Shrinkage

What shrinkage actually means

Shrinkage is every drop of liquor that left your shelf without a matching sale. Spill, waste, comp, freebie, over-pour, theft, a bottle broken on the floor. All of it is shrinkage. All of it shows up as a gap between what the POS expected and what the count confirmed.

It is the number one reason pour costs run high in bars that otherwise do everything right.

How it is used on the floor

Bar managers track shrinkage as a percentage of revenue or as a percentage of total usage. A well-run bar has shrinkage under 2 percent. An average bar sits between 3 and 5 percent. A struggling bar is 7 percent or more.

The goal is not zero shrinkage. Zero is impossible. Some loss is baked in. The goal is knowing what your normal number is and catching when it moves.

Categories of shrinkage

Industry operators usually split shrinkage into four buckets:

• Operational: over-pours, wrong pours, spec drift
• Accidental: spills, broken bottles, waste
• Intentional generosity: uncomped buybacks, heavy handing friends
• Theft: cash not rung, drinks for cash, product walking out the door

The first two are usually 60 to 70 percent of all shrinkage. The last two get all the attention but rarely dominate.

The dollar impact

Example: a bar doing $80,000 a month in liquor sales with 5 percent shrinkage is losing $4,000 a month. Annualized, that is $48,000. Cutting shrinkage to 2 percent recovers $2,400 a month, or $28,800 a year. That is the entire salary of a full-time bartender, recovered.

How to cut it

Start with measurement. You cannot fix what you cannot see. Weekly counts, per-SKU variance, and shift-level usage tracking catch 80 percent of the problem without any other investment.

Then move to process: jiggers instead of free pour, written comp policies, mandatory spill logs, a weekly pour test for new hires, and a written termination policy for theft.

Common mistakes

Assuming all shrinkage is theft. Blaming the whole staff when it is one shift. Not separating waste/spills from real variance. Reacting to monthly numbers instead of weekly trends. Giving up because the number “is what it is.”

How PourIQ handles it

PourIQ breaks shrinkage down by SKU and by shift so you know whether the leak is a bottle, a person, or a process. It tracks trends week over week so you can see the impact of fixes instead of flying blind. Seeing shrinkage drop from 5 percent to 2 percent is the fastest ROI you will hit with any software.