Everyone loves happy hour (obviously—that’s how it got its name). It’s a great promotion to help increase traffic and sales and keep customers thirsty for great deals. But tracking happy hour and special discount pricing in your bar or restaurant’s POS system can be complicated and time consuming.
However, this is a crucial part of running a successful bar. It’s important to be able to identify and evaluate the underlying numbers of your happy hour promotions or other special discount items.
If they’re structured incorrectly in your POS system, it’s almost impossible to identify the critical pour cost and profitability numbers and understand how these discounts affect your beverage program’s performance.
So, what can be done to make sure these special prices are properly set up in your POS system? Let’s take a look.
There are many different types of special promotions that bars and restaurants run to increase traffic during slow periods or promote slower moving products. At BevSpot, we’ve seen them all—from standard happy hour time frames to well drink half-off specials and local beer discounts on Thursdays.
It’s up to you to know your customer profile, locality and competition—as well as the local laws governing alcohol sales in your area—and decide what promotions will work best for your bar. This is the first step in organizing discounts in your POS.
Properly structuring your POS system is crucial to ensuring your staff can easily ring-in the items they need. But being able to quickly ring-in products isn’t enough. What matters is the way the underlying numbers are structured inside your POS—and what they’re doing to your profit margins.
Structuring your POS isn’t much fun to talk about, we know. So, we’ll make this as simple as possible: Just like any other product pricing, you need to be able to see how many of each item you sold at what price.
Luckily, this is something most POS systems handle fairly well. A great shortcut solution, though, is to have a separate button for ringing-in any happy hour drinks—we often see this show up with an “HH” before the item name—or, maybe the magic happens behind the scenes, deep inside some serious POS structuring.
What matters most is that when you look at a report from your POS, you see a line item for how many of that item you sold at the regular price, and a line item for how many you sold at the special price.
“But what if my POS doesn’t do that?” If your POS doesn’t track these pricing tiers separately, and you can’t commit to spending time restructuring the system yourself, take a weighted average of all the prices you’ve sold an item for, and you’ll get directionally correct numbers. These figures might be a little inaccurate, but at least they’ll give you a general idea of your sales and cost averages.
Now comes the fun part. Like all of your sales items, you want to evaluate your profit margins and profitability for these special discounts.
To determine these, you need to calculate:
Cost to pour / Sale price = Your cost %
For example, let’s say you sell a $10 Jack and Coke, and it costs you $2.00 to pour ($1.57 for the Jack, and $0.43 for the Coke). Your cost percentage is 20%. That means for every time you sell that drink, it costs you $2, and your profit is $8.
For cost percentages, low is good. As a general guideline, you want all of your items to be within a range of 18-22%, but these happy hour and special discount items will likely land outside of that range.
To decide if pricing these items outside of the target is helpful or hurtful, you need to do some investigating to understand how they affect the rest of your profitability.
For the profitability of your program as a whole, you want to evaluate:
Usage from inventory / Net $ received = Profitability
A great test to run to identify this number is to compare your bar’s overall profitability when you mix in these specials with a comparable sales period without them. Do these specials present enough draw to customers that they improve your profitability? Or are the cost margins too high to justify them?
Let’s say you typically have a $10,000 week at the bar, with $2,000 in usage. You’re typically running at an 80% profit. If you mix in a special discount that increases your sales to $10,800 and your usage to $2,500, you’ve changed your profitability to 77%. These are specials you would want to consider tweaking so they move the needle in the right direction.
It’s a lot to consider, but correct structuring in your POS is a critical part of running a profitable beverage program.
Need a little extra help?
Let BevSpot handle all the math for you. Do your inventory and ordering on our platform, import the sales data from your POS, and we’ll seamlessly calculate all your sales and profitability analytics for you, presented in beautiful, easy-to-read visualizations—all with the guide of our expert Customer Success team.
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