Economic Insights and Revolutionary Spirits

Discover the financial pulse of the bar and restaurant industry in our latest episode of the Bar Business Podcast with me, Chris Schneider. Learn how top-performing establishments are navigating increased labor, food, and occupancy costs while still maintaining profits. We'll examine the latest Starfish benchmarking data, revealing why non-major city bars and restaurants are seeing significant drops in net profits. Plus, get insider tips on effective financial controls and forecasting that can help your business thrive, even in challenging times.

As we gear up for the 4th of July, we'll take you back in time to uncover the boozy tales that shaped America. From John Hancock's rum smuggling escapades to Benjamin Franklin's "Drinker's Dictionary," discover how alcohol and taverns played a pivotal role in the founding of the United States. Hear stories of the Founding Fathers' drinking habits and how their favorite beverages influenced key moments in American history. Celebrate American independence with us as we explore these historical connections and their lasting impact on today's bar industry. 

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Welcome to the Bar Business Podcast, the ultimate resource for bar owners looking to elevate their businesses to the next level. Our podcast is packed with valuable insights, expert advice, and inspiring stories from successful bar owners and industry professionals. Tune in to learn everything from how to craft the perfect cocktail menu to how to manage your staff effectively. Our mission is to help you thrive in the competitive bar industry and achieve your business goals.

Special thank you to our benchmarking data partner Starfish. Starfish works with your bookkeeping software by using AI to help you make smart data-driven decisions and maximize your profits while giving you benchmarking data to understand how you compare to the industry at large.

For more information on how to spend less time working in your bar and more time working on your bar:
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Chris' Book 'How to Make Top-Shelf Profits in the Bar Business'
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Transcript

Announcer: 0:00

You're listening to the Bar Business Podcast where every week, your host, chris Schneider, brings you information, strategies and news on the bar industry, giving you the competitive edge you need to start working on your bar rather than in your bar.

Chris Schneider: 0:18

Hello and welcome to this week's edition of the Bar Business Podcast, your ultimate resource for bar owners. I'm your host, chris Schneider, and in today's episode we're going to discuss some updated numbers I have gotten from our benchmarking partner, starfish, and look at how the last three months differ from the three-month period before that. And because the 4th of July is tomorrow for those in the United States, we're going to talk about how alcohol influenced the foundation of the United States. We're going to talk about how alcohol influenced the foundation of the United States, but also how our founding fathers in the United States enjoyed drinking and just some cool little facts about the people that founded the US in relation to alcohol. So, to start with, we're going to talk through Starfish numbers and about a month ago we discussed some benchmarking data that I got from them and Jordan over at Starfish, who's their CEO. That was on the podcast.

Chris Schneider: 1:14

If you haven't seen that episode, it is a great episode gave me some updated numbers this week. Now, the numbers that we quoted about a month ago when we talked were from a three-month period that would have been December, january, february. Now we're looking at a three-month period of March, april, may. So a little bit different period, obviously different things going on in the industry, and there have been some changes this year. We're still seeing labor costs go up, we're still seeing food costs go up, and so we're seeing a little contraction in average net profits, which we'll get into. But then there's some also interesting data points around that and, just to remind everyone, when it comes to the Starfish numbers, there are a few caveats I want to throw out there, the first one being, obviously, these are all based upon bars and restaurants, so not just bars, but bars and restaurants that have taken the effort to sign up for additional accounting reporting with Starfish right, they're using their benchmarking data, they're using their AI system to help work on and make their business more profitable. Now, because of that, I think it's fair to say that these numbers tend to reflect a higher end of the market in some ways.

Chris Schneider: 2:43

The other thing that I want to mention before we get into the specific numbers is that, when I was looking at it, some of the data has changed a little bit in relation to what people are selling. So what I mean by that is I'm seeing that the percentage of food sold has gone down and the percentage of alcohol sold has gone up, percentage of food sold has gone down and the percentage of alcohol sold has gone up. Now that could reflect the market as a whole. That also could just reflect if Starfish has brought on more bars recently than restaurants and frankly, as I was putting together this stuff for this podcast, I thought well, that's probably a question. I should have asked Jordan, but I didn't. They've probably had a slight change to who is using their service or as they've grown they've just grown a little bit more in the bar space recently, but it's really interesting to see how these numbers have gone.

Chris Schneider: 3:34

So, as I mentioned, with net profits, we are seeing average profits down. And what does down mean? So, as I've told you before they break up my numbers into major cities versus non-major cities and kind of rural suburban areas, the reason why that's important is, if you think about a lot of things like rent is going to be higher in a major city, labor costs are normally higher in major cities and that's due to local and state politics and, generally speaking, increased labor costs and increased minimum wage in those areas within the United States. So, when it comes to net profit major cities, net profit when we talked about this a month ago the average was 10.4%. Now we're seeing 6%. In non-major cities we've gone from 21.4% down to 9%. So that's a statistically significant drop. For sure. Some of this could be seasonality, based upon the time period we're looking at. Some of this could be that Starfish has a lot more people on it now and not all of them have optimized their businesses yet from a financial standpoint. But I think trying to say that this is all just due to the sample changing is probably incorrect and what we're seeing is a contraction of something, and we'll get into what I think that is here in a moment.

Chris Schneider: 5:00

But what is really interesting to me is when you look at the top performers on Starfish, both in major cities and non-major cities, their numbers, their net profit, has not changed really at all. It was 33% before in major cities, it's 33% now in non-major cities I want to say it was 36% and now it's 37%, so basically no change among top performers. So if the average is down and the top is the same, obviously sample size may have changed. But that tends to imply to me that the operators that are not going after the numbers, the operators that are not paying attention to their P&Ls, the operators that are not really pushing to forecast and understand changes in their business so that they can react to them before an issue occurs, are probably suffering a little bit. And when you think about why would the top bars and restaurants have stayed the same? Well, they have more stable sales, they probably have better controls in place and they have better forecasting, like it's. What this all comes down to is. Overall, they probably have a better feel of their numbers and are reacting better to them.

Chris Schneider: 6:13

Now, as I was trying to figure out why this change occurred, one thing that I looked at was occupancy costs, which, from the Starfish numbers, I'm just taking the rent plus the utilities, and what I saw in both major cities and non-major cities is that this is up significantly over the period that we're looking at. So we went from 6.4% to 11% occupancy or rent plus utility costs in major cities and from 4.9% to 11% in non-major cities. Now why is this important? Obviously, electrical crisis could have gone up and we're not really getting into summer, but for a lot of areas of the United States, may was a really warm month, so maybe some of that is electrical used for air conditioning, but generally speaking, rent probably did not change much for most people between February and March, and so seeing that percentage go up tends to make me want to conclude that the big difference here, the change that has happened, is that sales are down Because if you think about it, if rent's five grand and you sell 50,000 a month, that's 10%. If rent's five grand and you sell 25,000 a month, that's 10%. If rents five grand and you sell 25,000, obviously now that's 20%. So lower sales will increase the percentage of rent nine times out of 10. And assuming everything else is equal, that is the conclusion here that the occupancy costs are higher because sales are lower. Now that would also make one thing that prime costs are probably the same or a little bit higher.

Chris Schneider: 7:52

But I don't see that in the numbers and what we see is in major cities. We talked about this last month. We said prime costs and when I say prime here I'm only talking about food, beer, wine, liquor, non-alcoholic beverages plus labor. We're not counting emergency services fees or other revenue, other cost of goods sold, things like merchandise that I would normally include in prime cost if I was doing a P&L for somebody and in my chart of accounts that I use with my clients, that is there Now for somebody in my chart of accounts that I use with my clients. That is there. But the numbers we're seeing major cities went from 64.8% prime cost down to 56% and non-major cities 57.8% down to 53%. So we see a pretty big drop in prime cost with an increase in rent and utilities. That makes us think sales are lower, but prime cost is also lower, so that tends to make me think that operators are cutting well.

Chris Schneider: 8:55

Now, some of this may be that they've gotten insights off of Starfish's AI that have allowed them to do that. Some of this might be overcutting. Now, anytime we talk aboutting that, anytime we talk about an economic contraction or we talk about a slower period throughout the year, one of the things as a bar owner that you need to be very careful of is over cutting. Obviously, you want to decrease costs when revenue decreases, but if you decrease costs too much, you can hurt your team or your guest experience and, quite frankly, once you start to do that, you create downward momentum. You have less sales, you have a worse experience, you have less customers, you have less sales, you have a worse experience, and it just kind of circles the drain, and so that in this data, that is the potential scary thing to a great team experience so that your team provides a great guest experience, and when you start cutting benefits, when you start cutting team activities, when you start giving less to your team, they tend to give less to your guests team, they tend to give less to your guests. So this could all be negative in that way.

Chris Schneider: 10:32

Now, on the other side, right, prime costs could have gone down because people are being more careful and they're doing things better. And if sales are lower and profits are lower and prime costs are lower, the decrease in prime costs and net profit could just be an indication that we're seeing lower revenue. It could also be an indication, as I mentioned before, of a bad team experience or a bad guest experience starting to build some downward momentum. So this is something we'll watch and we should have updated numbers here in about another 90 days and when I get those from Jordan, we will look at them and see, okay, what is going on here and if we're seeing any trends from quarter to quarter to quarter I shouldn't say quarter because we're not technically on a quarter three month period to three month period.

Chris Schneider: 11:20

Now, when I was looking at all this, I wanted to see if I could figure out any indications of what is actually going on and if there were any surveys or anything. So I found a survey from Restaurant 365 that they conducted in May so it was their Q2 survey of restaurants and bars on their platform and they said that 78% said that food and labor costs have increased this year, which, when we're looking at a decrease in prime costs on the benchmarking data that we have, seems a little contradictory. Most of them did say they also expect this to continue. Some of that could be oversampling from specific areas. I'm not sure where Restaurant 365's clients exist, but, as I'm pretty sure everybody in the industry is well aware, we have seen some definite increases to costs, particularly labor costs and minimum wage, across different states already this year and I believe there are more happening.

Chris Schneider: 12:17

Or just did happen on the 1st of July, because that's when a lot of state laws take effect, uh well, or just did happen on the 1st of July Cause that's when a lot of state laws take effect. So that could be pushing labor costs higher and it could be that as labor costs have gone up, prices have gone up and the prices going up has decreased the prime cost but at the same time decreasing the guest count, which, if you paid attention to the industry, that's actually been something that's going around and I haven't had any data to prove it, so I have not focused there. But there is a trend in the market that people are talking about where guest counts is going down, guest check average is going up, cash flow revenue, prime costs all that can look good, but actually that smaller and smaller customer base has long term potential issues for bars and restaurants in the market. So we will see what happens. The big thing here and let's take away from all this because let's be honest here there's a lot of conjecture in what I just said I'm making assumptions based upon the data I have and other data I can find on what is moving this market and how things are developing across kind of the financial side of bars and restaurants as a whole. The big thing to focus on here and this is my number one thing that anyone I work with this is what I always go to you have to manage your numbers and find incremental improvements, because when you can make little changes every day and increase a quarter of a percent there, a half of a percent there over time, that adds up to huge changes, and huge changes in the profitability of your business. It can take a business that's doing okay or barely getting by into a business that's thriving and profitable, regardless of where your own numbers are. And hopefully, if you have a bar and your numbers have contracted a little bit the last few months, this makes you feel a little bit better because you understand that it's not just you, but even if you're in that case or not, paying attention to your numbers and making incremental improvements is always the way forward and the way to increase your revenue and profit over time.

Chris Schneider: 14:30

Hey there, bar owners, it's Chris Schneider, the bar business coach. Are you tired of the daily grind and ready to skyrocket your profits? I've got the solution. With my coaching and consulting services, we deep dive into menu management, team empowerment and business optimization. Instead of slogging away in your business day in and day out, washing dishes, covering for employees and working 60 plus hours a week, picture this a thriving business that runs like clockwork, whether you're there or not, letting you enjoy the successes that you've dreamed of. Let's make it happen. Visit barbusinesscoachcom to schedule your free 30-minute strategy session with me, or you can book a session just by clicking the link in the show notes below. Together we will turn your business into a profit powerhouse, because at the Bar Business Coach, our only goal is to help you spend less time working in your bar and more time working on your bar.

Chris Schneider: 15:18

Now that we've talked about the starfish numbers, let's go ahead and pivot and talk a little bit about the 4th of July, because that's tomorrow and America's independence and our country's relationship with alcohol prohibition in American history and different things that America is not always forward about its alcohol consumption. There have always been sections of our society that aren't. But American independence and alcohol are really closely tied together, and one of the most interesting ways that they're tied together is that when we think of the Declaration of Independence, most of us think of John Hancock, and we think of John Hancock A because he was the president of the Continental Congress in 1776 when the Declaration of Independence was signed. But he also had that big flowing signature right in the middle of the document that we all think about Now. I should note that one of the things that you will hear is that he signed it that large so that King George III could read it without his glasses on. Unfortunately, that's apocryphal. That's not actually real, because that document was never meant to be sent to England. It was an internal document within the United States.

Chris Schneider: 16:39

But he did have a heck of a grudge with the government of England and most of that grudge came from the fact that he was a smuggler, and not just a smuggler, but probably one of the best smugglers in the United States. And then he used that money to fund organizations that helped push Britain out of the U? S. Now one of the things he smuggled was rum, and he was probably one of the, if not the largest, rum smugglers in the American colonies prior to the revolution. And because of his smuggling and his rum he was actually sued by the British government for tariffs and taxes that he had failed to pay for the equivalent today of $7 million.

Chris Schneider: 17:29

So basically he racked up a $7 million tax bill smuggling rum into the US before it was the US All right. So he smuggled a bunch of rum. He got a huge tax bill. He didn't like the crown much and became a huge supporter of the American Revolution. Now he didn't actually have to pay that $7 million. He was never actually really convicted of smuggling because his attorney got him off. Now his attorney happened to be John Adams, and John Adams is obviously one of the other key characters in America and in the founding of America, and John Adams out of the group was probably one of the smallest drinkers.

Chris Schneider: 18:15

He was not known for partying to excess and tying one on, like many of them were, nor was he known for being someone that owned a brewery or a distillery or anything like that. He was not in the business of booze, nor did he drink much. Now I should know when I say he didn't drink much, if I say that to somebody today, you're going to assume okay, maybe this person drinks once a week when they go out, or twice a week when they go out, or every other week when they go out. What made him a not that big of a drinker was that every morning with breakfast he had a cider, or more, he frequently claimed to have a cider with breakfast. That was well known. The question that no one knows is a cider a glass of cider or was it a bottle of cider? And there's some indications that might've been a bottle, not a glass. There are other indications that it was a small glass. So he drank cider every morning and he tended to drink with meals, as most people did during that period, but he was also known for drinking three or four glasses of Madeira every night before bed. He really enjoyed his fortified wine as a way to send him off to sleep.

Chris Schneider: 19:21

Now, on the brewing side, obviously, his cousin, sam Adams, was a big drinker and owned a brewery. Sam Adams Brewing is named after Sam Adams, and what Sam Adams is probably best known for is organizing the Sons of Liberty, which was a group in Boston that was essentially rabble-rousers. They did the Boston Tea Party, they had a lot of protests, they made a lot of trouble for the British and some of what they did was borderline guerrilla warfare, but a lot of what they did was strong civil disobedience. It was a little bit of a way to annoy the crown and promote freedom in the colonies. And so Sam Adams, when he wasn't rabble-rousing, the British, tended to hang out in bars and taverns, and the Sons of Liberty has a history of meeting in bars and taverns. So America, for a lot of its founding and a lot of the very impactful things that happened in this country at its founding, started bars, started in taverns, started in breweries.

Chris Schneider: 20:32

Now, another person that was also a big brewer and distiller was Ben Franklin, and Ben Franklin was known for his womanizing. He was known for his drinking. He was quite an active person. In that way, let's say, if he was around now he would make a good bar customer for any of us. But, as many of you probably know, ben Franklin was also a prolific writer, and one of the interesting pieces he wrote in 1737, so we're talking, you know, a good 40 years, basically before the Declaration of Independence he wrote what he called the Drinker's Dictionary. That included over 200 terms for being drunk. Now, obviously, a lot of those don't work today, but it included things like he's going to Jerusalem Not sure why Jerusalem means drunk, but to Ben Franklin that worked. Or he's mellow, which I think now we would use to describe something other than booze. That is, an intoxicating substance, and my favorite, though, of all of them is one of his ways to say someone was drunk is he's religious, which, seeing how religious America was at the time, is a little bit of an interesting statement.

Chris Schneider: 21:51

Now, when it comes to really big alcohol producers, probably one of the biggest or the largest producer of alcohol, for sure, but also not one of the biggest drinkers was George Washington. George Washington was not a partier, he was more like John Adams. He drank. For today's standards still, he drank a lot, but for the standards of his time he did not drink that much. And to put drinking in general in context, the most the United States ever drank as a nation was around 1830, so about 60 years after the revolution. We kind of ramped up that whole time and how much we drank, people drank, I want to say it was about seven and a half gallons a person a year and nowadays it's like two point something. So the average person during the time of the revolution drank, you know, two and a half, three times what we drink now. But George Washington, like I said, he wasn't the biggest partier but he was the most prolific producer of whiskey in early America and he started with a small distillery. But especially after his presidency the amount he distilled went up greatly and in 1799, which was the year that he died, his distillery produced 11,000 gallons of whiskey which, to put that in the perspective, is the equivalent of about 55,500 750 milliliter bottles. 5,500 750 milliliter bottles or 4,627 cases of 750 milliliter bottles. So he was making a whole, whole lot of whiskey and while he may not have been the biggest drinker himself. After the constitution was signed, which I believe was 1787, he threw a giant party and that party tab which George Washington if you actually look at some of the tabs he had for some of his parties were huge, but the tab after the Constitution was signed would be about $17,000 in today's money. So quite the nice time that I'm sure everyone at the party had.

Chris Schneider: 24:05

Now, finally, talking about history of America and drinkers and the founders of the United States, we'll take a look at Thomas Jefferson. Thomas Jefferson obviously wrote the Declaration of Independence and he was not a brewer or distiller, but he was a wine collector and in particular, before he was president, in his travels to Europe to lobby for the United States and work he did in France, he became a huge lover of French wine. He was really big on French wine and he just loved everything about wine in general. And what's interesting is his love of wine caused him to be one of the main wine people in the United States. He kind of drove what wine was interesting and what people wanted. He kind of drove what wine was interesting and what people wanted and along those lines he was Washington's wine buyer and advisor prior to when Jefferson became president. As I mentioned, he did prefer French wines but he also loved pale sherry from Spain and he had a special spot for Italian sparkling wine from Piedmont. And he had a special spot for Italian sparkling wine from Piedmont and he had one of the most extensive cellars, if not the most, I believe it was the most extensive cellar in colonial America and his cellar topped out at just over 20,000 bottles. So really big wine drinker and he had a lot going on there.

Chris Schneider: 25:49

But I think it's safe to say that all of the founders of the United States were drinkers. A lot of them were brewers, they were distillers, they were involved in the liquor business in general. All of them more or less like to hang out at bars and a lot of the conversations that founded America, that led to the Declaration of Independence, and a lot of the ideas and philosophy that founded the United States of America came out of bars, of bars. So I think the best thing we can all do to celebrate the 4th of July which is tomorrow, if you're listening to this, when it releases on the 3rd is to have a good time, drink and probably have a little bit of French wine, have a little bit of whiskey, maybe have some cider, definitely drink some beer and think about how the founders of this nation enjoyed all of those wonderful beverages and how potentially, their kind of chill, slightly drunk state of mind contributed to the formation of America. So with that, guys, I will let you go for today.

Chris Schneider: 27:02

If you're in the United States, I hope you have a great 4th of July this week and, as always, if you enjoyed today's insights, make sure you like, subscribe, leave a review. If you want to gain more insights, make sure to join our Bar Business Nation Facebook group. We're having conversations there. There's a couple hundred people there now and it's a wonderful forum where everybody can ask each other questions and really bounce ideas off of each other in a space that is bar owners and people that work with bar owners and have access to a lot of good advice that sometimes, as a bar owner, stuck in your own bar doing work, you don't get to interact with other people that face the same challenges you do. So that's really the purpose there. So check out Bar Business Nation on Facebook if you have not.

Chris Schneider: 27:47

Also, if you want to work on your numbers, if you heard some of that starfish data and you thought, oh God, I need to start working on my numbers. I want to have someone take a look at these that really knows the number side of the restaurant business and how to make sure that your P&L is set up for success. Go ahead and click the link below in the show notes to schedule a free strategy session with me. I'll learn about your business, we'll explore how we can collaborate. We'll talk about your P&L, what you have going on in your numbers right now and how we can use those numbers to help you have a more successful, more profitable and easier to manage bar. And with that guys I will let you go. So until next time, I hope you all have a great day and we will talk again later.

Announcer: 28:36

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