Every restaurant is decking the halls at this time of year as diners come in for celebrations, but what many don’t realize is that they could be losing thousands of dollars on alcohol.

Employee theft is a $11 billion problem in the U.S. and accounts for 4 percent of restaurant sales according to the National Restaurant Association, but it need not be, says Dan Smith, CEO of BevIntel, a beverage auditing service in Louisville, Kentucky.

Alcohol is typically stolen through three methods, he says—deliberate theft, spillage and overpouring.

“It’s a combination of all three that’s hurting restaurants,” he explains. “Employees often don’t realize that giving a drink to a friend or pouring someone more so they get a better tip, really is stealing.”

So what can you do to ensure your restaurant isn’t losing money through your drinks program? Smith offers these tips:

• Communicate with your employees and make them understand how you make money in a restaurant. Let them know what your expectations are.
• It’s an important part of any restaurant to comp frequent guests, but make sure it’s only on occasion. It’s important to keep it controlled. Have employees write down any comped drinks with a brief explanation.
• Allow employees to give away a certain number of free drinks but they should not exceed that number. And give them guidelines (preferably written) about giving away freebies.
• Spillage is especially a problem in busy restaurants, and becomes even more so during holiday season when there are a number of parties. Make sure your bar is set up correctly so that in a rush nothing is missing. It’s about being organized, being disciplined.
• Use jiggers to control the pours for cocktails—especially for holiday parties. Control spouts can also be added to liqueur and wine bottles but can be frowned upon in fine dining restaurants whose owners often think they cheapen the experience for the guest.
• Let your staff know what your disciplinary actions are in case you catch an employee walking out with a bottle of alcohol in his or her bag.
• Detail all your expectations in an employee manual and have employees sign off to show they’ve received it.
• Teach employees not to empty bottles of wine or liqueur into a customer’s glass even if there’s only a little there. It all adds up.
• Draft beers should never be topped off.
• Point out to employees that if they “steal” it hurts the restaurant. This could lead to it going out of business and then they won’t have a job at all.

Source: Restaurant Management Magazine, By Amanda Baltazar, December 2011

MISTAKE #1: Chasing The Smallest Opportunity

Problem: Increasing sales through customer acquisition is the most expensive and least productive method for driving profits. It is a restaurant’s own customers who are more likely to visit and spend money, yet most owners expend 90% or more of their marketing dollars in an effort to drive “new” traffic, which in most cases represents less than 10% of a restaurants growth opportunity.

Solution: Significant sales increases are more easily obtained through staying top of mind with current customers and giving them frequent reasons to return.

Example: A customer visits your restaurant twice a month. They are continually influenced by other advertising and offers, so they are dining in other restaurants as well. Imagine if you had a way to reach out and provide them with continual and repeated reasons to visit and spend money with you. Just one more visit per month is a 50% spending increase from that customer.

MISTAKE #2: Using The Wrong Media

Problem: Yesterday’s mass advertising media are in complete free-fall. They are no longer delivering the eyeballs they used to. The world has moved to the web.

FACT: Post Office losses are accelerating due to declining volume

FACT: The top 25 newspapers are hemorrhaging money

FACT: Radio has its lowest audience since Arbitron started keeping statistics

FACT: Today’s 18-34-year-old customer prefers email to direct mail.

Despite the fact that mass advertising is increasingly irrelevant and terribly expensive… the most dangerous aspect, is that it doesn’t work at all – unless it is discount driven. And since your offer is piled in with competitor’s offers – the bigger discount wins.

Solution: Building your own database of customers allows you to connect directly with them inexpensively… with offers designed to encourage a visit – without competing with competitor’s ads and offers.

MISTAKE #3: Suicidal Offers

Problem: Discounts have become the crack cocaine of restaurant marketing. And like any drug, it requires more and more to get any response at all. And, as we’ve just seen – the nature of the mass-advertising beast – is that the steepest discount wins.

Discounts hurt you in five ways:

1. They make the restaurant appear desperate
2. They reposition the restaurant as a low-end operation
3. They attract bargain hunting “junk traffic”
4. They murder sales and profits
5. They train customers to “wait” for the deal

Solution: Discounts should be used sparingly, and only for driving new traffic. Customers brought in from discounts should be immediately enrolled in a customer data base or rewards program for follow-up marketing.

MISTAKE #4: Reach & Frequency

Problem: Restaurant owners (especially independents) do not have the deep pockets to sustain an extended marketing campaign. They advertise when the budget allows or on an occasional basis in reaction to slowing sales. This leads to a downward spiral of boom and bust marketing.

FACT: Consumers buy, when they are ready to buy… not when a business owner decides to advertise.

FACT: On any particular day only 3% of your marketplace is ready to spend money with you. That explains mass-advertising’s dismal response rates.

FACT: Continual repetition is required to attract new prospects – and more importantly, it is needed to prevent customer erosion from competitor advertising.

Most owners over reach with too little frequency… this squanders marketing dollars because they only reach a tiny fraction of those ready to buy now.

Solution: Narrow the reach and increase the frequency. Rather than advertise to 10,000 people once a month, you’re better off reaching a zone of 2,500 people 4 times during the month. That insures that you are in front of all 2,500 at or near their dining cycle.

IMPORTANT: Enroll these people in your rewards program and then move on to the next zone. You must reach those most likely to buy from you – with enough frequency to instill a habit. Then, you must maintain that frequency (a rewards program does this automatically) – to prevent competitors from influencing YOUR customers.

MISTAKE #5: Obsessive Acquisition – Negligent Retention

Problem: Operators today, continue to pour most of their marketing dollars into expensive acquisition… yet, do little or nothing to nurture the relationship with those who are attracted to the restaurant. This traps owners in a vicious… Spend, Acquire, Lose Syndrome…

As a result many owners become frustrated at the “ineffectiveness” of marketing and cut back. This of course leads to slowing sales. Owners react by launching some form of discount offers in an effort to prop up sales. And the downward spiral begins…

Solution: You’ll never fill a bathtub without a stopper in the drain. And the same principle applies to marketing. Discounts should be used sparingly to drive new traffic. When new prospects arrive, immediately invite them to join your rewards program. This allows you to build a protective wall around your customers and keep them from being drawn away by competitors.

FACT: 7 out 10 new prospects will not return to your restaurant without a follow-up offer.

Summary: Mass advertising is “expensive.” Rewards marketing is “inexpensive.” Discounts train customers to “wait.” Rewards motivate increased “spending.” Reallocate part of your marketing budget to a rewards program that gives your customers continual and repeated reasons to visit, keeps you “top of mind” – locks in loyalty, encourages increased spending, and runs on auto-pilot. It worked for my restaurant, it works for our clients…it will work for you too.

(Source: RunningRestaurants.com; Kamron Karrington; November 2011)

In the restaurant industry it’s fairly common for suppliers to give away “gifts” to their customers, often individuals who make purchasing decisions on their products.

At the low end of the gift spectrum are things like concert and sports tickets or a ham or turkey around the holidays. However, there are also situations where chefs and managers receive items of much higher value like exotic vacations, high-end merchandise and even cash in return for their continued patronage .

As a result of these “gifts”, the restaurant owner ends up paying higher prices on the supplier’s products.

Every restaurant should have a straightforward and well- communicated policy regarding what’s appropriate and not appropriate for employees to receive from suppliers in the form of gifts.

You may think that a few free hockey tickets are no big deal but here’s Wal-Mart’s policy: Wal-Mart employees cannot accept anything from a supplier, not even a free cup of coffee. If they do, and the company finds out, it’s grounds for immediate termination. They don’t want anything to get in the way of employees doing what’s in the best interest of the company.

It’s also good to rotate people out of the purchasing function occasionally. Don’t have the same people control your purchasing decisions year after year. The longer they deal with the same suppliers, the warmer and cozier the relationships (and potential for abuse) can become.

If you suspect someone on your staff is receiving kickbacks, check to see if any suspected supplier’s prices are excessive. Have someone outside of purchasing, like a bookkeeper, do some competitive bidding on a few of your key products with those suppliers. If you’re paying premium prices, it should be fairly evident.
(Source: Restaurantowner.com; October 2011)