Owning A Bar 101

So over the past couple of months, we have been providing very 30,000ft hi-level overviews of commercial real estate issues, construction theory, and real estate development strategy. But lately, we started thinking maybe we should do a couple of short blog posts for the layperson or budding real estate developer out there.

Today our post is about How to open a bar. Why this topic during a pandemic when everything is closed or closing, you may ask? Because at some point the vaccine will be distributed and the world will open back up again and if you are considering developing commercial real estate, “Bars will be one of the most popular businesses.

Below are a few quick pros and cons of owning a bar:

Pros:

• Profit margins are high, especially on alcohol. Expect to make a mark up of between 200 to 400% on drinks.

• The average income from owning a bar is $30,000 to $40,000 per month.

• There are superb networking opportunities to meet people for both business and pleasure

• You're your own boss and can live and work on your terms

• It’s Fun

Cons:

• High startup costs to pay for licensing, a location (Location, Location, Location is everything), and equipment

• Running a bar is expensive and includes rent, salaries, and various unforeseen expenses like insurance, COVID closures, etc…

• Long working hours are common. Including weekends and holidays

• The market is saturated with loads of competition. You’re concept and customer base will make the difference

Startup Costs of Opening a Bar:

High startup costs are a significant hurdle of owning a bar and vary depending on several factors:

• The type of bar- Buying an existing neighborhood bar will cost less than purchasing a brewpub which requires expensive equipment

• The size- Larger bars are generally more expensive as you need more staff and equipment

• Location- Buying and renting property is more expensive in certain areas.

• Business and liquor license costs- These costs vary widely by state. The cost of a liquor license in Alabama, for example, will be anywhere from $300 to $1,000, whereas, in Washington, DC expect to pay $30,000 to $50,000

Below is a cost range for opening a bar depending on whether you’re renting or leasing, creating a bar from scratch (buying a location and paying a mortgage), or purchasing an existing bar.

• Renting or leasing: $110,000 to $550,000

• Creating a bar from scratch: $175,000 to $850,000

• Purchasing an existing bar: $25,000

• The operating costs of Running a Bar

Expect to pay a minimum of $20,000/month for running an average-sized bar. These costs will include your monthly alcohol and food purchases (roughly $6,000/month), salaries and wages ($13,000/month), rent, and various miscellaneous expenses.

11 Steps to Opening Your Dream Bar:

1. Creating a Lean Business Plan

Long, detailed business plans are usually only required if you need funding from a bank. The better approach is to create a lean plan of a few pages that will help you validate your idea and move along intelligently from the start.

Important parts of the plan should include the following:

• Your unique selling proposition

• Market need

• How you’re solving the need

• The competition

• Target audience

• Marketing strategies

• Your team

• Equipment needed

• Total startup costs

• Location/Location/Location:

2. Choosing Your Concept

Your concept is the main idea or theme and includes service style, cuisine, menu, and music. For example; craft brewery, urban winery, or dive bar.

3. Selecting Your Business Structure

Sole proprietorship, LLC, Corporation, or Partnership

4. Sourcing the Right Equipment

Create a list of equipment for your bar.

Typical needs include:

• POS system

• Furniture

• TVs

• Audio system

• Bar Back system

• Blenders

• Kitchen equipment

• Reach-in coolers

• Beer taps

5. Choosing the right location

Factors to consider: target audience, accessibility, parking, zoning restrictions, rent and utility costs

6. Hiring a Strong Team

You’ll need a manager, bartenders, waiters, and security. These employees will be the first point of contact with customers so you need to ensure you have the right staff that can deliver exceptional customer service.

7. Planning Your Menu

• Your food should match the concept and theme.

• Pricing should match your target market and theme.

• Keep it simple.

8. Sorting Out Paperwork and Licensing

Below is a breakdown of the licenses and documentation you’ll need:

• Business license

• Liquor license

• Employer ID number

• Zoning permit

• Sales tax permit

• Alcohol tax permit

• Foodservice license

• Food handler’s permit

• Building permit

• Sign permit

• Health permit

• Music licenses- (ASCAP or BMI license)

9. Planning Your Bar Design

• Your design needs to capture the concept and ambiance you want to create.

• Balance aesthetics and practicality

• Create a floor plan by either working with an architect

10. Marketing Your Bar

You can have the best concept, but customers won't come if they don’t know you exist. Market your bar in the following ways:

• Have an official launch if your budget allows where you invite family, friends, and other local businesses

• Create a loyalty program from day one

• Offer specials perks to loyal customers (every 3rd drink free)

• Write press releases you can publish in your local newsletter

• Introduce happy hour promotions

• Use social media

11. Investing in the Right Tools for a Smooth Operation

You need systems and procedures that provide structure for employees and your operation.

• Opening and closing

• Internal communication

• Employee scheduling

• Order processing

• Inventory management