Above the Bar – Revenue Streams 101

Posted in Above the Bar

Revenue streams are key components to any business. Many times these are overlooked, or in some cases many viable revenue generation sources completely ignored. Revenue steams may require additional staffing or re-training of existing staff to capture and increase revenues. In most cases simple training of existing staff can be the answer alone, but thinking outside the box to maximize these revenue sources is a task for the operator to implement.

Operator complacency is the single most damaging vice to any service based business. The fact that venues will look at a possible revenue stream only to reply, “But we have been doing it this way forever!” I get so frustrated when I hear this, just because you do it this way, does not mean that this is the only or correct way.

Things that you will need to do to manipulate these revenue streams to work for your venue may be as reorganizing paperwork, permits, training staff or even enforcing or implementing policy changes. Once in place they will pay dividends for the long haul. Setting up and dialing in these revenue streams to work with your particular business model will take some thought, planning, and even a little trail and error.

Liquor/Beer/Wine/Champagne

  • Bottle Sales- Wine/Liquor, “Single Night Use” or “Return Use” this is great to try in your venue as an anchoring and return trend tactic. When your customers come in and buy bottles you will hold the bottles in a highly visibility bottle display case. The customer is then given a card that represents the bottle and the level of spirit left in the bottle along with a code number for that bottle. The bottle is then labeled with the customers name and code number for that bottle. The additional revenue sources from this include charging for additional mixers and service charge to the customer on every return.
  • Drink Vessels- Beer mugs (pickle jars) shot glasses, boots, creative branded drink ware, specials.
  • Shot-Beer Combos, buckets of Beer, 2 for 1’s.
  • Package Sales- for off premise sales (some Licenses apply)

Liquor/Beer/Wine/Energy Drink Vendors Sponsorship/Partnership

You should be able to hedge the volume of sales your business does in a particular category to entice revenue out of liquor, beer and energy drink companies.

Selling you back bar real estate is huge leverage with buying power and guarantee volume to get buy back dollars up front or over time. Beer companies have installed entire tap systems for no cost and I have personally received large cash incentives from one vendor, for one venue. Liquor laws vary State by State.

Liquor/Beer/Wine/Champagne

Upselling to a Premium or Super Premium spirit. Updating drink menus that promote your spirit partners/sponsors and promotional products.

Cover Charge

This can include: Online ticket sales, entry charge, VIP room charge.

One of my favorite tactics is, a sliding cover charge. My management is constantly assessing every client, the time, the talent and the time of year in shades of Grey and Green never Black and White! From making allowances for great customers and big parties to judging liabilities with unsavory clientele. Sometimes turning away a customer willing to pay $20 will save you $1000 in upset customers who’s experience is tainted by your inability to identify problem patrons.

VIP Table Sales

VIP Rooms/Areas/Tables

Maximize revenue with real estate ie. VIP Areas, Champagne Room, Booths, Tables.

ATM Machines

Transaction charges $2 to $5 or more per transaction to a flat percentage of the total, I always recommend that the venue owns their own ATM machine.

Valet Parking

The club can operate the valet or contract the valet service for a profit share of all cars parked. Depending on the liability and the agreement, it is often better to sublet this out to a licensed valet parking service with a customer base already established. This would also make this a marketing play in your early stages of business development.

VIP Cards

These can be sold to the customers for as low as $20 per card to as high as $1000 and offer benefits and services not provided to non card holders.

Gaming/Social Gaming

  • Video Poker
  • Slot machines
  • Live Poker to include tournaments and live cash games

Vending Machines and Games

  • Pool Tables
  • Video Games, Pinball
  • Cigarettes
  • Jukebox
  • Photo booths

Cigar Bar

This is great to use as an additional amenity for your clientele. You increase the possibility to up sell this customer base with super premium spirits pairings such as Cognacs and Bourbons starting at $25 per snifter.

Coat Check

Establish a mandatory coat check policy to insure that your patrons are not able to bring in illegal or unwanted items into your venue. Charge from $3 to $5 per item. This can also cover dress code issues such as (Hat’s, Bandannas, Beanies, Backpacks, Oversized bags)

Special Events

  • Concerts/Special Guest DJ’s
  • Comedy Shows
  • Bar Crawls
  • Dating/Single Events
  • MMA Fights/Boxing Events/Sporting Events and Playoffs
  • Specialty Performers

Venue Rental Events

  • Corporate Parties
  • Private Parties
  • Holiday Parties

Advertising Revenue/Digital Signage

Bathroom advertising can generate up to $400 per month. Selling advertising space on your TV’s throughout the venue to businesses and services such as tanning salons, gyms, jewelry stores, local restaurants identifying with your venues target demographic.

Branded Merchandising

Hats, shirts and souvenir cups are a few great examples of incremental sales items.  A great example of a franchise that does very well in this category is Coyote Ugly. They utilize the power of their brand as a two fold attack #1 as a revenue stream and #2 as a marketing and branding play to capitalize on a marketing revenue stream.

Food Revenue

This is my least favorite category because of the high cost compared to serving spirits. A few high profit food items that I recommend are #1 Pizza #2 Hot Dogs #3 Mexican Food, these items have the easiest maintenance and highest margin.

Cashless Payment System

This is a new trend in many venues overseas that provide points of sale for customers to put money on in house branded credit cards to use in the venue instead of cash. The benefit to this is, if the customer loses the card then that is bonus revenue. The venue also charges a small transaction fee every time the customers recharges the card. These systems are proven to significantly increase on site spending as well as giving venues complete transparency over their staff, reducing theft and eliminating costs and risks associated with cash handling.

Dance Dollars/Venue Dollars (Gentleman’s Clubs)

This is a two fold revenue stream as there is a 10% to 15% charge to the purchase transaction and then another 5% to 15% buy back transaction fee to the entertainers

Gift Cards/Discount Cards

These are sold to your customers at a full rate or a discount with an expiration date. The chance that a customer will either lose or not return to use the gift card is the win for the venue. I would estimate that less than 75% of the gift cards sold get returned.

Out of the Box Ideas

  • Dunk Tank: Water or No Water, this is a great idea to fill full of foam or the playground plastic balls and charge $5 to $10 to dunk staff members.
  • Picture taking service that sells the branded frame and picture to customers for as little as $5 per picture, this is also a great marketing and branding tool.
  • Back bar coin toss for beer or shots where the bar keeps all of the revenue from the game.

COGs

The Cost of Goods in any business can be timely and difficult to track and monitor. This should be implemented in the beginning phases of any business. It is never to late to change or add policies and procedures in order to track, monitor and maximize your margins. Setting up these systems into spreadsheets and bookkeeping applications is the only way to accurately track the COGs. In any business model decreasing possibilities of theft, shrinkage and general loss is a major source of revenue to be found in any venue.

In the next few articles I will begin to breakdown into detail these categories one by one, so keep in mind that you should never stop looking to maximize your sources of revenue while minimizing your COGS “Cost of Goods”.  It will only make you and your business that much more viable. So remember to keep your head up and eyes open to all revenue stream opportunities and most important, stay Above The Bar.