Was the Does the Comments
description Name Number bid sheet lowest bid at item’s item’s quality
exist the required weight quality match
for this specification? or count checked? what was
item? checked? ordered?
in Columns 2 and 3. In Columns 4 through 8, write Yes or No for each question. This audit
should be performed while watching receiving personnel in their work; you want to see exactly
how they check a product’s quality, for example. In this way, you can praise complete work and
provide extra coaching if the clerk is not checking the deliveries sufficiently.
118 √ Chapter 6
Storeroom Functions
The storeroom is an area that requires special security and planning considerations to mini-
mize risks to valuable inventory. You will have to train storeroom personnel to conform to a
set of clear requirements that are not to be sacrificed when the establishment is busy or when
other pressures exist. The protection of the assets you have purchased is a key to successful cost
control. This need for security and accountability must, however, be balanced with the need of
your outlets to access the raw materials they are serving your customers. Once procedures are
established, however, the operation can be very smooth and consistent.
Storeroom personnel are responsible for controlling how and when merchandise is issued and
preventing loss from theft and spoilage. Specific functions include:
• ensuring that storeroom operation hours comply with management standards in order to
minimize off-hours entry, as this is a common breach of security.
• maintaining strict control of storeroom keys to ensure security.
• inspecting sanitation in all storage areas and bringing deficiencies to the attention of the
purchasing manager.
• verifying that food products are stored in the proper refrigeration units and that proper
temperatures are maintained and units are de-iced if necessary, so food quality does not
deteriorate and compromise sanitation standards.
• verifying that meat and seafood products in the freezer are wrapped.
• reporting any slow-moving items to the chef and the manager at the end of every month.
• ensuring that all food products have been marked with unit prices and that perishables
have been dated and stamped with the vendors’ origin.
first in, first out (FIFO) • practicing either first in, first out (FIFO) or last in, first out (LIFO) inventory rota-
Method of inventory tion procedures according to your company’s policy. FIFO means that you will use the
valuation and management oldest products first. This is advantageous for storeroom purposes and for avoiding spoil-
in which cost of goods sold age. However, in times of rapid inflation, a FIFO system causes an overvaluation of your
is charged with the cost of inventory. This is because the least expensive (i.e., oldest) inventory item is valued at the
raw materials, in-process new prices. When your inventory is overvalued, you appear to have more profit than you
goods and finished goods actually do, and you must pay additional taxes.
purchased first and in which
inventory contains the In inflationary times, you may wish to use a LIFO system to value your ending inventory. In a
most recently purchased LIFO storeroom, the most recently purchased products are used and charged, thus reducing
materials. current taxes by eliminating inventory profits. However, FIFO should always be used for prod-
uct rotation in the storeroom, even when an accountant uses LIFO for inventory evaluation.
last in, first out (LIFO)
An inventory costing Issuing Functions
method that assumes the
most recent units purchased When issuing food to outlets, the objectives are to ensure proper authorization for the release
are the first units used. of merchandise and to account properly for daily use. In doing so, issuing personnel must
The result is that ending observe the following procedures:
inventory consists of the
oldest costs and the most • Correctly record and update all food and beverage issues
recent costs are in the cost
of sales.
• Allocate all direct issue amounts (see below) to the correct outlet each day
• Verify that proper requisition procedures are being followed
Verification of requisition procedures should include both auditing after-hours requisitions
and checking who is allowed to take items from the storeroom.
Purchasing Controls √ 119
Direct Issue and Storeroom Issue Items direct issue A purchase
charged directly to a
The term direct issue means that a purchase is charged directly to a receiving outlet, such as receiving outlet.
the kitchen. The accounting system presumes that these purchases are consumed on the date
of purchase or transferred, so the purchase cost for these items is charged directly to the daily storeroom issue Purchases
food cost. Direct issue goods are not usually stored in the food storeroom; depending upon sent to the storeroom to
space, they are usually delivered to the kitchen outlet that ordered them. The goods most be stored and issued to
commonly classified as direct issue are bread, dairy products, fruits, vegetables, fish, and meats. the outlet when they are
Often they are the most perishable products, so leaving them in a storeroom only makes them requisitioned.
more likely to spoil before use.
Storeroom issue items, on the other hand, are food purchases that are sent to the storeroom
to be stored and, within a reasonable period of time, issued to the outlet when they are req-
uisitioned. Storing and issuing products can be very secure when you use the procedures out-
lined in the following sections.
Storeroom Procedures
Valuable inventory needs to be protected from theft, spoilage, and waste. Particularly with perpetual inventory A
perishable products, you must follow specific procedures to maintain sanitation and refrig- system of accounting for
eration. You must also keep and audit records of all products as they enter and leave storage. inventory changes, in which
This is what is called a perpetual inventory system—a running tabulation of goods received beginning and ending
and issued. A month-end inventory is used as a starting place, and then refigured with each inventories are noted along
receipt and issuance. At the end of every month, the perpetual inventory should be reconciled with any sales or purchases.
to the physical inventory, and discrepancies investigated. Discrepancies should be noted as
adjustments to the physical inventory in the perpetual inventory report and reported to the physical inventory A
manager. count of actual inventory
items, in order to note
Food products must be kept safe, as defined by federal regulations. This involves storing the quantities and values.
goods off of the floor, thereby avoiding problems with insects, rodents, floods, and other
sources of contamination. To further ensure safety from rodents and insects, schedule regular
exterminator visits.
Another important safety measure is to control refrigeration temperatures. Note the tempera-
ture guidelines for various products shown in Figure 6-3.
Figure 6-3 FridgeTemp Form Temperatures
42º Fahrenheit/6º Celsius
Item 38º Fahrenheit/4º Celsius
32–34º Fahrenheit/0–2º Celsius
Fresh fruits/vegetables * 32º Fahrenheit/0º Celsius
210º Fahrenheit/220º Celsius
Dairy products
Meat
Fish
Freezer items
*except bananas, grapefruit, potatoes, and
yellow onions, etc. which can be stored at
room temperature
As soon as perishable products are received, they must be transferred to their respective refrig-
eration units. In the case of fish and seafood, ice is the best preservative. Ice prolongs the
shelf life of these fragile products; be sure to store them so that the water drains off the ice
constantly.
120 √ Chapter 6
dead stock Stock without The storeroom should be well ventilated, with fans to provide air circulation. In addition to
significant inventory removing smells, this makes the storeroom a more pleasant place to work. Finally, sanitation
movement in sales due to must be maintained at the highest standard. Spills of any kind must be cleaned and disinfected
menu or service changes. immediately, and staff should clean all surfaces on a frequent and regular basis. This will mean
moving inventory in order to clean underneath packages and shelving, which is crucial to
storeroom cleanliness.
The storeroom must be organized logically and in a manner that preserves flavors and shelf
lives. Store heavy items that are issued in bulk, such as flour and sugar, closest to the storeroom
door. Do so as well with items that are most frequently used. This eases the physical strain on
personnel who must lift them. Organize all products by aisle and bin for easy location.
Overall, store different classes of foods according to their special storage requirements. For
example:
• Do not store eggs alongside foods with strong odors, such as fish or cheese, since egg-
shells are porous and can absorb flavors.
• Store tomatoes in the refrigerator to control how quickly they ripen.
• Avoid storing citrus fruits in the same area with vegetables and greens, as this will dimin-
ish their shelf lives.
• Do not store mushrooms and berries with potatoes and onions, as they will tend to mold.
• Store meat with the fat side facing up. If you store meat in Cryovac or other plastic, check
the packaging to make sure it is not punctured. This helps meat maintain its taste and
quality and keeps it from spoiling.
Facilitating storeroom record keeping is much easier with a system for marking or tagging
every inventory item. Immediately after receiving items, mark the date and price on perish-
ables with a wax crayon or colored sticker. These should be stored in a way that facilitates
FIFO rotation. In practice, the physical rotation of products is far more important than simply
dating products. Place new items behind older items. When employees are stressed and busy,
they are unlikely to look for the oldest date, and they will simply grab the most convenient
product. You want a system that encourages this common-sense rule: Items should be used as
soon as possible after receiving, and before newer items of the same type are used.
If you price your goods manually (i.e., without a computerized system), also price all canned
goods and staple items with a stamp or crayon before storing them. If you are using an actual
cost system (explained in more detail in Chapter 10), storeroom personnel should then calcu-
late the unit cost from the invoice and write the cost on the goods. These cost calculations can
be used as a basis for your total cost figures or inventory values.
Storeroom personnel should also keep track of how the inventory moves—or fails to move.
The chef must be advised, for example, of any perishables reaching the spoilage stage. These
should be used as a restaurant special or for employee meals and should be issued to an outlet
as soon as possible via the regular procedures. The storeroom supervisor should perform daily
spot-checks of perishables to prevent spoilage from occurring. He or she should also maintain
and update a list of dead stock items. The term dead stock is used to describe obsolete or dis-
continued stock items that are no longer in regular use due to menu or service changes. Dead
stock items should be kept physically segregated in the storeroom. The value of these items
should be updated regularly, and management should consider how to utilize these products
as soon as possible.
Monitoring and recording incoming and outgoing products is an important function in the
storeroom. Standardize hours of operation, and then post them in a conspicuous place. It
is important to impose strict limits on people who enter the storeroom to pick up the items
they need for their outlets. Ensure that the staff abides by these hours of operation by proper
Purchasing Controls √ 121
mise en place. Allow after-hours entry only on an exceptional basis, and only in the presence of
a manager or security person. Keep a logbook to note the names and departments of people
who enter after hours; check this logbook to determine who is using this privilege excessively.
Require that requisitions from outlets be submitted at least 24 hours in advance of needed
delivery, in order to allow adequate time to fill the orders. Require greater notice for special-
order or limited-delivery items. Schedule staggered delivery times for each outlet or area. This
serves two functions: first, the outlet will know when to expect delivery and will plan accord-
ingly; second, you and the issuing staff can plan your day around the deliveries. Each outlet
should have a par stock amount, which is a standard amount of each item it should have on
hand. These amounts can be based on the chef’s and manager’s experience, plus an assessment
of the outlet’s average use. This will help greatly in the requisitioning process. If you serve
banquet functions under a separate department, however, banqueting needs should be ordered
separately and on the basis of upcoming functions, rather than on a strict par stock basis.
Storeroom security is a vital concern. Stolen goods can be an enormous source of loss for your
company if security is not maintained. Take the following measures to minimize the risks of
loss from theft:
• Use adequate padlocks or strong locks. Replace locks at least once a year, or change the
combination of a combination lock on a weekly basis.
• Issue keys to as few individuals as possible, and let each person know how strictly you
expect those keys to be used. Keyholders should never give their keys to anyone, and
they should always accompany any storeroom entry. Also, whenever they allow someone
into the storeroom after hours, they should enter the visit in the logbook. Keys should be
signed out on a daily basis rather than issued indefinitely.
• If you install alarms on coolers and freezers, connect the alarms outside the storeroom to
enable other personnel to hear them when the storeroom staff is absent.
Storeroom Requisitions
A storeroom requisition is used to obtain food items from the storeroom. It is prepared in
duplicate by the requesting outlet. The original is signed upon issue of the merchandise and is
filed in the storeroom; outlet costs are calculated from these issued requisitions. The duplicate
copy is retained by the department issuing the requisition.
When writing prices on the requisitions, copy the item price directly from the containers or the
weekly price quotation sheet. Alternatively, an automated system can eliminate this step. Direct
issue requisitions do not require pricing, as they already have been charged to the receiving
outlet. The combination of direct issue items, transfers, and the prices tabulated from requisi-
tions equals the outlet’s food cost. This process is known as extension of the price, and it must
be carried out consistently in order to measure costs accurately.
After completing the price extensions, food items should be categorized and recorded. When
goods are used, they must be accounted for and replaced; the food-item record standard-
izes this process. The purchaser should then reconcile the record with the physical inventory.
This method is used primarily in manual (nonautomated) purchasing systems. The Appendix
includes a form called the Daily Storeroom Requisition Recap Form, which can be used for
this purpose. You can also design your own form. Simply include the items requisitioned and
issued to each outlet.
Meat Tag Systems meat tag A system
for controlling meat
When meats are stored centrally and are not issued directly to outlets, storeroom personnel by tagging, used for
will need to establish a meat tag system to identify and price all meat issued. The use of meat identification and
verification of actual use.
122 √ Chapter 6
tags can ensure an accurate issue price and weight on storeroom requisitions. Further, the
system aids in controlling meat waste in the storeroom. One copy of the meat tag is attached
to the item or kept in the storeroom until the item is issued. The second copy is sent to the
person performing accounting functions so that he or she can reconcile the expense.
As each meat item is received, it is tagged for identification and accurate pricing. You may
choose to set up a system in which one meat tag is prepared for each meat item, or one in
which a tag is prepared for lots of five or more items. In the case of a banquet order, you might
choose to set up the system to tag the entire shipment as a unit. Choose the system that works
best for your circumstances, and then prepare the meat tag (shown in Figure 6-4) as follows:
1. Each meat tag has a preprinted number for identification and control purposes.
2. The date is entered on the tag when the item is placed in the storeroom.
3. The vendor or supplier is entered on the tag when the item is received.
4. The meat cut (e.g., strip, loin, prime rib, tenderloin) is entered on the tag.
5. The weight of the item is entered.
6. The unit price of the item is entered, usually on a per-pound basis.
7. The total cost is calculated and shown as an extended price.
When the item is issued and recorded for daily cost purposes, the original meat tag is sent to
the person performing accounting and reconciliation functions, where it is stapled to the sec-
ond copy and filed. If an item is taken without a proper storeroom requisition, it will be easy to
identify from the second copy, and the appropriate cost can then be charged. The accounting
person should always follow up and determine the cause of any deviation.
Figure 6-4 MeatTag
MEAT TAG
Serial Number: (pre-printed)
Date:
Vendor:
Cut:
Weight:
Unit Price (per pound):
Extension:
Summary
The value of strict controls in purchasing cannot be overstated. Every dollar saved in purchas-
ing goes directly to profit, and there are many ways to save your company’s money. Success
in purchasing works for all employees; a profitable company is usually a much better place
to work.
About 90 percent of products purchased in the industry are food and beverage products. While
similar in many respects, they also have great differences. An endless number of vendors and
products makes determining the best buy a great challenge. Throughout the entire process,
ethical relationships must be maintained. Additional factors to consider include price, quantity,
consistency, reliability, availability, service, and product safety. Often, the factors conflict; for
Purchasing Controls √ 123
example, the supplier with the best price may not offer the best quality or service. Balanc-
ing these factors to optimize purchasing requires a careful analysis of your company’s specific
objectives. Ultimately, the end user, the consumer, plays a vital role by spending money where
he or she intends to get the best value. Each company needs to set appropriate purchasing
standards to meet the needs of its target market.
All of your care is for naught, however, if proper receiving, storage, issuing, and inventory
controls are not maintained. Proper receiving requires that quality, quantity, and price adhere
to standards and are duly recorded. Then the products must be stored securely in the appro-
priate environment. Depending on cost, frequency of use, and shelf life, some items are issued
directly, while others require a requisition and are issued from the storeroom. Use of the prod-
ucts must adhere to recipe and production standards to ensure proper control from purchas-
ing to use. Only by using these control procedures can expenditures for food and beverage
procurement be optimized.
Chapter Questions
Critical Thinking Questions
1. What are the primary objectives of receiving? What procedures should be followed to
ensure these objectives are met?
2. What are the objectives of auditing the purchasing department?
3. What are the advantages and disadvantages of FIFO and LIFO systems?
4. What are the differences between direct issue and storeroom issue items?
5. Define the following terms: credit memo, memo invoice, and tare weight.
Multiple Choice Questions
1. Proper receiving procedures require checking
A. the product’s quality.
B. the product’s quantity.
C. the product’s price.
D. all of the above.
2. What common-sense approach in determining how much to purchase is utilized by many
food-service operations?
A. purchase order
B. stockpiles purchasing
C. bid sheet
D. par stock
3. Which of the following is a business form that reduces the amount of the invoice when
items are refused or missing in the delivery?
A. credit memo
B. transfer memo
C. pickup memo
D. invoice addendum
124 √ Chapter 6
4. Which of the following is a purchase that goes directly into production and is
immediately assigned to the outlet that ordered it?
A. direct purchase
B. storeroom purchase
C. seafood
D. produce
PART
2
Beverage
Standards
Chapter
7 Introduction to
Beverages
Learning Objectives
After reading this chapter, you should be able to:
• define and classify beverages;
• distinguish among various distilled beverages;
• discuss how the history of beverages affects consumption today;
• explain the health and economic impacts of alcoholism, and identify how these
issues affect your sales;
• describe moral dilemmas and the law with regard to beverage sales;
• relate your pricing to the clientele and ambience of your establishment;
• calculate the cost of beverage items;
• discuss how availability and price competition affect your business;
• design your own pricing strategies.
In Practice
Two weeks before Myla Thomas was hired, the Sea Breeze Hotel lost its bev-
erage manager. So as one of her first duties, it became Myla’s responsibility
to recruit and interview a new beverage manager. Myla was pleasantly sur-
prised by the sheer number of interested candidates applying for the posi-
tion. When she sat down to think about it, she realized she had a strong list
of qualifications that she wanted the next manager to have:
• An in-depth knowledge of the products, from their manufacture to their
consumption
• Experience making beverage service profitable by implementing cost con-
trol procedures in purchasing, storage, and sales
• The ability to deliver customer satisfaction
• An understanding of the characteristics of beverage products and their
consumption trends
• An ability to read and interpret profit and loss reports
Myla knew that consumers could satisfy their needs for beverages in thou-
sands of places; therefore, the next manager’s chances of success among so
(continues)
Introduction to Beverages √ 127
(continued )
much competition would depend largely on his or her knowledge and ability
to manage and control costs.
Just before Myla started the first interview, she came across the following
statement in the former beverage manager’s file:
“Beverages differ significantly from food products in several ways.These dif-
ferences will affect how you order, receive, store, monitor, and serve bever-
ages, and can impact your cost dramatically. First, beverage packaging is
standardized, unlike food packaging. The establishment of just a few packag-
ing styles, rather than the infinite variety found in food packaging, means
that storage can be planned around the forms of packaging you know you
can expect. Thus, beverage shelf life is generally greater and more consis-
tent than that of food, and the required storage temperatures are less strict.
This usually makes beverages easier to order and to stock. Further, bever-
age costs are normally more stable and predictable, so planning for sales
and profitability is fairly straightforward. Access to beverage storage areas
is generally limited, so you have greater control. With beverages, you can
assume 100 percent yield for what you buy, which is not the case with vari-
able and volatile food products. Staff members are usually the sole cause
of yield variances in the beverage system. When you set up strong control
procedures, you can build excellent profit in this area. With all these factors
making it easier to control beverages, you can do so more accurately, com-
pletely, and profitably.”
Introduction
In controlling restaurant costs, you will treat food and beverages quite differently. This section
addresses these differences and explains how procedures for beverage control can be employed
effectively. You will learn how to approach beverage control in matters such as purchasing, inven-
tory procedures and control, sales, and customer satisfaction. Everyone in your establishment
should be asked to cooperate in this effort to ensure the most profitable beverage sales category.
Beverage Basics
Beverages are both alcoholic and nonalcoholic drinkable liquids. Nonalcoholic beverages ethanol is alcohol.
include soft drinks, mineral water, and sparkling wines and beers containing no more than 1/2
percent alcohol. Alcoholic beverages, on the other hand, contain ethanol and are usually clas-
sified as either fermented or distilled spirits. Alcoholic beverages comprise a large portion—in
both volume and sales—of the restaurant industry, and their purchase, sale, and consumption
will be a chief concern as you work to control costs and maximize profits.
Fermented Beverages
We’ll start our discussion with a description of the two main categories of alcoholic beverages:
fermented and distilled spirits. Fermentation is the action of yeast and grain such as wheatin a
solution to form beer, or the action of yeast and grapes to form wine. Simply put, fermented
grapes become wine, while wheat becomes beer. This process breaks down sugar from the grain
or grapes into two components: alcohol and carbon dioxide gas. The gas escapes into the air,
while the liquid alcohol remains behind and forms a fermented beverage. Figure 7-1 illustrates
128 √ Chapter 7
the process of carbon dioxide evaporation. The amount of alcohol left behind depends on
the amount of sugar in the grains. Grains with greater sugar content produce a liquid with a
higher percentage of alcohol.
Figure 7-1 CO2 Evaporation
The fermentation process produces wine and beer containing varied amounts of alcohol. In
a standard beer, alcohol content ranges from 4 to 6 percent, though some specialty imports
range as high as 12 or 14 percent. Wines normally range from 12 to 21 percent. Figure 7-2
compares a 10-ounce beer with 4 percent alcohol, a 4-ounce glass of wine with 13 percent
alcohol, and a gin and tonic with 1.5 ounces of gin at 45 percent alcohol.
Figure 7-2 Alcohol Content
Product Alcohol percent Alcohol volume Comparison
Ten ounces of beer 4% (as an example) 0.42 ounces
Four ounces of 13% (as an example) 0.52 ounces 30% greater than the
wine beer
1.5 ounces gin 45% (as an example) 0.675 ounces 69% greater than the
beer; 30% greater than
the wine
The volume of alcohol is directly related to the level of intoxication a person will experience.
As a seller of alcohol, it is important that you understand these characteristics of your products.
According to a recent national survey of adults conducted by Macchew Greenwald and Associ-
ates, only 46 percent of adults surveyed knew that a mixed drink made with 1.5 ounces of 80-
proof distilled spirits, a 12-ounce serving of beer, and a 5-ounce serving of wine all contain the
same amount of alcohol. This is quite revealing, as you will see from the rest of the chapter.
Beers are manufactured under consistent production standards, particularly by large breweries.
However, they are also the most perishable of all alcoholic beverages once they are opened. Further,
quality can vary due to improper delivery, storage, or service. Wines, too, can be greatly affected by
improper storage and handling, and they can be very inconsistent products. Wine quality must be
evaluated constantly because of the instability of the products’ manufacture and components.
Distilled Beverages
Distilled spirits are fermented first, then the alcohol is further processed, or distilled, from
the fermented liquid. In the distillation process, the liquid is heated in a still (that’s where
the word distilled comes from) to at least 175º Fahrenheit. At this temperature, the alcohol
changes from a liquid to a gas and rises. Most of the water solution is left behind because
Introduction to Beverages √ 129
water does not evaporate until it reaches 212º F.1 The high-alcohol-content gas is channeled
off and cooled so that it condenses into a liquid again. The result is what is called a distilled
spirit. These spirits are made under rigorous quality control. Because of their resulting stability,
distilled spirits, cordials, and liqueurs are considered the most consistent of beverage products.
This category includes rum, brandy, and whisky, and its products normally range from 40 to
70 percent alcohol.
Beverage Classification
Which of the beverages you see at a bar are fermented, and which are distilled? Given just these
two categories, how can there be so many alcoholic beverages? Figure 7-3 lists the familiar
names of alcoholic beverages.
Figure 7-3 Alcoholic Beverages
Fermented Distilled
Beers Wine Whiskies Gins Vodka Rum Tequila Brandy Liqueur others
and Ales
lager table scotch London cognac amaretto aquavit
ale - white Irish dry armagnac b&b
Holland
draft - red bourbon calvados benedictine
stout - rose rye chartreuse
light aperitif blend cointreau
- vermouth Canadian curacao
- dubonnet light drambuie
dessert galliano
- sherry irish mist
- port kahlua
- Madeira pernod
- marsalla
sparkling
- champagne
- sparkling
burgundy
The federal government has established standards of identity for various types of distilled spir-
its, wines, and malt beverages. Figure 7-4 is an example of a label on a bottle of whiskey. This
bottle information states certain requirements: what the liquor is made of, how it is made,
the type of container it is aged in, and the alcohol content. These rigidly enforced standards
Figure 7-4 Makers Mark Symbol
1See Appendix 380, Critical Temperatures for Quality Control, for details on products and temperatures.
130 √ Chapter 7
√ Discussion produce a beverage with distinguishable characteristics; federal inspections insure compliance
Point from each manufacturer. Imported products must also meet such standards in order to enter
the country. Therefore, everyone will recognize the contents as whiskey.
Why are beverages
packaged more These standards were developed after the repeal of Prohibition in 1934. The government
uniformly than food? imposed a strict control system on the new alcoholic beverage industry to avoid the chaos of
the Prohibition era. The purpose is twofold: to provide the basis for assessing and collecting
profit margin is federal taxes, and to protect the consumer. Beyond this, the standards can be helpful to you
determined by subtracting in understanding your products. You will know what you are buying and controlling, as well
your cost from your sales. as the differences between similar products. This gives you a basis with which to analyze your
profit margin, this chapter’s primary focus.
proof is the measure of the Differences among Distilled Beverages
alcoholic content of a spirit,
each degree of proof being Distilled beverages are alike in several ways. They are all distilled from a fermented liquid. They
½% alcohol by volume, all have a high alcohol content. And they are all served primarily before or after meals. Several
often written with the distinctions are important to the beverage industry, however. Primarily, these are differences of
degree symbol, as 100°. flavor and body, two characteristics of great importance to your customers.
√ Discussion Each type of liquor has a distinct taste or flavor. Within each category, there are further taste
Point differences; for example, bourbon whiskey tastes very different from scotch whiskey, and Irish
whiskey tastes different from both. There are also taste differences between brands. Most
As a manager, how guests who order these types of drinks know what kind of flavor they are looking for; in the
should you determine beverage business, you will have to understand their wishes and be prepared to provide them.
the types and brands
of spirits that you Body is another recognizable characteristic. There are full-bodied and light-bodied products
offer? within several categories. Three main factors determine both flavor and body:
1. The grains or other ingredients in the original fermented liquid
2. The proof at which the beverage is distilled. Proof is the measure of the alcoholic con-
tent of a spirit. Each degree of proof is 1/2 percent alcohol by volume, often written
with a degree symbol, as 100°.
3. What is done with the spirit after distillation, such as adding flavorings or colored com-
pounds to make the beverage distinctive
These variables make the proliferation of many brand names possible. You’ll need to research
the types of spirits and the brand differences in order to understand what your customer wants
and will pay for. Different vendors can help you with this process, so that you can provide a
range of products that is of reasonable size and cost, yet meets your clients’ expectations.
√ Discussion The History of Beverages
Point
To understand the beverage industry, there are key moments in U.S. history that explain how
What do you see as laws and practices have evolved. Since the repeal of Prohibition in 1934, consumption trends have
the long-range trend changed with the times. Several societal and industry factors have contributed to these changes;
in beverage sales? some are controllable, and some are not. Figure 7-5 is an example of how consumption has var-
ied with political and social change. It can be read as a chronology of the last several decades.
Overall, alcohol consumption is dropping, but it is decreasing most dramatically in the cat-
egory of spirits. This information affects you and your beverage outlet directly, and you will
need to plan to capitalize on the purchases your customers are still making. A study by the Dis-
tilled Spirits Council (DSC) indicates that, as overall consumption drops, the percentage of
premium brands consumed has increased. This indicates that people who choose to drink end
up drinking lower quantities of distinctly higher-quality beverages. The DSC study confirms
the decrease in overall consumption, particularly with regard to distilled spirits (Figure 7-6).
Introduction to Beverages √ 131
PER CAPITA CONSUMPTION IN GALLON U.S. PER CAPITA CONSUMPTION OF PURE ALCOHOL, 1934–2005
3
2.5
2
1.5
1
0.5
0 1934 1944 1954 1964 1974 1984 1994 2004 2005
0.61 1.13 1.01 1.04 1.25 1.35 1.25 1.21 1.19
Beer 0.07 0.18 0.21 0.24 0.31 0.37 0.28 0.35 0.36
Wine 0.29 0.76 0.74 0.95 1.11 0.94 0.65 0.68 0.7
Spirits 0.97 2.07 1.96 2.23 2.67 2.66 2.18 2.24 2.25
All ethonol
YEAR
Figure 7-5 U.S. alcohol consumption. Courtesy of U.S. Apparent Consumption of Alcoholic Beverages
Based on State Sales,Taxation, or Receipt Data. U.S. Alcohol Epidemiologic Data Reference Manual,
Volume 1, Fourth Edition, June 2004, NIH Publication No. 04-5563.
In Figure 7-6 you can see that per capita consumption by people over 21 was as high as 3.14
gallons in the 1970s, but dropped to only 1.87 gallons in 2007. The decline is in part due to
public awareness of the effects of alcohol on health, as well as government interventions such
as drinking and driving laws. Other studies conducted by the DSC confirm a proportionate
increase in sales of nonalcoholic beverages, such as mineral water and sodas, during these years.
A further study, commissioned by the Beer Institute, illustrates another portentous change in
beverage demand, as shown in Figure 7-7.
From this study, it is evident that malt beverages such as beer have gained a considerable
market share in recent years. When we say malt beverages, we are referring to beverages made
from malted grains, usually barley, that are sprouted to about 3/4 inch and then dried. The
beer industry’s rigorous promotional activities, as well as beer’s lower alcohol content, have
contributed to its successes. The same is not true with spirits. In fact, the distilled beverage
industry has imposed its own restrictions against advertising in the United States; however,
these restrictions have been relaxed as the industry’s products have lost market share.
The overall distribution of alcohol consumption is illustrated in Figure 7-8.
Why the Changes?
Consumption patterns have changed through the actions of three major forces. Our discussion
of these forces will focus on how—and whether—your food and beverage establishment can
impact or control these forces while maximizing profitability. The three factors are as follows:
1. Health and economic impacts of alcoholism (uncontrollable)
2. Moral dilemmas and the law (uncontrollable)
3. Pricing and clientele (controllable)
4. The first two of these topics are discussed on the following pages; the third, being con-
trollable, will be discussed in depth later in the chapter.
Apparent Consumption of Distilled Spirits in the United Sta
License States \a Control States Total
Wine Percentage Wine Percentage Wine
Gallons
Gallons of Total Gallons of Total Percentage
(000) Change
Year (000) Consumption (000) Consumption
1934 45,892 79.2 12,073 20.8 57,965 ---
1944 124,414 74.6 42,265 25.4 166,680 14.5
1954 136,956 72.3 52,515 27.7 189,471 –2.7
1964 209,721 76.0 66,141 24.0 275,862
1974 314,476 75.4 102,841 24.6 417,317 6.5
1984 324,226 76.0 102,512 24.0 426,738 2.5
1994 252,286 75.4 82,203 24.6 334,489 –1.0
2003 290,800 75.9 92,582 24.1 383,382 –1.9
4.6
NOTE: Because of rounding, detail may not add to total.
Beginning with 1992 data, apparent consumption includes low-proof data. T
\ a Includes District of Columbia; Alaska, beginning 1959; Oklahoma, beginning 196
\b Population data includes all states for all years except Hawaii & Alaska from 1934
\c Includes Mississippi gallonage from July through December 1966.
SOURCES: Distilled Spirits Council of the United States, Inc.; National Alcohol Bev
Figure 7-6 Distilled Beverages
132
ates, License and Control States, 1934 - 2003 √ Chapter 7
Adult Per Capita Per Capita
Resident Population\b Consumption Consumption Number
Population\ b (21 & Older) (Resident) (21+) of
(000) (000) (gal/person) (gal/adult) States
126,374 77,619 0.46 0.75 28
132,885 85,599 1.25 1.95 46
161,884 101,910 1.17 1.86 47
191,085 113,261 1.44 2.44 49
213,342 133,110 1.96 3.14 51
235,825 161,112 1.81 2.65 51
260,362 181,895 1.28 1.84 51
290,811 205,473 1.32 1.87 51
Therefore, data before and after 1992 are not entirely consistent.
60; Hawaii, beginning 1965.
4-49.
verage Control Association; Bureau of Census, U.S. Department of Commerce.
Introduction to Beverages √ 133
SHIPMENTS OF MALT BEVERAGES, 1934 – 2007
Quantities in 31 Gallon Barrels
250,000,000
200,000,000
BARRELS 150,000,000
100,000,000
50,000,000
Barrels
0
1934 1944 1954 1964 1974 1984 1994 2004 2007
Barrels 36,167,30 76,490,083 82,475,465 97,851,973 144,173,823 182,474,264 189,181,103 204,200,805 211,642,085
YEARS
Figure 7-7 Malt Beverages Shipments. Courtesy of the Beer Institute. Note:This chart represents
apparent consumption, as it reflects shipments or sales at the wholesale level.This differs from
national tax-paid withdrawals plus imports, due to reporting procedures and inventory levels.
Figure 7-8 Ethanol BeverageType
Proportional Changes in Kinds of Ethanol by Beverage Types, In Percentages Consumed, 1934–2004
1934 1944 1955 1964 1974 1984 1994 2004
Beer 63% 55% 52% 47% 47% 51% 57% 53%
Wine 7% 9% 11% 11% 12% 14% 13% 16%
Spirits 30% 37% 38% 43% 42% 35% 30% 31%
All Ethanol 100% 100% 100% 100% 100% 100% 100% 100%
Health and Economic Impacts of Alcoholism
The National Institute on Alcohol Abuse and Alcoholism (NIAAA), a branch of the U.S.
Department of Health and Human Resources, as well as other organizations such as Mothers
Against Drunk Driving (MADD), have been instrumental in alerting the public to the dangers
associated with alcohol abuse. A major study conducted by the NIAAA reveals the following:
• In 2003, 39.9 percent of traffic accident fatalities were alcohol-related. By 2004, the per-
centage dropped to 39.5 percent, but in 2006 it rose again to about 49 percent. In 2006,
alcohol-related crashes killed 16,919 people. Over 1.46 million drivers were arrested in
2006 for driving under the influence of alcohol. This is an arrest rate of 1 for every 139
licensed drivers in the United States.
• Arguably, alcohol abuse and alcoholism have accounted for more economic and social
damage than any other public health problem. The cost to society from these disorders is
134 √ Chapter 7
estimated at $90 to $116 billion annually. More than 70 percent of these costs are in the
form of productivity losses due to excess morbidity and premature mortality attributed to
alcohol use. Less than 13 percent of these funds are spent to treat alcohol disorders or the
medical consequences of alcohol consumption.
• Alcohol misuse is involved in approximately 30 percent of all suicides, 50 percent of homi-
cides, 68 percent of cases of manslaughter, 52 percent of rapes and other sexual assaults,
48 percent of robberies, 62 percent of assaults, and 49 percent of all other violent crimes. In
addition, approximately 30 percent of all accidental deaths are attributable to alcohol abuse.
• An estimated 20 to 40 percent of persons admitted to urban general hospitals have
coexisting alcohol problems and often are undiagnosed alcoholics being treated for con-
sequences of their drinking.
• Liver cirrhosis is the ninth-leading cause of death, with an annual toll of more than 28,000
lives. Persons with alcoholism are also prone to other health problems, including neuro-
logical diseases.
• More than 100,000 deaths each year are associated with alcohol-related causes.
• Fetal alcohol syndrome (FAS) is the leading preventable cause of birth defects in the west-
ern world. FAS, one of four leading known causes of mental impairment, affects 1 to 3
infants per 1,000 live births. In 2006, the direct cost of treating FAS was about $2.7 bil-
lion in the United States.
• Almost 14 million adult Americans meet diagnostic criteria for the medical disorders of
alcohol abuse and alcoholism. About 40 percent have direct familial experience with one
of these disorders.
Clearly, sufficient reasons exist for due caution in serving alcohol. The alcohol consumer needs to
understand the dangers, and your company has to take whatever steps you can to avoid negative
impacts. As an outlet for alcoholic beverages, your goals are happy customers and good profits,
not problems like those listed above. This brings us to the second force affecting consumption.
dram shop law A law Moral Dilemmas and the Law
requiring that not only
must the consumer take Laws governing alcohol offenses can be very inconsistent. The single exception is that the age at
responsibility for his or her which one can drink has been federally mandated at 21 years. Aside from that, each state treats
actions while intoxicated; alcohol-related offenses very differently. In recent years, the term “third-party liability,” otherwise
so too must the provider of referred to as the dram shop law, has gained recognition. Under this law, not only must the
the alcohol. consumer take responsibility for his or her actions while intoxicated; the provider of the alcohol
is considered liable as well. Individuals, hotel and bar personnel, and legislators have grown con-
cerned about the high social cost of alcohol abuse. Bars and restaurants receive money for serving
alcohol; third-party liability balances that monetary gain with culpability and prudence. The dram
shop law brought about many changes in attitudes and practices within the industry, including
the following: encouraging designated driver programs, the sale of mocktails (cocktails without
liquor), bartenders’ refusal to serve inebriated customers, and bartenders’ assisting customers
with calling taxis. Manufacturers, too, show respect for the law when they include warning labels
on their products or add statements such as “Please drink responsibly” to their advertisements.
Quiz
What is the legal drinking age in the United States? What constitutes intoxica-
tion in your state?
Introduction to Beverages √ 135
In 1980, a tragic event changed the gradual trend toward prudence into a virtual revolution.
A drunk driver with five previous arrests killed a 13-year-old in a car accident. The child’s
mother formed MADD, which has become a formidable body for public awareness. Largely
in response to MADD’s efforts, legislators introduced laws to reduce drunk driving, often by
raising the drinking age and by creating a legal definition of intoxication in terms of blood
alcohol content. In Colorado, for example, legal intoxication is measured at .05 percent blood
alcohol content and up. In your beverage service, awareness of these laws must be part of how
you think about and do business.
Your company policy should include an awareness of these issues and specific policies for staff
to follow. Your company and management must support bartenders when they refuse to serve
an inebriated customer, and you must actively encourage options like mocktails, designated
drivers, cab service, and staff education.
Quiz
Why is an understanding of third-party liability vital to the success of anyone
engaged in selling alcoholic beverages?
Pricing and the Clientele
Pricing and clientele are areas in which you and your company determine some of the con-
ditions under which alcohol will be consumed in your establishment. Both factors depend
largely on the type, location, and patrons of your outlet. Most businesses operate with more
enthusiasm than foresight, and they rely solely on advertisement, entertainment, or someone
else’s successful formula to improve sales. In this section, you will learn how to price your
products only after carefully considering cost, availability, competition, and environment. This
will not only make you competitive, but also give you a vital edge.
Do Consumers Really Respond to Prices?
Jess Stonestreet Jackson is the founder of Kendall Jackson Winery, which spe-
cializes in making popular wines that are good enough to command a premium
price. Jackson, who is now a billionaire, prices his wines a few dollars higher
than other mainstream wines. For example, if a Clos du Bois chardonnay
costs $9 at retail, Jackson will charge $11 for his chardonnay. When chardon-
nay became the rage in the late 1990s, Jackson tried pushing up his prices by
another few dollars over the competition. Unit sales dropped by 18 percent.
Jackson rolled back his prices, and the volume recovered.
Source: Tim W. Ferguson, “Harvest Time,” Forbes, October 16, 2000, pp. 112–118. Reprinted by
permission of Forbes Magazine © 2008 Forbes LLC.
Cost
The cost of a bottle of wine or beer is straightforward; it is also relatively easy to determine
the cost of a mixed drink. You simply add the raw costs of the ingredients together. Figure 7-9
is an example of costing a Bloody Mary. We have added commonly used terminology to the
worksheet. An explanation of the terms is below the worksheet.
136 √ Chapter 7
Figure 7-9 One Serving Cost Worksheet
One serving recipe costing worksheet
1. Item number M611 2. Is the item active? YES NO
3. Item description: Bloody Mary 4. Revenue group: Beverage
5. Prep location: Lounge Bar 6. Salable? YES NO
7. GL Account Number: 01120-130 8.Tracking period: DAILY MID MAIN
9. Batch size: one serving 10. Recipe group: Beverage
11. Ingredient 12. Ingredient item 13. Number 15. Unit cost 16.Total cost 17. Percent
of recipe 14. Recipe units cost
item number description units
87 Vodka Smirnoff 80 1.25 fluid ounce (FZ) $0.24 $0.30 31.25%
718 juice V-8 5.5 FZ $0.06 $0.33 34.38%
941 pepper black ground 0.25 WZ $0.39 $0.09 9.38%
617 spice celery salt 0.5 WZ $0.13 $0.06 6.25%
197 sauce horseradish 1 FZ $0.07 $0.07 7.29%
801 sauce Worcestershire 0.25 FZ $0.21 $0.05 5.21%
555 sauce Tabasco 0.1 FZ $0.36 $0.03 3.13%
631 lemon fresh 0.167 CT $0.18 $0.03 3.13%
TOTALS: $0.96 100%
18. Potential cost: $0.96
19. Menu cost: $5.00
20. Potential percentage: 19.22%
21.Target beverage cost percentage: 20%
22.Targeted menu price: $4.78
This worksheet is similar to the potential costing worksheet in Chapter 10. We’ll list the steps
to completing this worksheet here; if you’d like more information, review Chapter 10.
1. Item number. This is the menu item number you have assigned. If convenient, you can
use the same number as your POS system uses to track the item.
2. Is the item active? An active item is one that is being used presently.
3. Item description. In this case, it is a Bloody Mary cocktail.
4. Revenue group. In this case, the group is “beverage.”
5. Prep location. This identifies where the recipe is used for companies with multiple loca-
tions. This helps new employees, transferred personnel, and others who might not be
familiar with the item.
6. Is it salable? Salable means that, when this recipe is completed, you’ll have a product
you can sell. Contrast a recipe for a single Bloody Mary with a recipe for a gallon of
Bloody Mary mix for the bar: A single drink is a salable recipe, while a recipe for a mix
Introduction to Beverages √ 137
that won’t be sold until it’s further prepared is called a prep recipe. Circle YES or NO
to indicate the item’s status. This information is used to determine whether this item
will be counted when you report sales.
7. GL account number. This space lists a general ledger number to which the expenses for
this item should be assigned. This is a standard accounting practice. Your department
will have several GL account numbers, and you will decide which costs and revenues
go to each account. Our number here is just an example; companies use many different
formats for these numbers.
8. Tracking period. This is used in many operations to state the period of time used when
tracking an item’s usage. You’ll circle DAILY to indicate that the item is tracked every
24-hour period, MID if the item is tracked semimonthly, or MAIN for a standard ac-
counting period, usually one month.
9. Batch size. The batch size is the total amount produced by a recipe. In our example, the
batch size is one serving. You should practice making the recipe to measure the accu-
racy of the recipe size.
10. Recipe group. Recipes are grouped into categories to control and report what is made
and sold. In this case, the category is beverage; you might also have categories such as
appetizers, entrées, side dishes, and desserts.
11. Ingredient item number. This is the inventory code number, used to identify and track
how specific ingredients are utilized.
12. Ingredient item description. This is simply the name of the ingredient. It is listed with
the generic name first, followed by any specific types. Vodka, juice, and sauce are
the generic products, while Smirnoff, V-8, and horseradish specify which ones you
should use.
13. Number of recipe units. Record here the number of units for each item used in the
recipe.
14. Recipe unit description. The recipe unit description will be WZ, FZ, CT, or TS depend-
ing on whether the inventory item is measured in weighted ounces, fluid ounces, unit
counts, or teaspoons, respectively. See Appendix for a detailed listing of units.
15. Unit cost. This is the cost per teaspoon, count, weight ounce, or fluid ounce. In the
example of vodka, suppose it costs $8.12 per 1-liter bottle (remember that 1 liter equals
33.8 ounces; see Appendix for a conversion table). Divide the price of the liter by the
number of ounces to get the price per ounce, or unit cost: $8.12 4 33.8 5 $0.24 per
ounce. This calculation is performed for all ingredients.
16. Total cost. Next, multiply the unit cost (Column 15) by the number of units needed
for the recipe (Column 13). For example, 1.25 ounces of vodka is multiplied by its
unit cost of $0.24 per ounce, to arrive at $0.30. Once make this calculation for all
the ingredients, total all these amounts. The result is the total cost of the serving, or
$0.96.
17. Cost percentage. The cost percentage is the proportion of the cost of each item to the
cost of the whole. Simply divide an item’s total cost by the total batch cost to get this
percentage. In the case of the vodka, this is $0.30 4 $0.96 5 31.25 percent.
18. Potential cost. This is the sum of the total costs of all ingredients, or $0.96.
19. Menu price. In our example, we set the menu price at $5.00.
20. Potential percentage. This is determined by dividing the cost (in our example $0.96) by
the selling price, $5.00. This is the percentage cost you will have if you follow all con-
trol procedures accurately.
138 √ Chapter 7
21. Targeted beverage cost percentage. We set 20 percent as our target in this example. That’s
the beverage cost percentage we wanted to achieve for this drink. This compares favor-
ably to the potential percentage in Item 20 and gives us a small cushion in our price to
cover errors.
22. Targeted menu price. This is derived by dividing the potential cost (Item 18) by the tar-
geted beverage cost percentage (Item 21). It is recommended to set actual price above
target price due to cost control issues, which are discussed later in this chapter.
This example lists the ingredient costs of producing a Bloody Mary, but the time and equip-
ment used also must be considered. In these calculations, always use the replacement cost,
which is the current cost of replacing the item with one of the same type. Also remember the
hidden costs of doing business. While your customers may see only the quality and quantity of
the Bloody Mary mix in front of them, you also must consider the costs of storing and creating
the recipes. The costs of spillage, spoilage, breakage, ice, payroll, and many other items add
to the hidden costs. A customer is unaware of these costs and thus may wonder why a Bloody
Mary is so expensive. Managers must, nevertheless, consider these costs when calculating a fair
(and profitable) drink price.
Competition and Availability
A customer might pay more for a Bloody Mary at a mountain ski resort than in a state capital,
or more in an airport than in the neighboring city, because there is no competition on top of
a mountain or in an airport. Competition can influence pricing strategies significantly. Your
role will include watching your competition and investigating their pricing structures so that
you can make good decisions about how to price your own offerings. You will also want to
find out whether what you offer is available in your vicinity. If you’re the only establishment
offering an extensive wine list, for example, you may be able to take advantage of that lack of
competition.
Environment
When customers pay a price for a service or product, they perceive a relationship between price
and quality. As you set prices for services, you must keep your target customers’ price-quality
perceptions in mind. Nowhere is this more evident than in the price of beverages. People who
drink wine at home, for instance, are well aware of the actual cost. At your establishment they
are paying more money for a bottle of wine. Why? What is it that you offer that makes them
willing to pay a premium price, when they could have the same product at home for less? You
will have to identify the level of service and quality your target customers expect, which is tied
to how much they will be willing to pay. Your pricing strategy can be as easy as understanding
your competitors—both the successful ones and those that fail or change strategy. The tricky
part, then, is calibrating a good equilibrium for your own outlet or outlets. You will want
to consider service levels and ambience with respect to your target audience. If the services
and entertainment you provide are extraordinary, your customers might not object to paying
more. Always remember that a beverage enterprise is a business, with the goals of maintaining
a competitive edge, achieving employee efficiency, and enhancing the owner’s investment.
Designing Your Pricing Strategies
Your beverage pricing can affect the number of drinks you sell; therefore, you must put some
time and consideration into setting your menu prices. Because of the large variety of products
and brands that are found in bar and beverage operations, products are usually categorized to
facilitate pricing and control. This eliminates the vast differences among the thousands of dif-
ferent drinks. In general, categories are based on types of drinks and cost.
Introduction to Beverages √ 139
What Did That Salmon Dish Cost?
Restaurants mark up food costs by an average of 300 percent to cover their over-
head and to generate a profit, but the markup is not the same for all items on the
menu. Some ingredients—especially prime cuts of beef and exotic seafood such as
fresh scallops—are so costly that diners would not tolerate a 300 percent markup.
Instead, restaurants make up the difference on the cheap stuff—vegetables, pasta,
and salmon. Why salmon?The farmed variety is only $2.50 per pound wholesale—
much cheaper than prime restaurant-quality beef. At the Docks Restaurant in New
York, a 10-ounce salmon dinner garnished with potatoes and coleslaw has a menu
price of $19.50.The actual cost of the ingredients is only $1.90.
To take another example, the ingredients of the best-selling Angus beef tender-
loin at the Sunset Grill in Nashville,Tennessee, cost the restaurant $8.42. Apply-
ing the average 300 percent markup, the price of the meal would be $33.68. Few
diners would order the meal at that price, however, so the restaurant charges
just $25. In contrast, the restaurant charges $9 for its grilled vegetable plate,
whose ingredients cost only $1.55.
Source: Eileen Daspin, “Entrée Economics,” The Wall Street Journal, March 10, 2000, pp. W1
and W4. Reprinted by permission of The Wall Street Journal, Copyright © 2000 Dow Jones &
Company, Inc. All Rights Reserved Worldwide. License number 2103290892213.
There is no industry standard for either this categorization or the practice of price markup, but
the following list describes recognized categories for beverage service:
• Well brands. These are spirits that are poured or served to the guest when the guest does
not specify a particular brand. The manager will select these carefully to balance a guest’s
perception of average quality and an acceptable company cost. Remember that most
guests who do not specify a brand either don’t have a preference or are price-conscious.
Whoever selects your company’s well brands will have to determine what the clientele will
consider mid-range. A low-quality well liquor may cause guests to complain, while a high-
quality product can increase costs dramatically.
• Call brands. This refers to brands that a guest requests by name, such as Jack Daniels
whiskey or Remy Martin VSOP. They are more expensive, and they represent a guest
preference over other brands—and you should price them accordingly.
• Premium and super premium brands. These are the high-end examples of call brands;
accordingly, they are popular with high-end guests. Louis XIII cognac could be classi-
fied as premium or superpremium because of its triple-digit price tag. Prices with these
brands are virtually unlimited; you’ll have to determine which expensive brands you wish
to carry, if any, based on your clientele. You can then rank them as premium or super pre-
mium based on their prices.
• Domestic bottle beer. These are beers made in the United States, such as Coors, Budweiser,
and microbrews like Old Dominion or Fat Tire.
• Imported bottle beer. These are beers imported from other countries. Some examples are
Dos Equis from Mexico and Guinness Stout from England.
• Draft beer. These are keg beers tapped through special instruments; they can be either
domestic or imported.
• Nonalcoholic drinks. Perrier, root beer, and orange juice are examples.
Example of Wine List
SUGGESTED SELLING PRICES ARE BASED ON THE FOLLOWING MATRIX ----->
(Category a)
Product Item Case Case Bottle
Number Description Description Cost Cost
SPARKLING WINES
DOMESTIC SELECTIONS
9712 IRON HORSE BRUT CS=12/750ML $165.00 $13.75
9764 SPARKLING JORDAN "J" 90 CS=12/750ML $215.90 $17.99
9707 FREIXENET CORDON NEGRO CS=12/750ML SPAIN SECTION $4.99
$59.93
9710 CHAMPAGNE DEINHAD LILA CS=12/750ML GERMANY SECTION $4.99
9708 CA DEL BOSCO BRUT CS=6/750ML $59.88 $23.10
ITALIAN SECTION
$138.60
FRENCH CHAMPAGNE
9723 DOM PERIGNON 1.5LT CS=12/1.5LT $1,858.00 $154.83
9669 CHAMPAGNE MOET WHITE STAR CS=24/375ML $371.99 $15.50
CHARDONNAY SECTION
9887 CHARD FORTANT COLLECTOR CS=12/750ML $71.90 $5.99
6813 CHARD GRGICH HILLS 94 CS=12/750ML
$287.90 $23.99
9018 CHARD GRIGICH HILLS 93 CS=12/375ML HALF BOTTLE $12.99
9016 CHARD RUTHERFORD HILL 90 CS=12/375ML $155.90 $4.79
$57.50
Figure 7-10 Example of Pricing Strategies
140
(Category c) √ Chapter 7
(Category b) < $10 = 33%
< $15 = 35%
Priced at Priced at Priced at Priced at Priced at < $20 = 37.5%
40% cost 35% Cost 30% cost 25% cost 20% cost < $25 = 40%
< $30 = 45%
< $60 = 47.5%
$34.38 $39.29 $45.83 $55.00 $68.75 SUGGESTED
$44.98 $51.40 $59.97 $71.96 $89.95 SELLING PRICE
$39.29
$47.97
$12.48 $14.26 $16.63 $19.96 $24.95 $15.12
$12.48 $14.26 $16.63 $19.96 $24.95 $15.12
$57.75 $66.00 $77.00 $92.40 $115.50 $57.75
$387.08 $442.37 $516.10 $619.32 $774.15 $325.96
$38.75 $44.29 $51.67 $62.00 $77.50 $41.33
$14.98 $17.11 $19.97 $23.96 $29.95 $18.15
$59.98 $68.54 $79.97 $95.96 $119.95 $59.98
$32.48 $37.11 $43.30 $51.96 $64.95 $37.11
$11.98 $13.69 $15.97 $19.16 $23.95 $14.52
Introduction to Beverages √ 141
• Wine. Served by the glass or by the bottle.
• Cocktails. Also called mixed drinks, these usually contain distilled spirits mixed with soft
drinks, water, or blended mixes like Bloody Mary mix or margarita mix.
• Highballs. These are mixtures of a spirit and a carbonated mixer or water. They are served
with ice in a highball glass.
Most operators use a similar inventory grouping to determine their pricing strategies. This
is very common with bottle wines. The example in Figure 7-10 illustrates how some pricing
strategies might work in the bottle wine category. In Column A, fill in your cost, both by case
and by bottle. This should always be replacement cost—the cost to replace the bottle at today’s
prices. (This information, by the way, should always be kept confidential. You will not want to
share your data with anyone who is not involved directly with your pricing policies—not even
your vendors.)
Then, in Column B, a simple percentage markup is calculated. Actually, in this example, several
different percentages have been offered, so that you can select the amount of markup that you
deem best. You will be using your judgment and your knowledge of your client base to decide
the cost percentages you can safely employ. Profitability is paramount.
Another pricing strategy is illustrated in Column C: a sliding scale. In this strategy, as the cost
of an item rises, the cost percentage drops (though the actual amount of markup may still be
significant).
Finally, consider the pricing principles of cost, availability, competition, and environment. When
considering cost, note also that the costs of inventory maintenance, accounting, storage, person-
nel, spoilage, and loss of interest on inventory investment—all of which are covered in greater
detail in later chapters—must be factored into what you eventually charge your customers.
Weigh these factors well, so that your prices will be consistent, fair, competitive, and profitable.
Summary
Beverages differ significantly from food products in several ways. These differences will affect
how you order, receive, store, monitor, and serve beverages, and can impact your cost dramati-
cally. Beverages are alcoholic and nonalcoholic drinkable liquids. Since the repeal of Prohibi-
tion in 1934, consumption trends have changed with the times. Several societal and industry
factors have contributed to these changes; some are controllable, and some are not. The three
factors affecting consumption trends are as follows:
• the health and economic impacts of alcoholism (uncontrollable)
• moral dilemmas and the law (uncontrollable)
• pricing and clientele (controllable)
To be successful you need to understand these factors and apply them.
142 √ Chapter 7
Chapter Questions
Critical Thinking Questions
1. How can the use of a sliding scale strategy help to maximize profitability?
2. What are the factors affecting beverage consumption trends?
3. What are the societal impacts of alcoholism and alcohol abuse?
Objective Questions
1. The most distinctive trend in the consumption of alcoholic beverages has been the
decrease in the consumption of distilled spirits over the past decade. True or False?
2. The most important factor in maximizing profitability of the entire beverage operation is
maximizing the profit margin on each drink sold. True or False?
3. Because well brands are typically the least expensive of brands available in the house, it is
desirable to purchase whatever brand is currently least expensive. True or False?
4. Beer is the most perishable of alcoholic beverages. True or False?
Multiple Choice Questions
1. Which of the following is typically the most consistent?
A. beer
B. wine
C. distilled spirits
D. fortified wines
2. While overall consumption of alcoholic beverages has decreased,
A. wine sales have more than doubled in the past decade.
B. beer sales have more than doubled in the past two decades.
C. nonalcoholic beverage sales have increased dramatically.
D. prices for supplies have dropped significantly, thus creating greater profitability.
3. Third-party liquor liability laws are also known as
A. dram shop laws.
B. responsible service laws.
C. driving under the influence laws.
D. none of the above.
4. If the total potential ingredient cost for one drink is $0.72 and the targeted beverage
cost percentage is 18, what is the targeted menu price?
A. $1
B. $2
C. $3
D. $4
Introduction to Beverages √ 143
5. If the cost of vodka in a screwdriver is $0.38 and the total cost of the screwdriver is
$0.83, what is the cost percentage of the vodka?
A. 40.2 percent
B. 45.8 percent
C. 38 percent
D. 21.8 percent
6. If a 750-milliliter bottle of vodka costs $8.90, what is the cost per ounce?
A. $0.35
B. $0.38
C. $0.32
D. $0.40
7. Portion size, portion control, and standardized recipes are essential for
A. maintaining consistency.
B. controlling costs.
C. customer satisfaction.
D. all of the above.
Chapter Beverage
Procedures,
8 from Start to
Finish
Learning Objectives
After reading this chapter, you should be able to:
• explain how to purchase beverage products profitably;
• receive beverage products with effective controls;
• store beverage products using proper procedures and knowledge;
• establish and enforce appropriate beverage requisition procedures, such as bottle-for-
bottle exchange, back-order guidelines, and proper requisition authorization.
In Practice
Myla began her interview with Dana Miller by asking about her background
in cost control. Myla went on to ask Dana about the steps she would take to
implement control procedures.
Myla: In your past experience, how did you balance the pressure to make
profit and at the same time maintain high guest satisfaction?
Dana: It’s simply giving the customers what they want at a fair market
price.
Myla: Okay! Well, if you’re doing everything right, yet your actual cost is
excessively higher than your potential cost, what would you do?
Dana: There is definitely a flaw in the control procedures.
Myla: What do you mean? What type of flaw could it be?
Dana: If the potential cost is calculated correctly, then any variance could
be traced to employees in purchasing, receiving, storage, and main-
taining portion control.
Myla only wished Dana had been hired sooner. Considering all the irregulari-
ties Myla saw in her first visit to the bar (described in Chapter 9), Dana would
have her job cut out for her.
Introduction
When selecting and purchasing beverage products, you will need to make decisions while keeping
two complementary goals in mind: your profit goals and your guests’ preferences and satisfac-
tion. Let’s look at two examples to see how these factors affect your real-world decision-making.
Beverage Procedures, from Start to Finish √ 145
Let’s say that Absolut vodka comes in both 750-milliliter and 1-liter bottles. Compare their
costs: the 750-milliliter bottle is equal to 25.4 fluid ounces and costs $7.60. Dividing the cost by
the number of ounces, we get a cost of $0.29 per ounce. The 1-liter bottle is equal to 33.8 fluid
ounces and costs $8.40, with a per-ounce cost of $0.25. That $0.25 per ounce is not a lot of
money if your company sells very little Absolut. If your consumption is high, however, the sav-
ings can be significant. Over time, your guests’ preferences will tell you if the larger or smaller
bottles are called for.
Here’s another example: An extensive wine list ties up capital in a large inventory that makes
no profit until it is sold. But if your guests’ preferences lean toward a wide selection, you will
have to weigh the extra investment and inventory. If you don’t, you may lose market advan-
tage to competitors who do invest in their wine lists. In this process, consider the food and
beverage items that complement one another and will generate the desired profit levels with
your target market. In this way, you maximize both guest satisfaction and the chances of good
profit.
The important concept here is that beverage profit is an achievable goal, not a residue of
operations. In fact, many establishments offer beverages as the primary products, and food
is secondary. This is because beverages can be quite profitable when control guidelines are
followed, while food service carries an array of distinct costs. Use the menu-engineering tech-
niques discussed in this book to evaluate and standardize your beverage profit making.
There is no industry standard for the amount of markup on beverages, so you must set your
own standards for success (profit) and failure (loss) for every item you sell. If your percent-
ages of profit are high but you are not selling enough quantity to reach your profit goals,
this can easily translate into loss. On the other hand, selling thousands of units of a bever-
age product that has little or no percentage of profit is equally damaging to the bottom line.
Remember, you go to the bank not with percentages, but with the dollar value of your bottom
line. According to Paul Lee, director of food and beverage and faculty member of Monterey
Peninsular College, “This is the most misunderstood fact in operations: most managers do
not understand profitability.” It is a challenge to find the middle ground. However, armed
with effective purchasing techniques and a clear-cut pricing strategy, you stand every chance of
coming out a winner.
In this section we will discuss how to go about purchasing: the policies you set and the
procedures you establish; the routines of purchasing, receiving, and issuing beverages;
the inventory records and procedures that differ from working with food products; and the
use of inventory figures to measure bar cost and purchasing efficiency. The goal of bever-
age purchasing is the same as that of food purchasing: to provide a steady supply of raw
ingredients for the drinks you sell, at minimal cost, to maximize profits. First we will discuss
purchasing.
Purchasing
Just like food products, beverage products are available at several levels of quality. Unlike with
food products, however, you cannot simply select a single product to fit your specifications.
With beverages, you are likely to have several quality levels in a single establishment—a num-
ber of different vodkas, rums, gins, and other beverage types at different levels of quality and
price. Customers expect these kinds of choices when they buy beverages. This is as true for
wine and beer as it is for spirits. Selecting many varieties that correspond with your customers’
wishes, at the most advantageous prices, is an ongoing purchasing challenge.
In addition, you will have to familiarize yourself with your state and county laws and codes
regarding beverage purchases. For example, in one county in Colorado, liquor stores are
closed on Sundays. Check in your area for regulations that govern how you make and pay for
purchases of alcohol.
146 √ Chapter 8
Deciding what to buy involves two basic factors: the quality of beverages you will pour and
the variety of items you will have available. Let’s start with quality. Ask yourself (and other
restaurant managers) what level of quality your customers will expect and be willing to pay for.
It wouldn’t be wise to purchase a super premium cognac or expensive wines for a neighbor-
hood sports bar, for example. However, it would be equally unwise not to offer such items in
a fine-dining restaurant. As in all other management matters, you must know and understand
your client base.
Also bear in mind the quality of your well brands. Well brands are spirits served to guests who
do not request a particular brand. The manager and the purchaser should select well liquors
carefully, and then stick with them, to establish consistency in drink presentation. Many man-
agers cut costs by using the least-expensive brands, and they assume that the guest cannot tell
the difference. This may be true, and it may not: many bars display their bottles, so a guest
who dislikes a drink can probably spot the bottle it came from. Other managers may use a pre-
mium brand as the well liquor. The manager might make such a decision out of pride, or he
or she might justify the decision by saying that the company would be carrying the expensive
brand anyway, to respond to customer requests. While this practice means carrying less inven-
tory, it also means charging more money for what guests assume to be a lower-priced drink.
Limiting your selection in this way can cost you sales and even customers. You should target an
average or middle ground, based on what your establishment’s clientele will perceive as aver-
age quality. Then you can set prices accordingly.
Another practice to avoid is using very inexpensive liquors while charging premium prices.
You cannot fool your customers. They will not return, and they surely will tell others what you
charge for low-quality liquor. Richard Hendrie said it very well: “You have to know who you
are selling to and how you got them in door. Don’t be short-sighted in your strategy. One sale
isn’t success. Repeat business is success.”1
Once you decide what to buy, you will have to decide how much to purchase, based on your
current and projected sales volume. Unlike most food products, you can sometimes buy partial
cases of beverages. Although you will usually have to pay a broken case fee for such a service, it
can be cost-effective under certain conditions. Buying partial cases is a common practice, but
its advisability will depend largely on the size of your operation and your sales volume. A full
case may be too much to carry if you have space constraints, lower sales volume of an item, or
cash flow concerns. As with most purchases, in general, the more you can purchase at any one
time, the lower your cost will be. Larger purchases allow you to negotiate volume discounts
more readily. In the purchasing chapter, this matter is discussed in greater detail.
You must also consider how much liquor to specify in your recipes and to pour in your drinks.
Take the Bloody Mary example in the last chapter. This recipe calls for 1.25 ounces of vodka, but
perhaps your staff pours only 1 ounce. The guest may notice and become dissatisfied. You may
need to set your recipes at a higher amount and adjust the price accordingly. Again, what you’re
looking for is balance—keeping your customers happy while offering a cost-effective product.
In the two examples below (Figures 8-1 and 8-2), we compare two sets of decisions on quality,
quantity, and variety served to show you how your decisions will affect your cost. The same
type of chart can also be used with wine, beer, and other beverages. In Appendix you will
find a complete list of net unit ounces from different-sized beverage containers, along with a
sample worksheet. For these examples we will use two scenarios to show you the difference in
profit between two pricing strategies.
Columns A, B, and C of Figure 8-1, under the category Purchase Data, list the size, number
of ounces, and price for three liquors: well, call, and premium. Well brands, as stated above, are
used when a guest does not specify a brand; call is a midrange brand specified by the customer;
and premium is a higher-class brand with higher costs (and, therefore, higher prices to the
guest). Well, call, and premium categories are listed on the left side of the table. Column D
1 Richard Hendrie, quoted in The Liaison / UNIQUE VENUES, Spring 2005.
Beverage Procedures, from Start to Finish √ 147
Figure 8-1 Scenario 1 Sales Data Recipe Cost Information
Purchase Data
AB C D E F G H I J K L
liquor size FZ cost per sale # yield cost pour pour total total pour
btl price sold % per amt cost cost sales cost %
formula mo. FZ inFZ
well liter 33.8 $12.00 $2.50 GϫH IϫE DϫE J/K
C/B 1.25 $0.45 $90.00 $500 18%
200 100% $0.36
call liter 33.8 $12.00 $5.00 120 100% $0.62 1.25 $0.78 $93.60 $600 15.6%
prem. liter 33.8 $30.00 $8.00 280 100% $0.89 1.75 $1.56 $436.80 $2240 19.5%
total 600 $620.40 $3340 18.6%
states the price at which the outlet sells drinks made with these liquors, and Column E is the
number of items sold in a month. Yield (Column F) in beverage products is always assumed to
be 100 percent, unless there is waste or lost beverage, such as happens at times with keg beer.
We divide Column C, cost per bottle, by Column B, fluid ounces per bottle, to get the cost per
ounce in Column G. Round this to the nearest cent. In Column H we have entered the number
of fluid ounces used in a recipe for the drink; Column I, then, is the cost of one pour—Column
G (cost per fluid ounce) multiplied by Column H (pour amount in fluid ounces).
Column J, the cost amount for the month, is the result of multiplying Columns I (pour cost)
and E (number sold per month). Column K, the total amount of sales in the month, is equal
to Column D (sale price) times Column E (number sold per month). Lastly, Column L, cost
percentage, is equal to Column J (total cost) divided by Column K (total sales). So, overall,
in Scenario 1, you are selling alcoholic beverages at 18 percent cost. This doesn’t include any
mixers, labor, overhead, or other costs, but we can compare it to a second scenario under the
same conditions to see the results of a different pricing strategy (Figure 8-2). The entries that
are changed are in boldface type.
Now, let’s compare. Scenario 1 represents greater sales, but it also results in a greater cost
percentage. This is due to the far greater amount of liquor poured. While Scenario 2 looks
better in terms of cost percentages, guests may complain that the drinks they purchased didn’t
Figure 8-2 Scenario 2
C DE F GH I J KL
liquor cost sale # yield cost pour pour total total pour cost
per btl price sold % per amt cost cost sales %
mo. FZ in FZ
formula C/B G X H I X E D X E J/K
well $12.00 $2.50 100 100% $0.36 1.0 $0.36 $36.00 $250 14.4%
call $21.00 $5.00 120 100% $0.62 1.25 $0.78 $93.60 $600 15.6%
prem. $30.00 $8.00 240 100% $0.89 1.5 $1.34 $213.60 $1920 11.1%
total 460 $343.20 $2770 12.4%
148 √ Chapter 8
contain a fair amount of alcohol for the price: each well drink contains only 1 fluid ounce.
Note that the prices of the drinks were the same in both scenarios; this means that the com-
pany achieved its lower cost percentage at the expense of the guest’s pocketbook and satisfac-
tion. This kind of success may be short-lived.
Remember, you do not take percentages to the bank. The trick in pricing strategy and pour
sizes is to balance a higher price (to attain a reasonable cost percentage) and a lower price (to
increase sales volume). In the beverage business, sales volume is critical to profitability and
success. Keeping your customers coming back and spending more money in such a competi-
tive market is key. The sales volume will also determine your inventory turnover ratio, a topic
discussed in detail in Chapter 11.
In brief, your goal is to avoid excess inventory but also to present an image of a reasonable
selection. Excess inventory doesn’t earn profit; in fact, it is a cost to the operation. There
are costs involved in maintaining inventory records, product storage, and capital interest not
earned. For many establishments, you will want to limit your choices to popular and well-
advertised brand names.
You can implement a product request log, such as the one shown in Figure 8-3, to record
guest requests. Guests can make their preferences known to the staff, who then document
them. Use common sense when reviewing the log; if you see consistent requests for an item on
different occasions, it may be a wise purchase.
Figure 8-3 Beverage Product Request Log
DATE ITEM REQUESTED STAFF MEMBER
6-20-05 Coors Light Nancy M.
6-20-05 Louis XIII David K.
6-21-05 Coors Light Henry W.
6-21-05 Absolut Vodka Jackie S.
6-21-05 Coors Light Nancy M.
6-22-05 Coors Light Elaine Y.
6-22-05 Southern Comfort David K.
In this example, Coors Light is genuinely popular. You should consider making it available.
A log like this is much more valid than undocumented reports of requests. When you can see
exactly how many people have requested something over a given time period, you can make an
informed purchasing decision.
If your guest asks for a brand that you do not carry, you probably will not lose either the sale
or the customer if you can offer a well-known brand of comparable quality. However, be sure
your staff does offer the substitute—and doesn’t give the guest another brand without telling
him or her. If the guest calls for a brand, you can be sure he or she knows how it should taste.
Any manipulation will cost you trust and clientele.
One of the best ways to limit the number of brands and items stocked is to develop a pre-
printed menu. When you list what you have, most guests will find something they like. You
can change it periodically or even offer drink specials from time to time, but your primary
offerings will be laid out for the guest’s choosing.
Where you draw the line on brands and items to stock should depend on your storage space,
your clientele, your type of business (club, restaurant, hotel, or other type of establishment),
Beverage Procedures, from Start to Finish √ 149
your business volume, and your cash flow situation. One way to avoid an overabundance of
brands is to follow this policy: Never add a new item of unpredictable sales demand without
eliminating a slow-moving item from your menu list. You will have to review your sales history
to determine what is needed.
You also need to keep up with new products and to anticipate changes in customer demands.
You can do this by reading professional journals and by consulting with your vendors about
regional and national trends. Do not, however, let anyone (especially sales representatives) tell
you what you should buy. Consider their suggestions, but review your own operational needs
before making any decisions.
When choosing the individual items, buying beverages is mostly a matter of brand selection.
It’s a good idea to taste your own mixed drinks using different brands, and even to solicit cus-
tomer and staff input. Generic liqueurs, in particular, can taste quite different from one brand
to another, but expensive imported brands are not necessarily the best, either.
Purchasing Wine
Buying wine is somewhat more complicated than buying spirits. For house wines you can vintage The yield of wine
often buy jug wines if your clients will drink them; they are generally cheaper, and the wine or grapes from a vineyard or
will be consistent from one bottle to the next. However, most operators stay away from jug district during one season.
or gallon wines for serving customers. These wines present many problems, including weight, Wine is usually identified
storage, and negative visual impact. Wines served by the bottle are another matter. They are as to year and vineyard or
usually much more expensive, so pouring them by the glass is often not cost-effective. In a district of origin.
high-volume business, however, you could negotiate and establish an inexpensive house wine,
maybe with a proprietary label in either a 750-milliliter or 1.5-liter bottle.
Remember, too, that wines are very perishable, and if you do not use them quickly they may
spoil. This will affect your cost. In many instances the same wine will vary from one year, or
vintage, to another; at times the wine’s body and flavor will even change in the bottle during
storage. The term vintage means the yield of wine or grapes from a vineyard or district during
one season. Customer demand for wine is less clear-cut than for beer and spirits. Taste wines
before you buy them, and then choose according to what you know of your customers’ tastes.
It is also important to consider the menu when purchasing wine. Experts will tell you that
food tastes different when paired with certain wines, so train your staff to guide the customer
to a choice that complements the chosen menu item. Be sure to get as much expert advice as
you can. You may find helpful information by asking for the opinions of your staff.
Receiving Beverages
Taking delivery of exactly what you have ordered—brands, sizes, and quantities at specified
prices in good condition—is the definition of good receiving. This is not different from food
receiving, except that food products vary in quality and packaging far more than do beverage
products. Thanks to the federal government, liquor manufacturers must maintain consistent
quality and packaging standards with all brands and types.
With incoming deliveries, your receiving clerk should inspect the following key areas, using
your own purchase order rather than the vendor’s invoice:
• Verify the quantity, price, and extension
• Verify the vintage of wines
• Check the expiration dates of beer and soft drinks
• Check the seals and condition of bottles to make sure that none are leaking or broken
150 √ Chapter 8
• Monitor bottle sizes (it is easy to mistake a 750-milliliter bottle for a 1-liter bottle)
• Check the brand against what was ordered
Discrepancies in any of these areas should be communicated to the manager immediately and
should be resolved before the delivery is accepted. Such corrections may require returning
defective items and adjusting the invoices accordingly. The delivery person may insist that
he or she cannot return any items, such as ones from a partial case; you will have to decide
whether to return the entire case or keep the case with the defective items in exchange for
credit from the vendor. Your decision will depend on how soon the item will be used and
when the next delivery is expected. In Chapter 6 you will find a credit memo and procedures
for documenting such discrepancies.
Storage
The storeroom is the setting for the third phase of the purchasing cycle. It performs three func-
tions: physical care to maintain quality, inventory maintenance and record-keeping, and security
from theft. Think of the storeroom as an off-limits area; those who work there, such as the
storeroom clerk and purchaser, should be the only ones who distribute products. No one should
be allowed to enter and take his or her own goods. The storeroom should not be left open and
unattended. Door locks should be changed often, particularly if a storeroom employee leaves
the company. The keys or combinations should only be available to authorized employees.
Each beverage should have a designated place in a logical arrangement, with similar items
grouped on adjacent shelves. Stock must be rotated—that is, new stock is placed at the back
and oldest stock is used first. In storing distilled spirits, shelving should be sturdy and well
braced because cases of liquor are heavy. Sealed cases should be stacked on low platforms or
shelves. The general temperature requirement is from 70º to 80º Fahrenheit.
Store wines on their sides or upside-down in their sealed cases. They are perishable—subject
to deterioration via light, warmth, agitation, and old age. Wine needs a cool and dark envi-
ronment at an air temperature between 50º and 70º Fahrenheit. Most experts recommend a
constant 55º to 65º, or cellar, temperature. Move bottles as little as possible and handle them
gently. Agitating a wine may upset both its chemistry and its sediment. This makes it unserv-
able until the sediment settles again. Since wines have limited life spans, rotating the stock
becomes particularly important. The exceptions to this rule are wines that increase in value
with age. Your vendor should be able to give you this information.
Wine corks should be moist to prevent cracks or dryness. Cracks might allow wine to leave the
bottle or let oxygen enter. Corks should be inspected for leakage both upon arrival and during
storage. If you see leakage before receiving a product, reject it. If you find it later, consider
discarding it or giving it to the chef for use in recipes.
Beer has the most limited shelf life. Product rotation is therefore crucial to prevent spoilage and
waste. Canned and bottled beer should be stored below 70º Fahrenheit in a dark place. Draft
beer and unpasteurized canned or bottled beers should be kept refrigerated. Draft beer should
be kept at 36º to 39º and should be used within 30 to 45 days, or as specified on the container.
Proper Beverage
Requisition Procedures
If you work in a hotel with several food and beverage outlets, each outlet’s bartender should
remove all empty liquor bottles from the shelves at a specified time, usually at the end or
beginning of a shift. These empty bottles become the basis for, and the physical evidence of,
Beverage Procedures, from Start to Finish √ 151
the liquor to be requisitioned. The bartender fills out a requisition form, being careful to requisition Request for
enter the correct bin number (or item number), item description, and quantity required; food, beverage, supplies, or
then she or he sends the empty liquor bottles and the two-part requisition form to the bever- personnel.
age storeroom. In a computerized requisition system, the manual system described above is bin number A specific
altered. In such a system, the requisition is entered directly into a computer terminal that is reference number assigned
linked to the purchasing system and printer in the storeroom. The purchasing clerk fills out to an inventory item.
the requisition for either pickup or delivery, depending on your company’s policies and proce-
dures. The requisition is then posted or charged to the outlet via the purchasing terminal. In a par stock Stock levels
single-outlet establishment, like a restaurant, the process is the same but on a smaller scale and established by management
therefore is a bit simpler. for individual inventory
items in varying outlets.
In both manual and computerized systems, the empty bottles should be sent to the storeroom,
where they are checked off by the storeroom clerk to ensure that they are empty, correct, and
issued by the company. This is called the bottle-for-bottle exchange system. The clerk further
checks that the empty bottles are equal in quantity and brand to the requested bottles. When
issuing liquor, the storeroom clerk should ensure that a full bottle is exchanged for a corre-
sponding empty bottle. In this way, the bar’s par stock level can be better maintained.
Par stock, or par level as it is sometimes referred to, is the quantity of an item that should
be on hand at a given time of the business season. To take this control a step further, attach
a point of sale (POS) receipt, from the beginning period when the item was requisitioned to
when a requisition is placed, for each item requisitioned. This proves the item was sold and
is now being requisitioned to replenish the par stock. The bar should always be stocked with
the right number of full, partial, and empty bottles to equal the par levels. Using this system,
you can also ensure that no item is replaced if it has not been paid for and recorded in the
POS system.
There are some exceptions to bottle-for-bottle exchanges. You may decide to adjust a bar’s par
levels if consumption volume changes, or you may get a breakage requisition when a bottle is
broken. You might also receive an interbar transfer form that accounts for a discrepancy in par
levels. These forms, and a description of their use, can be found in Chapter 11.
The storeroom clerk sends the empty bottles for disposal, in the process of which the bottles
must be broken. This eliminates the possibility of empty bottles being removed from the trash
and used in a subsequent requisition. Standardizing this process guarantees the accuracy and
integrity of bar par stock and cost accounting.
Since customers in a hotel may dispose of bottles in their rooms, the requisition of spirits
through the room service department should be supported by a sales slip or chit, demonstrat-
ing that a full bottle has indeed been sold.
The return of an empty bottle is not required when requisitioning wines, beer, or soft drinks.
In these cases, bar par levels are monitored and consistent. For wines, however, it is necessary
to submit a POS slip that matches the bin number of the wine being requisitioned. With beer,
par stocks should be established by the case. There should be a discernible pattern to the quan-
tities required to restock each type of beer in your bar (or bars, if you have multiple outlets.)
In a well managed restaurant or lounge, the outlet’s beer requisitions should be matched with
sales data from a POS system. While the sales figures may not match exactly the bottles of beer
requisitioned, they should be within a minimum variance.
Back-Order Guidelines
If the requested brand of beverage is out of stock, the beverage requisition is marked out of
stock and is returned to the bar or outlet until the item is received and delivered. The out-of-
stock item is recorded in a back-order logbook, and the sales slip is retained by the beverage
storeroom clerk. When you see a back order, you should check to see if the par level should be
raised. When the item is replenished, the storeroom clerk enters the item into the inventory
152 √ Chapter 8
purchasing system in order to maintain the perpetual inventory. In the accounting for that
outlet, the cost of the requisition should be charged to the outlet only when the items are
delivered.
Proper Requisition Authorization
The beverage storeroom should have a list of the people who are authorized to requisition
beverages. In a larger operation with more than one outlet, establish a time schedule for issu-
ing beverages to each outlet, and stick to it. This confines issuing to times and situations when
it can be monitored. In a smaller operation, the manager him- or herself may be the only issu-
ing staff, perhaps reducing the need for a set schedule.
A beverage requisition form should be prepared in duplicate and completed in ink for each and
every order. If any changes are required, the first and second copies should be corrected iden-
tically and signed by an authorized storeroom staff member. The purchaser and the accoun-
tant use the original copy of the requisition for costing. Both copies of the requisition should
accompany the merchandise order to the outlet, especially when anyone other than the bar-
tender delivers the requisition. The bartender signs the original after checking that all the
merchandise listed on the requisition has been received. The purchasing clerk uses this copy to
document the perpetual inventory and a daily record of beverage purchases.
Summary
Following all of the controls in this chapter might seem daunting. Duplicate forms, locked
storerooms, empty bottles . . . Is this much control really necessary? Purchasers and others
attempting to control costs can testify that, yes, these controls can make or break an establish-
ment. Beverages, as much or more than food, are tempting targets for theft. A fancy bottle of
imported rum or an old bottle of wine can be gone in an instant—an expensive instant. You
are unlikely ever to find the culprit, but you can initiate controls that help to seal up potential
leaks, and you can monitor how your procedures are followed. These are the best bets for
your company. In effect, you are trying to create a best-case scenario: How much can your
restaurant make under ideal conditions and controls? How far do you vary from those ideals,
and why?
Chapter Questions
Critical Thinking Questions
1. What are the primary objectives of beverage receiving? What procedures should be
followed to assure objectives are met?
2. For control and customer service, how should a back order be handled?
3. What are the best methods for rotating wine, and why?
4. What impact does customer preference have on actual cost of sales? Please provide data
to support your answer.
5. What factors should influence the selection of well brands for a beverage outlet?
6. What are the advantages and disadvantages of automated beverage dispensing systems?
Beverage Procedures, from Start to Finish √ 153
Multiple Choice Questions
1. Portion size and control and standardized recipes are essential for:
A. maintaining consistency
B. controlling costs
C. customer satisfaction
D. all of the above
2. With incoming deliveries of wine, your receiving clerk should inspect the following key
areas, using your own purchase order, rather than the vendor’s invoice:
A. Check the expiration dates of beer and soft drinks
B. c and d
C. Check the seals and condition of bottles to make sure that none are leaking or
broken.
D. Check the brand and vintage against what was ordered. Including quantity, price
and extension.
3. What is the pour cost percentage?
BC DE G H I J K L
Pour
Liquor Number Cost per Number Cost per Amount Pour Total Total Pour
Formula Fluid Bottle Sale Sold per Fluid in Fluid Cost Cost Sales Cost %
Well Ounces Price Month Ounce Ounces G3H D3E
$12.00 $0.36 I3E $250 ?
33.8 $2.50 100 C/B 1.0 $36.00
$0.36
A. 14.4% B. 15.2%
C. 14% D. 14.7%
4. What is the cost per fluid ounce?
B C D E G H I J KL
Number Pour
Liquor Number Cost Sale Sold Cost per Amount Pour Total Total Pour
Formula Fluid per Price per Fluid in Fluid Cost Cost Sales Cost %
Call Ounces Bottle $5.00 Month Ounce Ounces
G3H I3E D3E J/K
33.8 $21.00 120 ? 1.25 $0.78 $93.60 $600
15.6%
A. $1.00 B. $.62
C. $.80 D. $.72
154 √ Chapter 8
5. What is the pour cost?
B CD E GH I JKL
Liquor Number Cost Sale Number Cost per Pour Pour Total Total Pour
Fluid per Price Sold per Fluid Amount Cost Cost Sales Cost %
Ounces Bottle Month Ounce in Fluid
Ounces ?
Formula C/B I3E D3E J/K
Prem. 33.8 $30.00 $8.00 240 $0.89 1.5 $213.60 $1920 11.1%
A. $1.50 B. $1.50
C. $1.34 D. $2.00
6. If the potential cost is calculated correctly, then any variance could be traced to
employees in:
A. accounting and sales
B. front desk, purchasing, and storage
C. portion control and accounting
D. purchasing, receiving, storage, and maintaining portion control.
7. Wine needs a cool and dark environment at an air temperature between ______________
Fahrenheit.
A. 70º and 90º B. 90º and 110º
C. 50º and 70º D. 30º and 50º
8. Draft beer should be kept at ______________ and should be used within 30 to 45 days,
or as specified on the container.
A. 36º to 39º B. 45º to 55º
C. 55º to 65º D. 26º to 49º
9. What is the total cost? G H IJ K
B C DE Pour
Amount Total
Liquor Number Cost per Sale Number Cost per in Fluid Pour Total Sales
Fluid Bottle Price Sold per Fluid Ounces Cost Cost D3E
Ounces Month Ounce $250
$12.00 1.0
Formula C/B G3H
Well 33.8 $2.50 100 $0.36 $0.36 ?
A. $250 B. $40
C. $12 D. $36
Beverage Procedures, from Start to Finish √ 155
10. What is the total sales? D E GH IK
BC
Number Number Cost per Pour
Sold per Fluid Amount
Fluid Cost per Sale Month Ounce in Fluid Pour Total
Price Ounces Cost Sales
Liquor Ounces Bottle
Formula C/B G3H
Well 33.8 $12.00 $2.50 100 $0.36 1.0 $0.36 ?
A. $300 B. $100
C. $250 D. $12
Objective Questions
1. Because well brands are typically the least-expensive brands available in the outlet, it is
desirable to purchase whatever brand is currently least expensive. True or False? Explain
your answer.
2. The one goal of over riding importance in selecting and purchasing beverage products is
your profit goal. True or False?
3. You will achieve maximum success in profitability and customer satisfaction by following
industry standards in your mark up on beverage costs. True or False?
4. In choosing the brands of liquor for your well drinks the rule of cheaper is better applies.
True or False?
5. Too much focus on profit in marking up your drinks can be counter productive if it
sacrifices customer satisfaction.
6. If you don’t have the brand a customer requests it is best to supplement a comparable
brand serve the drink and see how the customer reacts upon tasting it. True or False?
7. Access to the store room for wines should be left open to the employees so that when
the establishment is critically busy filling customers drink requests is not in any way
delayed. True or False?
8. Not moving better wines from place to place in the store room improves the effective life
and taste of these wines. True or False?
9. When a liquor bottle is empty proper disposal consists of putting the empty in a recycling trash
bin to comply with environmental concerns and in some locales regulations. True or False?
10. Expensive bottles of wine or spirits are prime targets of the unscrupulous employee and
can when pilfered dramatically affect your operation’s profitability. True or False?
11. The goal of beverage purchasing is the same as that of food purchasing: to provide a
steady supply of raw ingredients for the drinks you sell, at minimal cost, to maximize
profits. True or False?
Chapter Beverage
Controls
9 and Service
Procedures
Learning Objectives
After reading this chapter, you should be able to explain and apply knowledge about:
• beverage control, including portion size control (PSC) and standard drink recipes
(SDRs);
• other beverage controls, such as the following:
• bar par stock
• color-coded outlet stickers or stamps
• waste, breakage, spoilage, and spillage
• interbar transfer
• control of cash bars
• control of hosted bars
• banquet beverage storeroom procedures
• beverage cost variance;
• service procedures regarding wine, liquor, and beer service; guest requests for
unusual recipes; and suggestive selling techniques.
In Practice
As soon as Myla Thomas was named manager of the Sea Breeze Hotel in
Monterey, she quickly walked over to the hotel bar to observe the operation.
So far, only the owner, Eric Breeze, knew that Myla had been named man-
ager, and she preferred it that way! She entered the bar area, walked over to
the bar, and sat down. Upon seeing her enter, the bartender walked over and
asked, “What can I get for you, Miss?”
“I’ll have a glass of your house merlot,” Myla replied as she glanced around
the room and at the TV screen. There was a basketball game on: LA Lakers
playing the Bulls in Chicago.
Myla watched the bartender pour wine into a wine glass up to the top of the
glass. She watched him ring $4.50 on the cash register and place the check
in front of her.
(continues)
Beverage Controls and Service Procedures √ 157
(continued)
A waitress approached the servers’ station at the side of the bar and yelled
out, “Hey, Colin! I need three Bud Lights, a Bombay Sapphire and tonic, a
Seven and Seven, and two house merlots!”
Obediently, Colin opened up the Bud tap and stuck a beer glass under it. Myla
watched him dispense the beer, which he did rather carelessly. He poured a
certain amount of beer down the drain as he attempted to get solid beer to the
rim of the glass. As he finished the first glass, he set it down without shutting
off the tap and leisurely placed the second glass under the tap. Meanwhile,
more beer was going down the drain. He did the same with the third glass.
Having filled three beer glasses and placed them on a tray, Colin took a cock-
tail glass, filled it with ice, and grabbed the bottle of Bombay Sapphire gin.
He filled three-quarters of the glass with gin and the rest with tonic from the
dispenser gun, stuck a lime wedge on the side of the glass, and placed the
glass on the tray.
Colin grabbed another glass, filled it with ice, grabbed a bottle of Seagram’s
Seven whiskey, looked at it, and said to the waitress, “I’ll be right back, Vivian.
I have to get another bottle of Seven Crown.” Before leaving, he recorded No
Sale on the cash register so he could open it and grab a key from the cash
drawer.
A few minutes later, Colin returned with not only a bottle of Seven Crown,
but also a bottle of Bacardi rum and another of Grey Goose vodka. After set-
ting the bottles on the bar, he grabbed a glass, filled it with ice, filled the
glass halfway with whiskey, topped it out with 7UP from the dispenser gun,
dropped in a maraschino cherry, and placed it on the tray.
Finally, Colin took two wine glasses and filled each to the rim with merlot. He
took the tray over to the waitress and said, “Here you are, Vivian.” Vivian took
the tray back into the dining room.
Colin then walked over to the order entry system’s printer and casually
ripped off a series of chits that had been building up, rolled them into a ball,
and tossed them into the trash can.
“Wow!” Myla exclaimed quietly to herself. “Colin did everything wrong that
you possibly can! He got his own liquor from the liquor room since he had
the key. Half the beer ended up in the drain; the waitress had to walk gingerly
so she wouldn’t spill the wine or beer; and at least one patron was going to
wonder why his drink was so strong. The customer may think he is getting
a good value, but the company’s liquor costs are going sky-high! Beer and
wine costs would also be well above what they could be.
“And I bet some of those drinks weren’t recorded in the order entry system,”
Myla thought. Colin didn’t even look at the chits coming off the printer to see
what was actually ordered.
Just then, a customer walked up to the bar with an empty beer glass. “Hey,
Colin!” he yelled out. “How about a refill?”
“Sure, Bob!” Colin replied, and he started filling the glass with Coors Light in
the same careless manner with which he filled the earlier glasses.
As Colin brought over the beer, Bob dropped a dollar on the bar. Colin walked
over to the cash register, rang No Sale, and put the dollar bill in the tray.
(continues)
158 √ Chapter 9
(continued)
Myla couldn’t believe her eyes. “He just gave away a free beer and commin-
gled his tip money with the company’s cash receipts! I bet his cash register
always comes up even,” she mused.
Myla continued to observe Colin tend bar for about 45 minutes. She set $5
on the bar and indicated that she wanted to pay.
“Could I have a receipt, please?” she asked Colin.
“Sure, Miss,” Colin replied. Myla watched Colin as he recorded the transac-
tion on the cash register and placed the $5 inside the till.
“I wonder where the beverage manager is,” Myla thought. “Probably at home
watching the Lakers game.”
Introduction
Myla played the role of a secret shopper in the story above. A secret shopper measures and
compares customer service levels, spots trends, and provides accurate feedback in the form of
mystery guest hotel, restaurant, and spa reports. Managers view secret shopping as an indepen-
dent verification of what is working and what needs fixing. There are several companies on the
Web that offer these types of services to hotels and restaurants.
Despite the worst-case scenario painted in this story, your staff can actually play very positive roles
in the beverage profitability of your establishment. While you and the management team set up
procedures that establish control over your inventory assets, your servers and bartenders are out
there on the front line, making sure your guests’ needs are heard and answered. Again, you are
balancing the needs and preferences of your clients with your profit-making goals. Both control
in the back of the house and service in the front of the house can help you achieve these goals.
The starting point in beverage control and sales is the establishment of portion size control
(PSC) and standard drink recipes (SDRs). All employees and managers must work to see that
these two controls are followed. Without them, you will not be able to evaluate valid data or to
control costs. The objectives of these controls are
• to monitor and identify deviations from standard operating procedure (SOP) so that you
can quickly correct the situation.
• to aid the manager in compiling cost data, which is used to compare and analyze potential
versus actual cost.
• to provide a basis for consistency.
• to set ingredient quantity guidelines.
• to simplify and standardize training information.
• to serve as a continuous source of reference for everyone involved in service.
• to act as a watchdog for combating both internal and external theft.
Portion Size Control (PSC)
Portion size control is the standardization of beverages in order to control both quantity of
liquor and quality of the drink. It is vital to create a method for pouring exact portions because
you are often dealing with numerous bartenders and possibly high turnover. The point here,
Beverage Controls and Service Procedures √ 159
as always, is consistency. This is undeniably important to building a client base. New customers
expect your Bloody Mary to taste like others they have had, and repeat customers expect it to
taste like the last one they ordered from you.
Meeting customer expectations may be even more important for good profit than setting
your drink prices correctly. Sales price multiplied by sales volume produces your revenue.
You cannot build volume with drinks that do not meet customer wishes consistently. To
achieve this, you need portion size control (PSC) for each and every drink. When PSC is in
place and followed by the whole staff, the customer will get the same drink no matter who
makes it.
Another advantage of consistency is accurate control of the amount of liquor poured. If you
control the quantity of liquor, you also control costs. In this way you can maintain your cost-
to-sales ratio and protect your profit. To achieve all of this, standardize three elements of each
drink: size, recipe, and glass.
Size
There are three common methods of measuring liquor. The first is to use an automated pour- jigger A measuring
ing device, with which the major ingredients are measured and dispensed through a handgun device used to serve
or specialized pourer. These shut off at pre-established amounts per drink. A second way is for predetermined quantities of
the bar staff to pour drinks using an established jigger size and to fill them only to the line a beverage.
on the jigger. A third method is to free-pour. This is a subjective form of measurement that
involves turning the bottle, with a pourer in place, and pouring upside down at full force. The
bartender counts in his or her head; to pour an ounce, for example, he or she might count
“One, two, three” or “Ten, twenty, thirty.” This method is not recommended because it is the
least accurate; it is only as consistent as the bartender. Free-pouring varies between bartenders
and from day to day.
Inconsistency is one of the biggest sources of guest complaints. Mr. Jones might receive a
perfect Bloody Mary from one bartender at lunch on Monday; then, on Tuesday at dinner,
his drink might be diluted or too strong or too peppery. Even the same bartender will make
very different drinks at times. The way to combat this is to implement standardized recipes,
discussed later in the chapter.
Computerized dispensing systems are used for portion control, perpetual inventory, standard
recipe controls, and accuracy in guest charges. These systems have an electronic control device
attached to each bottle to monitor and control the amount of alcohol dispensed. Beverages are
poured accurately each time. Some systems have check-processing capabilities that ensure that
the guest is charged properly for every drink. Taking control over the pouring of beverages is
one of the most critical decisions a manager can make. The following are some of the advan-
tages of using computerized dispensing systems:
• Less time is needed to train bartenders.
• There is less spillage and less breakage.
• Prices are preprogrammed into the machine, so pricing mistakes are eliminated.
• Standard recipe pour amounts are consistent and accurate.
• The system deters dishonest employees from stealing or giving away free drinks.
• Operational control of the bar is improved.
• You have an accurate accounting of the sales and profitability of each item.
• The system produces the sales, inventory, and employee reports you need.
160 √ Chapter 9
There are several automated dispensing systems on the market; not all of them provide you
with every advantage mentioned above. The biggest criticism is that the systems can break
down on occasion. The following are some other disadvantages:
• Because of the way beverages must be stored, guests cannot see the bottles or the brand
names at the bar. Ambience and brand promotion are lost.
• Most systems cannot mix all possible drinks that are available.
• Most bar operations do not have a contingency plan for use when the computer breaks
down. Therefore, a malfunction can literally shut down sales until manual operation is
installed.
• A dishonest employee may be able to beat the system by breaking it.
As a manager, you must weigh these advantages and disadvantages in light of your own opera-
tion. You should research the available models and try them out, weighing your operation’s
needs against each system’s functions. Whether or not you choose an automated dispensing
system, you will still need to establish adequate PSC standards.
Standard Drink Recipes
(SDRs)
A successful standard drink recipe, or SDR, is a carefully calculated relationship of ingredients,
with further calculations and standards for the glass, ice, and garnish. This is one area in which
the chef’s expertise can play an important role; it is advisable to combine the chef’s cuisine
with a suggested drink that goes well with the food. Many diners are calorie-conscious, how-
ever, so chefs may need to keep this in mind when suggesting drinks. Twelve ounces of regular
beer contains 150 calories; 5 ounces of wine contains 100 calories; and 1.5 ounces of 80-proof
distilled spirits contains 100 calories.
There are many bar books to refer to when planning a drink menu and making recipe calcula-
tions. Simply write down the exact recipe for each drink you serve. Then, train the bar staff to
follow the recipes consistently; this way, they’ll produce a consistent product no matter who
tends the bar.
Prepare each drink and take its photograph; compile these photos into a visual presentation
manual for your bar staff. The following information should be included:
• The amount of the primary ingredient to be poured (which becomes the jigger size you
need to make available to your staff)
• The other ingredients and their amounts or proportions to the major ingredient
• The size of the glass to be used
• The amount of ice in the glass
• The amount of garnish and its arrangement on the glass
The ice in the glass is a key ingredient in any drink made with a carbonated mixer or juice. Its
function is to chill the drink and control the proportion of liquor to mixer by taking the place
of liquid in the glass. The ice goes into the glass first. The more ice you use, the less mixer goes
in the drink.
Experts will tell you that the size and shape of the ice cubes makes a difference. With large,
square cubes you have to fill the glass more full with ice, as these cubes have big spaces between
Beverage Controls and Service Procedures √ 161
them. If you want a strong proportion of mix in relation to liquor, use less ice or a larger glass.
If you want a stronger liquor taste, use more ice or a smaller glass. All of these factors must be
considered in writing your SDRs and establishing their consistent use.
Getting Specific: How the
Controls Work
Your costs will vary widely when different amounts are poured. Review the information in
Figure 9-1. From a 33.8-ounce (1-liter) bottle of vodka, you can get 33.8 one-ounce servings,
27 one-and-one-quarter ounce servings, or 22.5 one-and-a-half-ounce servings. Let’s assume
the bottle price was $12 and you are selling one drink for $3. Watch what happens to your cost
when you have three bartenders who use different pours (Figure 9-2).
Figure 9-1 Control for Liter Sized Bottles
Number of Fluid Yield in 1-Ounce Yield in 1.25- Yield in 1.5-
Ounce Drinks Ounce Drinks
Size Ounces Drinks
22.5 portions
Full Bottle 33.8 33.8 portions 27.0 portions
11.3 portions
Half Bottle 16.9 16.9 portions 13.5 portions
2.3 portions
1/10 Bottle 3.38 3.4 portions 2.7 portions
Figure 9-2 Sales Variations with Different Pours
Bartender Portion # of Drinks, Liter Portion Selling Total Sales Cost %
served (per the table Cost Cost Price (# of drinks
above) x price)
A 1 FZ 33.8 $12.00 $0.36 $3.00 $101.40 11.83
B 1.25 FZ 27 $12.00 $0.44 $3.00 $81.12 14.79
C 1.5 FZ 22.5 $12.00 $0.53 $3.00 $67.59 17.75
You can see that, for just this one item, the cost difference is staggering. The difference
between the 1-ounce and the 1.5-ounce servings in terms of cost percentage is 5.92 percent.
This is equivalent to Bartender B giving away 6.8 drinks while Bartender C gives away 11.27
drinks.
If this difference were applicable to total sales figures, the impact on your bottom line could be
critically significant. If you are not controlling your recipes (with SDRs) and pours (with PSC),
you will need to implement such measures right away.
Master Beverage Pour Cost Sheet √ Exercise
You can use Figure 9-3 to determine the ingredient costs for your beverages and to keep them Use a measuring
all in one place. The data must be accurate to be relevant. If you have more than one outlet, device (jigger) to pour
use a separate form for each, as you may have different pricing strategies from one outlet to a certain amount and
another. Use and update these forms for each outlet. The information gives you a ready per- then try to free-pour
spective on costs across your beverage offerings. the same amount.
162 √ Chapter 9
Figure 9-3 Master Beverage Pour Cost Sheet Total Selling
Cost Price in $ Cost %
Product Item Size of Portion Portion Mixers
Number Name Item per Bottle Cost Cost
bin cards A manual Other Beverage Controls
system for keeping track of
inventory items The manager is the custodial authority of the beverage storeroom. He or she will be monitor-
ing the stock of each item at all times. When everything is systematically in place, he or she can
easily notice if something is missing. One method to systematize your storeroom is to use bin
cards, including a unique bin number for each item.
A typical bin card shows the brand name, bottle size, quantity on hand, and bin or inventory
code number. The minimum or maximum stock levels may also be recorded on the cards, as
this information makes it easier to determine purchasing needs. The card is then affixed to the
appropriate shelf. Bin cards note each entry and exit of a product. They are also very useful in
a perpetual inventory system. The amount of stock delivered is added to the quantity on hand,
and the amount issued is subtracted. The number of bottles shown on the bin should always
agree with the actual number on the shelf. Storeroom personnel will need to spot-check inven-
tory against the bin cards to help keep track of inventory. The information on the card, then,
provides reliable rates of inventory use.
Another aspect of beverage control is eliminating the confusion in bottle sizes, spelling of
names, and different brands. The purchasing manager should identify every kind of beverage
carried in the restaurant or bar by means of a bin number or item number. Each type of bever-
age is assigned a block of numbers. For example, in a four-digit system, gin might be 1000,
rum 2000, tequila 3000, and so on. Then particular brands would fall into those categories—
for example, Tanqueray is 1001, Beefeater’s is 1002, and so on. This system makes storage,
inventory, par stock, and ordering procedures more organized and standardized. Bin or item
numbers are used in a beverage control system for the following reasons:
• To simplify and standardize beverage control procedures and forms
• To facilitate purchasing, storing, requisitioning, and recording of physical inventories
• To provide precise numerical product descriptions to be used in inventory and purchasing
control systems
The restaurant or bar par stock list is one of the most important procedural controls in a
beverage control system. A par (Figure 9-4) is a pre-established limit of an outlet’s beverage
stock.
A copy of each par stock listing should be located in the outlet itself; there should also be
one in the manager’s office and one in the beverage storeroom. Each outlet is then issued
only enough beverages to meet those par numbers. The purchasing clerk should never issue
any beverage product in a quantity greater than the par value without special authorization
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3. 餐飲成本控制及採購 Practical Food and Beverage Cost Control -2th-edition ( PDFDrive.com )
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