Cutting into losses at the bar

Erin Wallace, an owner of the Devil's Den tavern in South Philadelphia, with Ken Nolan, who runs a business that does liquor and beer auditing.
Erin Wallace, an owner of the Devil's Den tavern in South Philadelphia, with Ken Nolan, who runs a business that does liquor and beer auditing.
Posted: June 08, 2012

It's Philadelphia Beer Week, which packs extra drinkers into dozens of neighborhood taprooms. "It's insane: My staff will be working crazy hours; things will break; the cash register will jam; let's hope the cooler doesn't break down," said Erin Wallace, an owner of Devil's Den in South Philly.

How does a bar make money, between special promotions and half-price happy hours, in a city crammed with taprooms? "I can — if I don't have any loss," Wallace told me. "I can't have a bottle go missing. I can't afford it."

How hard is that? "There are so many ways people can steal from you. I understand sometimes you have to give somebody a drink. Somebody's food comes out wrong. Or someone that comes in every day, a regular, brings in five friends. But do it within reason. And be accountable."

That's a job Wallace is happy to contract out to Bevinco, a Louisville, Ky.-based franchiser whose local face, working weekly rounds through a swath of metro Philly, is Belfast-born Ken Nolan, a onetime Catholic schoolteacher and Shore bartender, later manager at Jerome Donovan's Old City's Plough and the Stars, before going into the liquor-and-beer audit business 13 years ago.

"Everyone's a potential thief," Nolan told me. "Having said that, the vast majority of people are honest. The biggest problem is not people giving away drinks. It's overpouring." At 9:30 a.m., he was almost eight hours into his shift, checking electronic pour data after closing time, using his company's BevIntel tracking software.

How big is a shot supposed to be? "Bartenders, I'd say in 75 percent of cases, they're never actually told what their shot is supposed to be. Now, the standard is an ounce and a quarter. Some do an ounce and a half. Some do two." It doesn't matter how big your house's shot is. It matters a lot if you're underestimating.

At the Plough and the Stars, an initial 1999 audit showed nearly a quarter of the inventory was walking out the door unpaid. "Oh, I fired people as a result of that," Nolan said. Impressed by the savings, he bought into the auditing service, then a DOS-based accounting system using tally sheets. Today's proprietary software uses a digital scale and bar-code reader that transmit data to a handheld computer.

Wallace first tried the system at her extended family's other bar, Old Eagle in Manayunk, in the mid-2000s. "We learned we were losing a half-keg of beer and four or five cases of [beer bottles] and a case of liquor a week" — more than one-fifth of the bar's pour.

"So much stuff was going out, it was the hardest thing not to fire a bunch of people." Instead, the owners showed staff how future generosity would be recorded. The system costs an average $200 a week; Nolan estimated savings at six to seven times as much, which Wallace affirmed.

At Devil's Den (named for an infamous corner of the Gettysburg battlefield), "we sat our staff down before we opened" and explained the audits, Wallace said. "If you hire the right people, most people are honest. But people get tired. They get sloppy."

Like food-portion control, digital inventory has changed the business, Nolan said: "When I started bartending in Wildwood in 1980, it was free rein. You could drink behind the bar, give stuff away." Now, he warns in his sales pitch: "A manager can kill your business faster than two bartenders. Temptation is there."

Play ball

Fanatics Inc., the $800 million (estimated 2012 sales) sports-apparel arm of Michael G. Rubin's Conshohocken-based online retail holding company Kynetic, says it has raised $150 million from venture investors Insight Venture Partners and Andreessen Horowitz, plus a $75 million line of credit for future expansion, in connection with its newly closed acquisition of Florida-based rival Dreams Inc., Fanatics president Jamie   Davis said.

This sale of a 10 percent stake in Fanatics implies a value for the company of $1.5 billion.

"We've invested a ton in our infrastructure, our technology, and our inventory," said Davis. Among other plans: new "fulfillment and regional distribution centers" added to its current Kentucky warehouse, which employs up to 3,000 at pre-Christmas peak sales season.

Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or @PhillyJoeD on Twitter.

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