Bar Owners and Profit and Loss

There is no video for this lesson, and there is no reason for you to study this. Give it a quick read and move on. Like this entire section on “Bar Operations,” the reason for this lesson is that I just wanted to give you an idea of what the bar manager is looking at every day.

Again, many of you have no idea how a restaurant and bar operates as you’ve never been in the business. This lesson, and this entire section 13 overall, give you a bit of the basics.

Management monitors expenses very closely. So, when they get on you for wasting napkins – or preventing people from pilfering shot glasses, you’ll know why.

Another thing to keep in mind is that many mangers receive bonus’s. And, their bonus is tied to the “PAC” line. What is that? It’s “Profit After Controllables.” In other words, bar owners want their managers to stay on top of expenses – and reward them handsomely.

First, look at the below examples of a Restaurant and Bar’s Profit and Loss (P & L) statement. Keep in mind that I just kind of threw these together to give you an idea of what the managers, accountants, and controllers are looking at.

The P & L, along with the “Income Statement,” “Balance Sheet” and “Cash Flow Statement,” are some of the accounting tools that management uses to track what’s going on in the bar. We’re just looking at the P & L here.

Keep scrolling down for some additional information…

Now, let’s look a little closer on how all of this comes together. Generally speaking, there are three sections to a bar’s P & L Statement:

• Sales And Revenue
• COGS (Cost Of Goods Sold)
• Operating Expenses

Revenue

A bar and restaurant’s revenue would include all profits from the sale of food, liquor, beer, wine, and merchandise. Basically, anything that the bar sells. Simple.

Sales (All Food, Beverage, Merchandise, Vending, etc.)

Whatever you ring into that cash register. Food and liquor sales, T-shirts, mugs, etc. Anything that the bar sells must be wrong up under the proper key of the POS System.

Gross Profit

The amount of money left over after paying for all food and beverage expenses. Things like that case of Absolut Vodka and heads of lettuce. Keep in mind that the gross profit we are talking about here are food and beverage items.

Things like napkins, cleaning supplies, glassware, and labor are accounted for elsewhere. These are general, everyday expenses.

A general rule of thumb is to get about 80% gross profit from liquor, beer, and wine sales. For food sales, a decent gross profit is around 60%.

Many bars will break down their liquor sales: Separate gross profits for liquor, beer, and wine. They may also break down the times of day – especially for food sales. For example, a separate gross profit on lunch menu items vs. dinner menu items. They may also separate out all soda, juice, and bottle water sales.

Many bars will include things like cherries, olives, fruit garnishes, and juices in the liquor gross profit/inventory instead of the food inventory. Every bar is different!

Costs

Overhead, insurance, payroll/labor, paper goods, cleaning supplies – the list goes on and on, and most bar’s will have a separate line on their P & L for each category. You can see examples of this stuff in the images above.

Cost of Goods Sold

This is the bars “usage.” Basically, it’s how much the bar spends on inventory to fulfill a sales transaction. It can get a bit complicated, but this is all you need to know. Unless you plan on going into management.

Payroll/Labor

Besides the cost of food and beverages, this is usually the bar’s biggest cost. Hourly wages and salary, bonus’s, vacations, sick pay, training, management/accounting salaries.

Operating Expenses

Supplies, repairs, marketing. Utilities, rent, insurance, licenses. Almost everything but food and beverage items. Many bar’s will include almost everything on their P & L under operating expenses.

Bar’s and restaurant’s are all over the place on all costs. Many categorize them differently for simplicity sake – and others are very nit-picky.

Occupancy Expenses

Rent, taxes and interest payments, depreciation, utilities, trash service. It all depends where on the P & L the bar owner wishes to list these items.

Insurance

Workman’s Comp, loss of income, equipment breakdown, property damage, fire damage, theft, etc. Pretty much any kind of insurance you can think of.

Controllable Expenses

A bit different from “uncontollable expenses.” Controllables are any expense that management has SOME control over. Like overtime hours. Cutting waste in bar supplies, ordering the correct amount of product, reducing food waste.

This is a very important category on a bar owner’s P & L because it is many times tied to the amount of bonus money paid to the management staff.

Uncontrollable Expenses

Things like insurance, utilites, licenses. Usually items that have a “set” cost and cannot be controlled by anyone in management.

Prime Costs

Food, beverage, and labor costs. The “Big 3.” These three items are the bar’s biggest costs.

Net Profit

The owner’s paycheck.

There you have it – a general idea of how Profit and Loss works in a restaurant and bar. Really, the only thing new bartenders need to pay attention to is waste – and honesty!