The case study involves a full-service restaurant that has different venue focus areas with seating for over 400 people. Annual sales are roughly $6 million.

The challenge here was the constant problem with accurate inventory values. From month to month, it was impossible to figure out where the inventory mistakes were made. This operation was unique in the fact that they actually had too much space for liquor, beer, and wine storage; the opposite analogy of collecting less junk when you do not have a garage space for it.

Whenever you have difficulty getting accurate inventory numbers from management, the issue is usually the organization of the bar or the setup and organization of the storage space. Restaurants that have small storage end up having fewer inventory issues and more accurate numbers because space is used efficiently. One issue is the relationship between bad inventory numbers and ordering practices – if management cannot count the bottles correctly, then how are they ordering accurately?
Here are the steps we used for this restaurant:

1. Develop an authorized product list for the bar including liquor, beer, and wine. Restrict the bar manager from ordering any items that are not on the authorized list unless he or she has discussed and ensured that it is the correct product and correctly priced. Discontinue “combo-pack” purchases from vendors.

2. Organize the bar areas with a set amount of bottles. This is setting up a par system. It is best to take the time to organize the bottles in the best manner for bartender use. Decide the number of bottles you need of each item and make this a standing par. Diagram the set up for future reference.

3. Set up a break system that only issues a bottle when an empty bottle is received.

4. Clean up the storeroom and organize it in the same order as the inventory and ordering process. These two actions are basically the same function.

By using a standard par behind your bars you can then have an accurate number of the total inventory value of the bar. You should treat each bottle as a full bottle – do not bother using the ridiculous point system; the purpose of a perpetual bar par system is the assumption that bottles get emptied and refilled continuously throughout a month and their actual state of volume at the end of a month is irrelevant over the course of a year. This system also lets you identify issues quickly when a bottle is missing from the par – it is either a theft issue or ordering issue.

Month on Month Comparison
January 2011 vs. January 2012                                   Usage Value                         % Bar Cost
Pre-par system                                                             16671.10                                 20.0
Perpetual Par System                                                  14301.07                                18.9

About the Author

Jean Hagan, PrincipalJean Hagan
Restaurant, Hospitality
Jean has owned, operated, and consulted in the restaurant industry for more than 30 years. During that time, she worked with a well-known national chain; owned a food and beverage company that operated multiple restaurants, bars, and event spaces in the Squaw Valley area; and became the president, CEO, CFO, and shareholder of one of the highest-grossing restaurants in California. Today, Jean is Principal and leads the Restaurant Operations Consulting practice at KROST. » Full Bio