What it Takes to Break into the Bar Business

By 2018-12-26 June 24th, 2019 No Comments

People come to the bar business for lots of different reasons. Some of us have romantic notions about opening a bar business like the one from the show Cheers. Others of us have great bar business ideas that we feel driven to realize. Most of us have spent a fair amount of time in watering holes—on either side of the bar counter—and think we can do it better than the guy closing up at the end of the night.

So what does it take to break into the bar business?

Are you Cut out for Starting a Bar BUSINESS?
One of the first things to keep in mind about the bar business is that it is a business. A lot of would-be bar owners get hooked on the idea of the bar as a cool place to hang out, and forget that opening a bar business involves a lot more than being a good bartender (though bartending experience is a great starting point). Unlike being a bartender, starting a bar business involves a lot more than just pouring the drinks and keeping the bars clean.

First, you must be able to manage others. A large part of a bars business involves dealing with others. You have to be able to hire people, set their schedules, keep your employees on task, make sure they are not stealing from you, and occasionally even fire an underperforming employee. This also means that you have to think and act like a boss, not like a buddy. Novices who are just starting a bar business sometimes have a hard time adjusting to this difference, especially since a lot of us who are attracted to bar business tend to be fairly sociable to begin with and like to be “one of the gang.”

Second, as I mentioned, the bar business is a BUSINESS. That means that you have to have a mind for numbers. You have to be able to calculate profits, figure out the rate at which you are going through your stock, keep track of salaries and pay suppliers and determine the most effective ways of pricing drinks and structuring promotions. Not being aware of these kinds of financial issues involved in the bars business leads to a high number of poorly run bars. Business acumen is a must for success in the bar business.

Third, you have to be able to fully commit to opening a bar business. This is not the kind of business you can start while you are still working at your day job. Even if your bar is only going to be open from 6 pm to 2 am, you will still find that you need to be there much earlier. Vendors will have their own delivery schedule, and the majority of maintenance, cleaning and preparation will have to be done before you open you doors. Although it may be okay to have a silent partner that just shows up every so often, the actual person running the bar will not have much time for anything else.

Finally, the hours of the bar business are not perfect for everyone. You will be working during the times when most people are relaxing with family and friends. This means that on weekends and at night when most people are with their families, you will be at the bar. This kind of a schedule does not suit everyone and can have strains on your family. So be sure you know what you are getting into before you begin.

A Note on Partners: As this list has no doubt made clear, the skills and qualities necessary to make it in the bar business are diverse and demanding. No one can do it completely alone and expect to succeed. You either have to hire trusted, responsible individuals or else you have to have good partners. Often, successful bars—like other successful businesses—involve a partnership between two individuals who bring slightly different skill sets to the enterprise. Usually you have one partner with a strong head for numbers and another partner with a vision for business itself—a behind the bar guy (or gal) and an office guy (or gal).

A good partnership allows these duties and responsibilities to be distributed so that one person is not overwhelmed. The benefits of this are obvious. However, like in a good marriage, partners starting a bar business together need to be able to get along and keep the bigger goal in mind, so be sure you can live with your partner, because bar business divorces rarely go smoothly.

For more on opening a bar business and what it takes to manage one once it is open, see our comprehensive guides:

How To Start Your Own Bar/Nightclub

Nightclub Management Training Guide

The Economics of Starting a Bar Business

So let’s get down to the nitty-gritty of the economics of the bar business. Opening a bar business—like most businesses—requires a substantial up front cost. It is good to have these costs in mind before you think of opening a bar. Here is a list of the costs associated with opening a bar:

The Location: This is one of the most difficult costs to determine because it can vary so much. For example, property prices themselves can vary greatly depending on where you choose to open your doors. If you want to open a wine bar business in a ritzy section of a major city where there are a lot of stores and foot traffic already, you might find that buying or leasing a space can be very expensive indeed. On the other hand, if you want to open the same wine bar business in spot that is a bit run down you might be able to get a deal but be forced to increase your marketing costs to draw customers. A lot depends on the type of bar you are looking to open and what you are ready to spend. Generally speaking, you are looking at at least $100K no matter where you go. However, this cost can rise substantially depending on the cost of living in your area.

Used Bar or Building from Scratch: One way to avoid some of the start-up expenses is to find a place that was already a bar or restaurant and to use the existing infrastructure to build your own bar. The benefits can be reduced start-up costs; the drawbacks are that you may be stuck with a design that is not perfectly suited to your needs. In addition, if the bar you are buying was failing, you may find yourself soon following in its path.
Franchises: Another possibility, of course, is to buy into a franchise. The benefits of a franchise bar is that the franchise will offer you a road map you can follow to set up your bar, giving you not only a plan for remodeling but also a business plan for opening. Often the franchise will also give you a bit of consulting help to make sure both your interests and theirs are aligned. Of course, the drawback to a franchise is that they will take their cut and that you will be limited on the amount of control you have over your vision. If you have very specific bar business ideas, this might be too limiting an arrangement for you.

Business and Liquor License: You will need to check out the local laws for the area you intend to open your bar. You will definitely need a business license and a liquor license for your bar business. Both of these vary depending on the type of establishment you are going to establish. Take California: a basic license just to sell bottled beers and wines can cost between $3,000 and $5,000. If you are going for mixed drinks, etc. the starting cost starts at $12,000 and can climb much higher for a large multi-bar establishment. Be sure you get clear about this before you close escrow on a particular location.

You may also need to adhere to a set of particular local bylaws specifically governing establishments that sell alcohol. Many towns, for example, have laws against hard alcohol being sold in the same place where kids eat—so if you are opening a bar-and-grill, you may need to adjust your plans.

Equipment: Just about every bar that you start will need its own set of equipment, everything from an ice machine to the overhead TV must be figured into the cost of course. Equipment costs vary depending on both the amount you buy and whether you buy them used, lease them, or get them brand new, but this is rarely less than $10K as a minimum and usually more along the lines of $20-25K. For a detailed list of the back bar equipment see our article here: Your Essential Guide to Back Bar Equipment and Back Bar Products.

Renovation/Interior Design, and Furniture: Unless you are just taking over successful bar, you will probably want at least redecorate the interior. In some cases, this is just a question of putting up your own Guinness posters and that sort of thing, but more often than not, this is a bit more involved. If you going to change to a completely new theme or are designing things from scratch, this can involve buying everything from new bar stools to having booths and walls installed. If you have the seed money to start with and clear vision of what you want, it is best to get the design down at the beginning so that you do not have to try to close up at a later date to redesign major aspects of your establishment. For more on Bar Furniture see this link: Your Essential Guide to Bar Furniture

Hiring Staff: You will also have to consider the costs of hiring staff. Although if you have a little hole-in-the-wall that you and your twin brother are going to run completely by yourselves, you might be able to avoid this. However, if you are going to open your average bar in a location you are not that familiar with, you will need to put out the word that you are hiring in local publications. This will also take some time, as interviewing needs to be done correctly if you really want to find the right people.

Advertising/Marketing: It is always a good idea to set aside some money for getting the word out about your establishment. This can be as simple as setting out banners announcing your grand opening or sending out someone to pass out free drink vouchers at the local campus, or as complex as a full fledged advertising campaign in local publications and on the web. (For more on adverstising and marketing your bar, see Bar Adverstising 101 and Marketing Bars in the Internet Age.)

Legal Fees/Consulting Fees: If you are going to have partners and investors, then having a legal contractor drawn out to protect everyone involved is a must. In fact, the more people involved, the more important it becomes to get everything spelled out legally. In addition, you should be sure to get a business plan drawn up. If this is for a fairly big venue, you should have an industry savvy consultant, drop in, check out your plans and help to troubleshoot your plans. This can save a lot of headaches in the long run.

So what is the final price tag here? Costs will vary, but even in an area where costs are relatively low, you will need $50K just to get started (that is, of course, without the costs of buying the bar outright). Buying your own bar will cost considerably more. And, on average, you will be spending closer to twice that amount to really get going.

What are the prospects for success in the bar business. You may have heard that old chestnut that nine of 10 bars close in their first year of operation. This is actually not even close to true. Only about one in three restaurants/bars close before finishing their second year. Seven of ten close before they reach their tenth year. Making sure you are one of the successful ones is possible, but will take commitment and planning.