How to organize a bar: Risks and Hidden Costs

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How to organize a bar: Risks and Hidden Costs

gestione bar

Organizing a bar is not a joke!
I remember an episode many years ago when a wealthy man of my age said to me “me and my father
took over a bar, we had a lot of fun.”

Where does the idea of opening a bar start? Have you ever thought about it?

“I like being around people.”
“I can make cappuccinos and my friend can make cocktails, we took a challange.”
“You cash in right away, you don’t have to wait for late payment of bills.”
“Who doesn’t get a coffee?”
“What else am I going to do?”

To finish with…”It would be really nice to have a coffeeshop here.”
I think these phrases are high-risk because, although with honourable intentions, they hide pitfalls that a very complex work like running a bar imply.

Unforeseen risks may be:

  • reduced margins
  • hidden costs
  • working hours

Bar Management Margins
Often the cost of many products is more or less standardised in all premises. Products such as

  • espresso
  • cappuccino
  • brioche
  • liquors
  • etc…

But how many did the calculation of the food/drink cost (product cost)?
It is good to do it BEFORE putting it on display or on the Menu.

An Unwritten Rule that talks about x3, x4, x5 might be useful:
the calculation to get the final price starting from the raw material. As a reference of the “weight” by which multiply, you can consider the craftsmanship and therefore the hours of work, in addition obviously to the influence on fixed costs.

Hidden Costs in Managing a Bar
Avoiding the topic of costs at a university level, think about:

  • cleaning products
  • rags
  • sponges
  • soaps
  • trash bags
  • swabs and various health checks
  • purchases by receipt, i.e. those products you might want to buy at the supermarket rather than of order them from the company
  •  wasting such as cut lemon, damaged fruit, leftover milk, sandwiches and brioche
  • self-consumption, namely how many ice creams do you eat in the summer or how many espressos do you take per day?
  • small gifts or customer upgrades
  • small maintenance such as broken light bulbs or neon, paint adjustments, change of broken chairs, etc…
  • replacement of glasses, small parts, cutlery, etc…

…and so on with this reasoning.
All these costs should be foreseen, codified and put on initial budget as much as possible, codified and budgeted, possibly also by calculating the relative “weight” for each product.

Obviously “hidden” doesn’t include fixed costs such as:

  • utilities, to the present day even Wi-Fi
  • rent
  • mandatory health checks
  • various assurances
  • equipment assistance contracts
  • entertainment licenses
  • accountant
  • any fine
  • various depreciations

And these costs should also be treated as above

Let’s talk now about the mother of all costs: work!

Take a stopwatch and have every item you have on the menu , make it prepared or prepare yourself, from the moment of the order to the delivery. When calculating the cost of time take into account the total annual cost of an employee, including contributions, holidays and miscellaneous accessories, then divide by actual working hours. From here you can get the cost per minute and be so relevant in reporting it on every product.

For example, you will find that a “ macchiato ” has a food cost very similar to a cappuccino, while generally the selling price is the same as the espresso or that you sell chewing-gums more as a service than for profit: do you have other examples?

Then “this activity is good for a family” means that you’ll spend 12 to 16 hours a day inside the coffeeshop…should we not calculate that too?

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