If you want to run a successful wine program the diligent somm usually becomes a veritable variance Hawk.
Running a restaurant—especially if it’s your first time—is like wandering through a field of landmines blindfolded. Variance can quietly demolish your profits if left unaddressed.
Being vigilant with precise pours is a key component in the zen of the sommelier’s arsenal.
Defining the minefield called variance:
- This difference between your purchases and sales can come from many hidden sources:
- Unrecorded sales—one offs aren’t a problem, but if you aren’t recognizing certain types of sales, your product costing may be off. Batching Banquet wine-sales may be simpler during service, but you lose insight into your actual beverage costs.
- Bad inventory counts – this can happen but corrects itself over time.
- Breakage—stuff breaks, it happens. Make sure you capture it and write it off, or else you will lose track.
- Over pours/unrecorded “tastes”—your staff should be encouraged to let customers taste, but all these should be recorded as comps at the end of the night. Over pouring can slowly bleed a beverage program through a thousand cuts (or glasses).
- Theft – this is a difficult but unavoidable area to address.
Why is it important:
- Restaurants live and die on two things: Top line revenue and margin. Margins are razor thin in the industry as it is. Variance is what eats away directly at margin and can be the difference between making it and being amongst the 60% that never make it past the first year.
How does variance impact the bottom line?
|Variance Totals||May 1 to June 1|
|Product Type||Theoretical Inventory Value||Actual Inventory Value||Variance Value||Sales||COGS||COST %||Actual Cost %|
You can have great top-line revenue (great for cashflow!) but if you’re losing product/money through variance, your profit margins will be eaten away until you get control of it.
- A practical example: here’s a program that’s already running on the edge of acceptable cost and is probably struggling a bit to make the margins work. The Variance value shows the difference between what the restaurant should have had on hand at the end of an inventory cycle to what was actually counted. Having nearly 5% of inventory sounds pretty awful, and it is. When you factor in the cost of missing product to that month’s Cost of Goods sold, it reduces overall profitability by nearly 3%.
So how do you control it? This is where the Zen of the Somm comes in…
5 tips to minimize variance (although you’ll never get entirely rid of it!)
- Make sure you set up a process of capturing all sales and properly depleting your inventory so your cost of goods sold calculations are accurate. This especially includes if you batch-sell wines for banquets/buy-outs. You’ll never get an accurate understanding of your profit margins if you don’t.
- Breakage – See above!
- Front of House policy – any product poured needs to be accounted for. This means training your staff to capture all non-revenue pours (tastes, waste, staff consumption) and record all of your comps every night. (If you don’t write it off, it’s just straight loss).
- Make sure your staff is pouring exactly to whatever ounce measurement you’ve decided is a glass. The math gets scary here quickly: if you sell 20 glasses a night and you over-pour by an ounce, then by the end of the month, you’ve just given away 2 cases of wine.
- Manage your inventory. Matching your sales and depleting your inventory on a nightly basis will help you track your cost of goods sold and manage variance like a hawk. Hey, we’ve got a system that does that!