5 Strategies to Manage Food & Beverage Costs for Bar & Restaurant Profitability

Hello and welcome to the Bar Business Podcast , where we help bar owners increase profits , attract loyal guests and simplify operations so you can avoid burnout and finally enjoy your life outside of your bar . I'm your host , chris Schneider , the Bar Business Coach .

Before we get started , a quick thank you to our sponsors SpotOn , who provide a great , modern POS solution for the bar and restaurant industry , and Starfish , who use AI to turn your books into actionable steps to increase profits . Restaurant industry and Starfish , who use AI to turn your books into actual steps to increase profits .

Today we're unpacking five strategies to help you control your food and beverage costs without sacrificing your guest experience . Now , to start with , let's put this all in context . Right , because our industry has faced a lot of issues over the last few years .

When you think about bars and greater bar and restaurant industry or hospitality industry as a whole , we're facing changing guest expectations , inflation , changes to our labor pool , increased regulation , higher minimum wage all sorts of things are impacting our businesses , but the thing is that , even in the face of all these issues , there are bars out there making 15%

plus net profit . There are bars out there making 15% plus net profit . There are bars out there making 20% plus net profit . Now , the average bar may be doing 5 , 6 , 7% , but there are folks out there that are really successful even in the face of all of that .

And one of the key differences between those who are not as profitable and those who are quite profitable comes down to their ability to control costs , and not just all costs , but specifically the most controllable costs . And the two largest controllable costs that you have in this industry are food and beverage costs , your product costs and your labor costs .

Now , today we're going to focus on that food and beverage side . Then we're going to cover five strategies plus one bonus strategy that you can use to control your food and beverage costs . So before we get into them individually , I just want to tell you what all five of these strategies are .

They are cross-utilizing ingredients , optimizing your portion sizes , implementing efficient inventory management , preparing items , in-house batching cocktails and , like I said , at the end we'll have a bonus strategy . So let's go ahead and get started breaking these down .

Our first strategy is to cross-utilize ingredients , and when I say cross-utilize ingredients , I mean you should really not carry anything . I mean you should really not carry anything , especially when we're talking on the food side , that is not used in multiple dishes that you carry and this is even true on the liquor side time .

But a piece of chicken isn't Chicken's going to spoil pretty quick , and so if we're looking at food where we have spoilage issues and then we're saying , okay , what can I cross-utilize to have the biggest impact , it's going to always be your proteins , and it's your proteins because they spoil the quickest and cost the most for most bars out there and for the

purposes of this conversation , I'm not really considering your higher-end food centric bar , because in those establishments , yeah , you might bring in ingredients just for one product because you have a certain style of service you're going for .

But for the rest of us , for the majority of bars out there , when we're thinking , you know neighborhood bars , places where people gather in large numbers that aren't all about the food but are more about the community and coming together you're going to have protein as your most expensive item and you always want to cross-utilize it .

So when I say cross-utilize ingredients , cross-utilize proteins , what do I mean by that ? Well , one thing is you should never have a protein on your menu that is not used in at least two dishes , and ideally you're going to use it in three or four . So what is an example of ? Well , let's say , chicken breasts ?

So you buy in chicken breasts , you have a breaded chicken sandwich , you have a grilled chicken sandwich , you have a grilled chicken entree , you have chicken strips , you have chicken tenders All of those can come from a chicken breast .

So we're buying in one style of protein and then either preparing it differently or cutting it apart , you know , breaking it down so that we can make multiple menu items from it . Now , obviously you want to pay some attention to expense , right , we don't want to break down a really expensive protein where maybe we could use a less expensive option .

But in general , the more you can use a protein on your menu , the more different ways you can use it , the better off you are . And you're better off for two reasons here .

A , we're reducing waste , both in reducing the ability for spoilage to occur , but also we're reducing waste just because there's going to be less items on hand and that generally , when you have less things , you waste them less . That's just human nature .

The other thing we're going to do here that's going to help really control our costs is we can now buy in larger quantities . I think everybody knows that a couple chicken breasts cost a heck of a lot more per pound than a case of chicken breast , and if you're going through a couple cases a week , maybe you can get even a better deal from your supplier .

So there's a direct correlation between the quantity you buy in and the price you pay per unit . So we cross-utilize proteins . That's going to allow us to buy in larger quantities , reduce the opportunity for there to be toilets . We have some costs cut down . So that's going to take us to our second strategy , which is to optimize your portion sizes .

Now , something that's very true in the United States not around the world , but Americans .

We have always liked in our bars to put what some may say is too much food on a plate , and a lot of people think that America's large portion sizes come from you know it's a more modern thing , but if you go back in the history of bars in America even Tocqueville when he wrote about America , commented on how large the portion sizes were at American bars .

So , especially in the US , we have hundreds of years of history that bars serve large plates of food relatively cheaply . Kind of hands us in . But when I say optimize your portion size , what do I mean by that ? Well , two things .

A standardize it so you actually have a theoretical and an actual usage , and you know when we get into the next point , which is implement efficient inventory management . If things aren't standardized , you can't implement efficient inventory management . The other thing too is you want portions that are big but that a lot of people actually consume .

In the place where I see almost everybody give out way too much of a product and at the end of the day , waste some money , is French fries . And why French fries ? Well , french fries are almost always bought and frozen in a bag . We're not normally cutting our own French fries at most places .

And even if we are , the same thing happens Somebody grabs a handful , they throw it in the fryer . That handful is the portion .

Well , different people have different size hands and in a lot of bars , if you pay attention to the food going back to the dishroom , the easiest way to measure whether or not your portion sizes are correct is to watch the food that isn't eaten . Not the food that is eaten , but the food that people take home and the food that's getting thrown away .

When that plate comes back to your dish room and if you notice that fries are frequently being thrown out , well , then you're serving too many fries . If you notice that large portions of your salads are getting thrown out , well , then maybe they have too much lettuce , right .

So by watching what gets thrown away , you begin to understand where your portion sizes might be too large , and then what you have to do is say , okay , I need to standardize a portion , and fries with most people that I'm coaching are literally where we start , because it's the easiest place to get this down . Now , is it the most money of anything ?

No , fries are relatively cheap , but it's a good place to start to be able to understand where your portion sizes should go , and a lot of times this is going to take some experimentation . I talk a lot about continuous improvement .

We make small , incremental steps that help our bottom line , and we do them methodically and carefully in order to avoid negative impact to our business . So if we were going to say , look at fries . We would say , okay , we were doing handfuls , let's try seven ounces . So we're going to portion the fries in seven ounce bags and we're going to watch them .

Are the fries getting eaten or not ? Well , okay , now a lot of fries are still coming back to the dish . Let's move that to six ounces and see what people say . And you just play with it until you achieve a result where most of the guests are eating most of the food and no one's really complaining about your portions being small for what you're charging .

And so you have happy guests , you have the smallest amount of food possible on the plate and in turn , then you've optimized your portion size . Another place where this can be very useful when we talk about optimizing portion sizes is behind the bar . Now , some of you have probably heard me say this before , because I'm a huge proponent of doing this .

Pay attention to your glass sizes . If you think about a drink , the size of the glass literally limits the portion that you can put in it most of the time , depending on the type of cocktail and the type of glass and all of that . But if we're talking about just a standard mixed drink and a standard glass .

The size of the glass dictates the drink , and what you see a lot of bars do is they'll have 14 or 12-ounce glasses for mixed drinks , and I personally like 9 , 10 , and 9 or 10-ounce glasses .

Now why is a 9-ounce glass going to be better than a 12-ounce glass when it comes to your power shrink control , and how does that not negatively affect your guest experience ? So first thing to think about is that in any glass we're putting ice in , at least in the US , because we really like ice , we really fill it in there .

You're taking up about 50% of the volume of that glass with ice . So a 9-ounce glass is going to fit 4.5 ounces of liquid . A 12-ounce glass is going to fit 6 ounces of liquid .

Now , if we're not changing the amount of alcohol involved in the drink , we have saved an ounce and a half of mixer . An ounce and a half of mixer it's kind of like the fries . We're not talking about a huge amount of money here , but over time that effect compounds and an ounce and a half of mixer .

When we're talking about Coca-Cola , which we're pulling off a gun , is pretty cheap , but when we're talking about all the ingredients in a tiki cocktail , it can actually be significant money . So we are lowering that amount of mixer that we're using At the same time .

Because we're lowering that amount of mixer , if we're doing an ounce and a half standard pour and we have four and a half ounces of liquor in a nine ounce glass or , I'm sorry , a cocktail in a nine ounce glass , or six ounces of cocktail in a 12 ounce glass , six ounces of cocktail in a 12-ounce glass , when we decrease the size of the glass we use less

mixer , which means that the ratio of alcohol to mixer is higher . In the 12-ounce glass we're getting 25% alcohol to mixer . In the nine-ounce glass we're getting 33% alcohol to mixer .

So we're using a smaller glass , we're using less mixer , which has some incremental savings that should drop basically straight to our bottom line , but at the same time we're not actually negatively impacting the guest experience .

We're positively impacting the guest experience because you go from a 4 to 1 or a 3 to 1 ratio to a 2 to 1 ratio as far as mixer to alcohol , and that 3 to 1 ratio to some people tastes a little bit weak , but that two to one ratio tastes really strong to everybody .

So you can go from having a bar that some people say your drinks are a little weak , or some people complain about your drinks . To a bar where people complain because your drinks are too small , and the only thing you've done is reduce the size of your glass , reduce your mixer , and most people can't tell the difference in glass sizes .

So you know , obviously , if you're going to do this and you have a pre-existing bar , the last thing you want to do is use the exact same design of glass when you make them smaller , because everybody will notice , but if you switch up your glass design , no one notices . You improve your guest experience and you cut your costs at the same time .

So , optimizing your portion sizes , make sure on the food side that you're not serving more food than people can eat , so you can get those portion sizes down to where your guests are happy and your bottom line is optimized .

And on the cocktail side , you want to make sure that you're providing your guests with a great experience and what they feel like is a strong drink . And you do that by lowering the size of your glass to optimize that portion of mixer which , again , both of those , will cause incremental increases in your profit .

And those incremental increases because nothing else about your business has changed will go straight to your bottom line . So even if we're only talking about , you know , optimizing portion sizes , saving you 10 grand of cost a year , that's 10 grand .

That's falling directly to your bottom line , which , if you own the bar and you don't have any partners , means that's 10 grand in your pocket . So it's worth doing . Now , our third idea here for how to optimize your cost controls and how to control your controllable of food costs is to implement efficient inventory management .

Anytime we're talking about improving a business and we're looking at incremental changes that are going to lead to big results when they all compound . We have to live in the world of data and in this case , we need to look at key mixes and we need to look at actual costs versus theoretical costs . And we need to look at actual costs versus theoretical costs .

Right , waste , which is the biggest issue for us when we're talking about food costs in particular , waste is the number one killer of food costs . To measure waste , we have to make sure that what we're going through is what we should be going through , based on our PMICs . So you have to implement efficient inventory . You have to do inventory well .

And Dave Netzel , who was on the show . You guys can listen to it . It was back in the spring of this year . One of the things he said that has stuck with me and it's something I believe and is very true and I've held it to be true for a long time .

But what he said was basically , if you're just counting , you're not doing inventory for a long time , but what he said was basically , if you're just counting , you're not doing inventory . Inventory requires the step of doing reconciliation . And what do I mean by reconciliation ?

Comparing what you used to what you should have used , which means you need to pull your P-mix . You need to understand exactly the ingredients going into each cocktail , each food item on your menu , and you need to compare what you should have used , based on what you sold and what got rang in , to what you actually use .

Because , again , if we're just counting , okay , we can make an order , but we have no clue if that number represents a good sale , a bad sale . We don't know what's going on here .

So you need to implement inventory that has a reconciliation process to understand the numbers , because without understanding the numbers , like I said , you cannot use continuous improvement , you cannot incrementally increase your business , because , guess what ? You got nothing to measure .

You have no data , so you're just kind of making shots in the dark and maybe it's better , maybe it's not . Maybe you think you're actually improving your business , but you're not so efficient . Inventory management properly doing your inventory is required Now efficiency in inventory . Here's the thing .

If you are not currently reconciling and all you're doing is counting and ordering , you're not doing the whole thing , so it's not going to be efficient . When you look at ways to make your inventory process more efficient , there are some options . You could outsource your inventory altogether to a company like Barometrics .

You could use a system like MarginEdge , which is going to help you understand your inventory . Additionally , margin edge has weights now or has a scale system now , so you can basically do the barbed metrics type approach on your own , and so that's great . That will help you understand and improve the efficiency of your inventory . Or you can do it in Excel .

I always did it in Excel . I made my own formulas and things . But make sure the way you're doing your inventory is capturing things accurately and your data is good , because efficiency , when we're talking about the whole system , means that you're getting the accurate data the fastest .

So you might have to spend more time to get the accurate data , but you're not doing inventory management unless you have the data and you're comparing data sets what you did use and what you should have used , which means you always have to do more than just count . So our fourth strategy to control F&B costs is to prepare items in-house .

Now , when I say prepare items in-house , what I mean is make as much stuff from scratch as you can . Avoid using too many breaded frozen products and too many things that are prepackaged . Now , the reason why I say that is A . I think it should be obvious to everyone . Normally that's more expensive . It's going to cost you .

Normally also , we frozen vegetables there . There are a few things where I don't think quality suffers in a way that would impact a neighborhood bar , but generally speaking , if you make something from scratch , it's going to taste better and be higher quality than if you want something pre-made .

Also , if all you're doing is buying things and heating them up I'm not . It doesn't really count to me as providing good quality food to your guests . So you have an opportunity when it comes to making things . Yes , it adds some time , but oftentimes the time can be offset by the food cost differences , and then you're providing a higher quality product .

So you're improving your guest experience while keeping your costs the same or probably , in a lot of cases , lowering them a little bit . So what are some items you can make in-house that are not difficult ? Well , chips , particularly tortilla chips . You can buy tortillas , cut them apart , put them in the fryer . You have tortilla chips .

They're going to be higher quality , they're going to taste better . Everything about them will be better than buying tortilla chips in a bag . Plus , tortilla chips and potato chips if you wanted to hand fry those as well or fry those to order as well require a lot of storage space . There's a lot of air in those bags . You can't smash them right .

Having tortillas as opposed to bags of tortilla chips decreases your storage needs by a heck of a lot . And while , yes , it takes employee time to fry those chips , the end product is so much better and it is incrementally cheaper than buying bags of tortilla chips . Same with potato chips , same with we were talking about chicken earlier .

Same with , say , chicken strips or a breaded chicken sandwich .

When you buy that chicken , free-breaded and frozen , everybody that eats that knows it's free-breaded and frozen , most people and anybody that's ever been in the industry can tell the difference pretty easily between free-breaded chicken on a chicken sandwich and just recently freshly breaded , in-house breaded chicken on a chicken sandwich .

So you're raising your quality , you're lowering your food cost a little bit , you're adding a little bit in labor , but , net-net , the more items you can prepare in-house , the better your guest experience is , the lower your food cost is and labor , if you manage things properly , shouldn't increase . So you're keeping your labor down , or similar .

You're moving your food costs down , you're increasing your guest experience Win , win , win . And you're controlling your controllable food costs . Now our fifth strategy and this is not food related , this is purely cocktail related is to batch your cocktails .

Now , before we get into this , I do want to give a bit of a disclaimer here , because it is true that you cannot batch cocktails in every space , in every area , in every jurisdiction , and the reason behind that is that some places it's just illegal .

And so if you're in the United States or anywhere around the world , reach out to your local liquor folks , excise liquor board , whomever and make sure you can batch cocktails . And then , if you can batch cocktails , what can you batch ? So certain jurisdictions will say , yeah , you can batch it all you want , we don't care .

Certain jurisdictions will say , well , no , you can't batch different types of alcohol together . Some places may not allow you to premix anything . It just kind of depends .

But to the extent that you can batch , go ahead and batch . So what are ways you could batch ? Let's say , if you can't batch liquor , well , you can batch sets of mixers together . Now , you can't batch mixers that have carbonation in them because obviously they will lose carbonation and that's a problem for your drink .

So you can't like batch sour and soda or Coke together for a Long Island . But you can batch different juices . If you have a specific cocktail on your menu that has three or four juices in it , you can batch those together . Now , it's not going to last that long , but you can batch it every day or two and that's going to speed up your service .

And in places where you can batch liquor , you can batch your liquors together . So if you have a special on Long Island and you can just make up Long Island and have them in a pitcher , great , you just pour them and go , you're done . But even if you can't or aren't going to use them that quickly , so you're worried about the coat going flat .

You can batch all the liquors together so that you have one Long Island bottle in your well and just pour out the proper count for all the alcohol that's going into a Long Island , rather than to have to grab five bottles and pour them all individually . So obviously , here the benefits we're getting is we're decreasing our service time .

So if you're doing the weekly challenges , we talked about ticket times this is one of the ways to decrease your ticket time .

But the other big win here is we're improving the guest experience via improving consistency , because I really don't care if you are a free pour master that can pass every pour test and are close , close , close , right within a tenth of an ounce of every pour that's ever given you to you , or if you're using jiggers in your bar and everybody is measuring

everything . Well , we've talked about jiggers before , but unless you're all using the same jigger , it's possible that those are totally different and that the measurements are off . It's possible that you still overpour or underpour with a jigger . So using a jigger is not a guarantee of 100% consistency . Free pouring is definitely not a guarantee of 100% consistency .

Batching gets you a lot closer , so it can reduce overpours , it can also reduce underpours , but you're going to hurt your guest experience and because you've introduced that experience , or that consistency , I should say because you've introduced that consistency your guest experience is going to improve , because every drink they get will be the same .

But , like I said , before you look into batching liquor , make sure you take a look at your local laws . Now , our bonus strategy here produces incremental income by increasing food costs , and that's why it's a bonus strategy , because everything we've talked about so far is going to decrease your food costs , decrease your beverage costs .

This is going to increase your food costs , to increase your beverage sales and increase your food sales in a way that generates more money than if you didn't do it . So it's a little different in that way .

Now , what this strategy is is essentially strategically using loss leaders , specifically food loss leaders , in order to drive business on slower nights that increase your revenue beyond the amount of the leaders , in order to drive business on slower nights that increase your revenue beyond the amount of the loss leader , in order to generate additional profit to your bottom

line . Now , that probably just sounded like a whole mess of buzzwords and finance words , so let's break this down . So a loss leader is an item that we're selling at cost or close to cost . In theory , we could be taking a loss on it .

Now , that works well in retail , but in hospitality , I'll tell you right now your loss leader , your goal should not be to lose money . Your loss leader should be set up so that you don't make or lose money on it . It's a revenue neutral . You're literally charging your guests your cost and then you're going to put that on a slow night .

So normally if I'm talking with clients , we're talking , you know , monday , tuesday , wednesday on something like this .

They're slow nights , there's not a lot of traffic , so we're going to give people a great deal on food on one of those three nights and what that is going to do is encourage people to come in , drive business on those nights and while we are giving away some food at cost , the increase in business and the other things people order are going to increase our

profit above the baseline for that . Now , what is the food loss leader ? What should that be ? Well , it needs to be something compelling . It needs to be something that brings people in the door . It needs to be a deal as good or better than anybody else in town has on that , because that's how you're going to use it to drive all this additional business .

It's also probably going to be regional based right . If you're in the Southwest , maybe it's burritos . If you're in the Northeast , maybe it's lobster rolls . If you're in the Midwest , where I am , what I would do steak and potatoes . To give Midwestern folks a good deal on steak and potatoes , they will be there every week for it .

And so I had what I call the steak night . I had a bone-in pork chop , a ribeye , prime rib and filet available , baked potato and a salad came with them , and I literally sold them all out . So how did that help my business ? How did that not just make it ? So ? I had a lot more work and a lot more people , but no extra profit .

A few things A the whole purpose of using a loss leader is to drive in more business . So the more people in your business , the more people see your business and your bar as being busy , the more likely they are to want to come in and join . B we have this food loss leader and we know for a fact that everybody that comes in is going to order it .

So I had four different items on my steak night menu that were all basically at cost and those were ordered by roughly 50% of my guests . So 50% of my guests are going to I'm going to make no money on , but 50% of the people that come in are going to order food and those are people that probably wouldn't have come in without the promotion .

The other thing too is is because all these people are eating , they're going to have two , three , four drinks . So again , they wouldn't otherwise be there except for the food special . But now they're going to have three or four drinks and I'm going to make money on that .

And to break this down into a mathematical example for you real quick , let's say I have a bar and I'm trying to increase sale on Monday nights and just for easy math , right now I am selling a thousand bucks and my margin is 15% , so I made $150 . So Monday I sell a thousand , I make 150 . That's my normal month .

I introduced , like this steak night type thing , or a lobster roll thing or a burrito thing or whatever works . Where you are thing right , you're in Texas , maybe it's a barbecue night , whatever you implement this and over time it becomes popular . People realize you have a great food and a great deal , so they start flocking there on your Monday night .

So now , on Monday night , instead of selling $1,000 , I sold $3,000 . And that $3,000 was , let's say , two grand of that was food and one grand was booze . We're just going to keep this math super easy . In that two grand in food , like I said , 50% of the people ordered the special and I made no money .

Essentially , what I did was , instead of making $1,000 , I sold $1,000 extra in food and $1,000 extra in booze . I actually sold $2,000 extra in food , but on half of it it was at cost .

So I'm only making additional profit on that extra $1,000 in food and that extra $1,000 in booze , which , assuming a 15% margin , means I went from making $150 on my Monday to profiting $450 on my Monday .

I've literally tripled my profit , quadrupled my revenue , increased the number of people in my bar , given my community a great experience at a great value , helped my servers , because the more volume , I need more people on shift and they're going to make a better .

They're going to make better tips because there's a bunch of people there for dinner , and so my employees are happier , my guests are happier , I'm happier , everybody wins , and I've tripled my profit on a Monday night . So let's run through these all real quick .

So we had the five strategies plus a bonus strategy to get your food and beverage costs under control without sacrificing your quality or your service . And when you go to implement these , if you do go to implement these , one thing I don't recommend doing is don't do them all at once . Do like one a month . One strategy a month .

Get your data , measure your data , make sure you should probably start by implementing efficient inventory management , because that will give you the scoreboard then to use as you implement these other strategies . But do them one at a time . Measure them , make sure they work , problem solve them , troubleshoot them , try to figure out ways to make them work better .

But if you do four or five things at once , you don't know which is which . Maybe one's hurting you , maybe one's helping you , you don't know .

So make sure you are gathering your data and analyzing your data in order to know that what you're doing is working and then , once you have that data , you'll see which strategies are working well for you , which are maybe not working for you , which are working but not that much , and the ones that are really working for you . Capitalize on those .

Push those until you reach the limit of how much you can max out that individual strategy . Now just to recap the five strategies we're cross-utilizing ingredients , optimizing your portion sizes . Implementing efficient inventory management .

Preparing as much as you can as far as your food items , in-house batching your cocktails in our bonus strategy , using lost leaders strategically to increase your business and your bottom line . Now , before I go , today we do have one listener question that I want to address , and this is from a listener in Woodstock , ontario . I am setting up my business .

Can you talk about tips , tip pools , et cetera , and how it's divided up or ways to divide it up for front of house and back of house ? Let me start with saying I'm willing to talk to you about a lot of controversial things , but something I don't tend to talk about is tips , and that's because there's no good generalized answer

here . If you look within , say , the United States , we have well in Canada , the US and Canada we have a very different tip culture than a lot of countries out there . All right , the way we look at tips versus the way that somebody would look at tips in England or Ireland or Australia or Slovakia I mean in any country in the world .

It's going to be different and we have a tipping culture in the US and Canada . But the thing about that tipping culture is it's also somewhat regional in how bars and restaurants have established their norms .

If you take major East Coast cities in the United States , a lot of them have gone to charging a service charge , so there's not really the need to tip afterwards . They're just kind of collecting it and charging it automatically , and then they're breaking that up and distributing it to people front of house , back of house , what have you ?

And so that system works well in New York . But if you tried to come to where I am in Indiana and implement a system like that , the people would look at you like you're crazy , because most bars and restaurants here are a lot more , for lack of a better way to put it , eat what you kill . You get your tips , you keep your tips .

You may have to tip out , so you might , you know , throw 3% of your liquor sales to the bartender or something like that .

The culture for tipping and tip pools and how tips get handled in restaurants is way different in Indiana than New York , and both of those are going to be somewhat different from California , which are all different from Texas , which are all different from Canada .

So , because different states , regions and countries have different norms when it comes to tipping , tip pooling , all of that , I try to avoid the subject a little bit , which is why I haven't talked about it before .

So my best advice is talk to as many owners as you can in your area , talk to as many managers as you can in your area , talk to as many managers as you can in your area , and then talk to as many bartenders and servers as you can in your area .

It's particularly important , though , to talk to owners and managers to understand the way that your area works , because sometimes , servers and I don't mean this in a bad way , but I have known servers and bartenders over the years who , when they get hired , especially by someone that is new to the industry , will quote systems and they'll go oh yeah , everybody does

tips this way . Well , no , they don't . You're just saying that so that you make more money .

So check with other owners and managers , because they'll probably give you a more straight result and they can tell you what they've tried that's worked , what they tried that hasn't , what they like and don't like from the ownership side , rather than just relying on all this from the employee side , because , as much as our teams and us and ownership are aligned ,

everybody has a little bit of greed in them , right ? So we want to make sure we're being very fair and reasonable and within the market with our team and we want to make sure that we're not getting screwed . They're not getting screwed , everybody's happy , so talk to folks around you .

The other thing I will mention is that within the US , if you are doing tip pools or if you're doing a service charge , that's acting as a tip pool , as an owner or manager . If it's a tip pool , you're legally not allowed . If it's a service charge , you are allowed to take that money . Ethically , I think that's wrong .

Owners and managers should not be involved in your tip pools ever , in my opinion , just from an ethical standpoint . And the only time a manager and owner is allowed to take tips is outside of a tip pool . But the only time these folks should be getting tips is when you're doing the job .

If your bartender calls out and I do this from time to time , although , as I've mentioned to you guys before , I'm a terrible bartender , so my servers always hated it when this happened but if I had a bartender call out , I couldn't get anybody else to cover .

I was the makeup bartender of last resort and so if I'm actually tending bar for a 10-hour shift and I'm getting tipped directly from the customers I'm serving those drinks to , I guess I'm keeping those tips . That's my money If I keep those .

I actually threw them all in an envelope in the safe and I would do this every time I worked throughout the year and then that became my money to spend on employees at the holidays . Sometimes I put some of it in my pocket too . There was a little bit of both , but most of the time I actually reinvested that money back in my employees .

But that's the only time as an owner that you really have an argument to take tips is when you have been doing the work yourself . Otherwise you should stay out of your tip pools and away from it for owners and management . And again , I have no solid advice about tips , tip pools et cetera , because it is regionally specific .

So you need to talk to people about it who work in your same market , who understand what that market's history is and what they expect , can give you the

real information . Because something else that's really true especially in areas with lower population . You know there might be a city 20 miles away , 30 miles away , and the way that tips are handled in the city versus the way the tips are handled outside of the city could be totally different . So make sure you understand your local market on .

That about wraps it up for today . If you enjoyed today's insights , make sure you like , subscribe and leave a review . If you are ready to take your bar to the next level , schedule a strategy session with me by clicking the link in the show notes below . Until next time , have a great day and we will talk again later .