Purchasing & Profitability
Let IHS help you:
Independent Hospitality Solutions understand how frustrating it is to achieve great sales results, yet see little to no profitability increases. Apart from simply getting more people into the venue, there are 3 main ways to easily increase profitability within your business:
IHS have access to high level pricing discounts across all relevant sectors, allowing your business to take advantage of the prices that would normally be out of reach. Our specialist consultants will assess your range and requirements across the business – in areas from Beer and Spirits to Consumables and Hotel Laundry. After the initial assessment, we will provide a set of recommendations and assist in the construction of buying guides to ensure that you bring down your spend – thus increasing your GP and your bottom line profit.
Stock slippage is one of the most significant impacts on overall profitability in the Hospitality industries, and unfortunately, is often seen as a ‘fact of life’ by operators. There is a perception that the costs associated with counting and analysing stock on a regular basis will outweigh the savings. However, even in a business with a modest liquor turnover of £6000 net per week, a very achievable 2% GP saving will equate to £120 of bottom line profit – enough to cover the costs of a visit every single week during the initial phase of the control programme; or alternatively a saving of over £6000 throughout a whole year.
IHS offers a selection of different options to assist with stock control depending on the scale of the business, the problems identified on the initial assessment, the capability of the team in place. These can include:
- Twice weekly, Weekly, Fortnightly or Monthly stock counting and results analysis
- Staff and management training, focussed on reducing the common causes of wastage (overpouring, poor line cleanliness, poor drink presentation etc)
- Bar reconnaissance (can be delivered as part of a bespoke Mystery Customer programme)
Where extreme cases of loss are identified, an intensive programme of daily counts may be appropriate in order to identify particular offenders and put a swift end to the slippage.
IHS can offer a bespoke package in this area, so please contact us for an assessment.
Pricing and Offer Strategies
Pricing in Hospitality businesses is an incredibly intricate science with many considerations. It is certainly no longer enough to take your target GP and work out a sale price based on that! Regrettably, too many businesses do take this outdated and inefficient approach to pricing; or worse, they simply price by what they feel is right! There are many factors to take into account of when developing a pricing and offer strategy, including, but not limited to:
- Competition pricing of comparable products
- Cost price of the product
- Speed of serve considerations
- Quality perception
- Dwell time
- Trading patterns
A good pricing and offer strategy, when combined with some simple and efficient marketing, can make a significant difference to profitability.
Late Bar and Club in Surrey
This club was the last bar on the town circuit, and as such, started getting busy around 1:00 AM, hitting its peak at 1:30 AM. With a 2:30 AM last serve time, and the most popular products sold being bottles of Lager and Alcopops, along with Bomb Drinks and Vodka Energy; this created a very pressured 90 minute window to sell as much product as possible. This was made worse by a licensing condition mandating plastic only serve – required decanting of bottled product. This was resulting in average Saturday session bar takes of around £3000 (gross), from almost 400 people through the doors – a spend per head of only £7.50! The bar GP being achieved was c. 70%.
The bar strategy of the venue was overhauled with the following introductions:
- PET bottled drinks, at a higher cost price
- Specialised Bomb Shot cups to allow pre-pouring of spirits
- Heavily discounted timed offers on J-Bombs and VodBulls - £1.50 before midnight
- £1 double up offer on all spirits throughout the evening
These changes led to an immediate impact. Within one month, the average Saturday bar takes had nearly doubled to an average of £5000, with the same 400 people through the doors – a spend per head of £12.50, an increase of £5! Also, the bar GP achieved had increased to 72%. This was as a result of the following effects:
- The club was busy by midnight, adding 60 minutes to the serving window (a 40% increase)
- The speed of serve was drastically increased by removing the need to decant. Also, staff were no longer running out of glassware to serve other drinks
- Pre-pouring the J-Bombs, with a strong offer attached to them, increased the sales of this high-margin, quick service product even more
- A move from bottled items to spirit and mixer increased the achieved margin while also increasing the frequency of drink purchase
Of course, the strategy changes alone wouldn’t create this impact; there is also a requirement for:
- External promotion – to push the message out
- Internal promotion – to push customers into purchasing the required product
- Bar staff training – to upsell (or in fact downsell where needed) to the required product
- Bar audit – to ensure the correct equipment and products are in place to maximise sales
- Deployment audit – to make sure the correct numbers of staff are in place at the right times
The effect of this strategy? The venue enjoyed continued excellent sales and strong profitability margins over the following years, eventually achieving a regular spend per head of nearly £15 while still maintaining the keen pricing needed to remain busy.