By: Robert Plotkin

When you’re talking about the on-premise business with John Hennessey you’d be well advised to do most of the listening. He’s owned and operated the Bevinco franchise for Arizona since 1996 and has spent every day since behind bars. Add in his extensive hands-on experience and you have a man with an uncommon understanding of what makes some bars succeed and others flounder and fail.

I recently had an opportunity to sit down with Hennessey and ask him how the current recession was affecting the on-premise sector in Arizona.

“A great many established bars and restaurants have gone out of business. Not only have we been hit harder by the economy than almost any other state, we now have the most stringent DUI laws in the country, all of which have deadened the late night business at many smaller establishments. Today it’s imperative that operators put out a quality product and become even more vigilant about controlling costs.”

Bevinco specializes in auditing beverage operations and determining their profitability by analyzing what was depleted from inventory and comparing it to what was sold. Eliminating variance is essential to sustainable long-term profits. Yet Hennessey is far from a cut-and-dried numbers guy.

“I help my clients improve their bottom lines. Bars and restaurants have a lot of moving parts and they all affect the success formula. So I take it upon myself to consult with owners about things ranging from the cleanliness of the facility to things like using proper glassware, reviewing the bar’s drink prices and making sure they’re liquor orders take full advantage of available discounts. I wouldn’t be much of a consultant if I didn’t give the client all of my observations regardless of whether they’re favorable or not.”

Hennessey contends his business fills an essential need all food and beverage operators have to address. “Multi-national corporations, the military and even Congress have auditors with independent oversight. Good, bad or ugly, I let owners know exactly what’s happening behind their bar right down to the last shot. In most accounts, I interact with the staff, managers, GM and owner. I weigh the kegs, open bottles of liquor and count every bottle of beer and wine. I’m like a walking CAT scan.”

Before he meets with an operator for the first time, Hennessey spends time in the establishment as a customer to gain insight into the owner. He contends the cleanliness and appearance of the facility and the quality of the staff and menu reflect directly on the capability of management.

“The sharpest operators I’ve met know they have alcohol control issues only can’t quantify to what degree. They’re open to listening to new ideas and approaches that could benefit their bottom line. The most successful of the bunch are eager to hear ways to improve their profitability.”

STICKY FINGERS

Hennessey has unearthed every type of scam and scheme imaginable. And they’re not always perpetrated by bartenders.

“I had a client who owned a concert venue in Phoenix. The place was hemorrhaging money. As it turned out his GM was part owner of a lounge down the road and was buying liquor and beer for that place through this guy’s business. All the while the bartenders and managers were actively ripping off the house, stealing huge amounts of cash and liquor from the bars. It was like a feeding frenzy.”

In another instance his audit uncovered so many discrepancies in the liquor inventory that he returned several days later to repeat the process. This time the variance report indicated that more than 20 liters of liquor were missing. Hennessey and crew later discovered the security team was filling their cars with liquor every night. That week alone the restaurant lost $25,000 in product at cost.

However, bartenders are often at the heart of the problem. Hennessey typically conducts several audits before the employees know that the business has retained Bevinco. It establishes a baseline as a means of comparison.

“I recently started working with a new client. That first week the staff entered $41,000 in bar sales, yet the audit revealed that based on usage retail sales should have been closer to $48,000. The owner then called a meeting and notified the bartenders that he had retained our services. Two of the employees immediately quit. That week sales in fact increased to $48,000 and the bar used $1100 less inventory, a weekly net gain of $8,100. That’s a lot of money on an annual basis.”

Hennessey revels in the knowledge that his services pay for themselves many times over. Indeed, he guarantees that he can save an operator triple the amount of money he charges as a fee or his services are free. In nearly 14 years that’s yet to happen.

“This business turns honest people dishonest. They make a mistake once and then seem to fall into the behavior as a pattern. Generally speaking, I think bartenders over-pouring liquor is the biggest source of losses. In any case, once we identify an operation’s problem areas they’re eliminated in short order.

Sustaining a positive cash flow is challenging enough in a down economy without employees deliberating siphoning off their share. Hennessey’s parting piece of advice bears this in mind. “Our approach to business is simple—compare units used to used sold. Success is predicated on eliminating the gap between the two. It goes right to the heart of the matter.”

Not surprisingly, so does John Hennessey.

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ROBERT PLOTKIN is a judge at the San Francisco World Spirits Competition and author of Successful Beverage
Management - Proven Strategies for the On-Premise Operator. He can be reached at
www.BarMedia.com or by e-mail at robert@barmedia.com.