Drink Shrinkage: Franchise keeps tabs on liquor inventory, sales

Steve Nurnberg, who bought a Bevinco franchise in January 2006, has recruited 14 clients – including T.G.I. Friday’s, Indigo Joe’s and Agrario – for the company’s services. The goal, he said, is to reduce losses – or shrinkage – from over-pouring, spills or free drinks.

“In almost any business that you’re involved in, shrinkage is something you manage, but in the bar and restaurant business it averages 20 (percent) to 25 percent, and there’s no other business that would even consider running with that kind of losses,” Nurnberg said.

Nurnberg, who is retired from the management industry, started his Bevinco business because he was looking for something to do, and he said giving clients the tools to help them make management decisions seemed like a good fit.

One thing he must be willing to do to operate his franchise – which has no employees and is strictly a family operation – is wake up early.

Starting as early as 4 a.m., Nurnberg visits clients to weigh bottles of liquor, wine and kegs. He’s long gone before the bars and restaurants greet their first customers of the day.

Sophisticated software

The concept is simple, but the software is pretty sophisticated, Nurnberg said. A Palm Pilot scans bar codes on unopened beverages. Opened beverages are scanned and then weighed with a pharmaceutical scale.

Bevinco software on Nurnberg’s laptop automatically records the brand and type of alcohol, density, bottle size, cost and weight.

Once the beverages are scanned and point-of-sale data is recorded, a report is created that includes a summary of sales and inventory variance. The report also calculates ideal pour costs per brand, overage and shortage percentages and revenue potential.

“The number tells you a lot more than whether you have shrinkage or not,” said Mike Gallagher, vice president of operations for Tricorp Management Co., which owns 13 T.G.I. Friday’s restaurant franchises.

Tricorp pays Nurnberg about $10,000 a year to audit beverage inventories for two of its restaurants – one in Springfield at 3242 S. Stewart Ave., and one in Fayetteville, Ark.

Gallagher said Bevinco’s report helps with more than tracking shrinkage.

“It tells you how the training for your bartenders is,” he said. “It produces a procurement number, an ordering number, your usage. It helps keep the cash in the bank and not on the shelf.”

Bevinco’s fee varies depending on beverage inventory volume, Nurnberg said. In general, the cost is about $200 per audit, but the higher the volume, the more frequent the audits will be.

But clients may recoup money they spend on audits by using information they provide.

Linda Ownby, general manager of Martha’s Vineyard, has seen revenue increases since she hired Bevinco about a year ago.

“It decreased our liquor cost, over-pouring and possible theft by employees,” she said. “It definitely helps identify problem areas.”

Initial costs

Although Nurnberg hasn’t had to provide a day or shift audit in Springfield, he said it’s an available service that ensures more bartender accountability.

Nurnberg paid startup franchise costs of $40,000, which included the franchise fee, a two-week training course in Toronto, software and equipment. The franchise fee is good for five years, but there are three built-in renewal periods of five years each.

“Basically you’re paying for the right to do this for 20 years,” said Nurnberg, who posted about $100,000 in revenues last year. He also pays Bevinco Corp. an annual fee based on the royalty-fee structure in his contract, which he said averages about 8 percent of revenues.

Nurnberg also is considering purchasing a Bevinco Food Controllers franchise to help clients track food inventories.