Opening your own bar has long been your goal, but you're unsure of where to begin? Maybe your concept and name are set, but you're unsure how to get funding and other necessary approvals. If you do your research and follow the proper procedures, owning and operating a successful bar can be financially rewarding.
If you've always wanted to be a bar owner or have a sports bar we've laid out the steps you'll need to take from the beginning to the end.
How to open a bar: A checklist to open your bar business
Starting a neighborhood bar is exciting as it may sound, you probably have many questions before deciding how to open a bar. However, even if you're an expert in your field or have a natural knack for business acumen, opening a business can be challenging.
This guide will walk you through starting a sports bar from scratch, and it will teach you everything you need to get started.
Are bars profitable investments?
Yes, a bar business is a suitable investment. The average existing bar net profit is higher than the stock market return. What's the best way to judge an investment?
The stock market has averaged 10% returns over the last century. Inflation reduces your purchasing power by 2.5% annually. That means the stock market returns 7.5% annually.
However, this does not account for the significant upfront costs associated with starting a bar. This only considers annual revenues once a bar has been open for a while.
How Much Money Do Bars Make?
Bars may be quite profitable. This is because they may mark up the price of alcohol by up to 500%. Bars' gross profit margins may reach as high as 80%. The average monthly revenue for a bar owner is $27,500, or around $330,000. After costs, which average around $24,200 each month, you end up with a net profit of around $39,600 annually.
Moreover, profits from cigar bars are used to pay the owner's annual salary. If a bar owner keeps all the net profit without reinvesting, they make just under $40,000 per year including a tobacco tax.
Those figures are based on a 12.5% net profit margin, between 10% and 15%. And $330,000 annually. If sales are higher, use these numbers to estimate salary.
How hard is it to run a bar
Opening and running a bar is one of those once-in-a-lifetime opportunities; you never know what it will be like until you take the plunge. While it may be fun, fulfilling, and even profitable, it also takes long hours and hard labor.
Running your own bar is difficult no matter how many years of experience you have. Your employees, inventory, and clients are all things that need your attention. Additionally, you'll need to keep an eye on your company's profitability and productivity.
It's hard to open a beer bar, and even more difficult to maintain a successful one. Many company owners feel that just because a bar is well-stocked and open, it will produce tremendous profits. "People drink to rejoice, and they drink to commiserate in terrible times," as they often claim. People will always buy alcohol, in good times or bad.
A Step-by-Step Guide to Starting a Bar Business
Write Your Bar's Business Plan
Failure to plan is planning to fail.
A bar or restaurant business is a type of business where not planning ahead can be expensive or even impossible to fix. That's why it's essential to have a business plan before opening a restaurant.
Long, thorough business plans are often necessary only if you need bank financing. Create a lean strategy of a few pages that will help you validate your idea and move forward smartly from the beginning. Incorporate the following into your strategy:
- Your unique selling point
- Study the market need (e.g. Maybe there's a neighborhood tavern in your neighborhood that doesn't provide much entertainment. You might provide live music, pool tables, and other special events to meet this need)
- Consider the competition, both direct (other bars) and indirect (other places that provide entertainment).
- Demographics and psychographics of the target audience
- How you'll implement marketing strategies: Will you have an official launch?
- Who do you need on your team to make this work?
- What kind of equipment will you need?
- Create a spreadsheet to track the costs of opening a bar.
- Study the location: Will you be in the heart of a metropolis or in the middle of nowhere?
- Family and friends, the bank, and outside investors are all possibilities for funding.
Minor details aren't that important since they're likely to change over time. For example, don't expect your break-even point to be exactly two years from now. Instead, it could be 20 to 25 months, depending on three or four key factors.
Bar Business Plan Template
A business plan is a written document that explains how your bar sets goals and how it plans to reach those goals.
Use a bar business plan template to quickly and simply construct a plan that outlines your vision and assists you in starting, growing, or seeking funding for your bar.
Obtain the Proper Licenses
Legal issues can arise if your bar isn't adequately licensed before having a grand opening.
You'll need a license if you want to serve all the alcohol or only beer, food, or even music in your bar. They range in difficulty from simple to difficult to obtain. Many are expensive, both in terms of time and money.
Don't make the silly mistake of skipping out on getting your bar the proper license. This could lead to your establishment being forced to shut down.
Consider Special Licenses Permits Types of Insurance and Other Items
Attempting to open a bar business without the proper licenses, you could face fines, penalties, or even closure. In line with this, have a business attorney discuss permits.
To own a bar business is to become a master of licenses and permits. One example is the Employer Identification Number (EIN). All businesses in the United States must get an EIN, which is similar to a business license.
What are the licenses every bar and alcohol-selling restaurant needs?
- Liquor Licenses- A liquor license lets you sell alcoholic beverages in your business. State laws may vary. Some states, like Oregon, regulate alcohol distribution, sale, and consumption directly. States frequently restrict the number of drinks per customer and require unfinished bottles to be left inside the establishment to prevent public intoxication.
- Understand Your State's Liquor Laws- Each state has its own liquor license rules. Every state has its own Alcohol Beverage Control (ABC) agency. To learn your local authorities' laws and how to get a liquor license, contact your local ABC agency. Some states limit the number of alcohol retailers at any one time. If this quota is reached, getting a permit may be difficult.
- On-license vs. Off-license- You can get an on- or off-license to sell alcohol. On-licenses are for places that sell alcohol to be consumed on-site, while off-licenses are for liquor stores. An on-license liquor license is required for a bar or restaurant because customers will be drinking inside the establishment.
- Food-service License- You're serving food to your customers with a bar, restaurant, or taproom. You want to make sure everything is safe and up to code, and so does your city or county, which means you'll need a food service license.
Find the right location
The perfect location for your specialty bar really matters. Here are a few things to consider before choosing the right place for your bar:
Your Style: Are you formal? Elegant? Casual service style? This can ideally determine the customers you'll attract to your bar perfectly.
Demographics: Different areas of your city appeal to different demographics. If you want to appeal to college students, open a location near a university. If you wish for higher-class customers, set up shop in an affluent area.
Accessibility and Parking: A bar's location parking is less of an issue for tourists who are more likely to hail a cab or use Lyft or Uber. Tourists are less likely to be repeat customers. Keep this in mind when choosing your location.
Zoning regulations: Some areas are designated for commercial usage, while others are designated for residential use.
Rent and utility costs will have an impact on your operational costs.
Set Up Your Business Structure
When starting a business, one of the first big decisions is how to structure it. Plan to be a sole proprietorship, partnership, LLC, or corporation?
In a sole proprietorship or partnership, you're personally liable for lawsuits and debt incurred by your bar. If something goes wrong, you may need to forfeit personal assets to cover a loss.
Form your restaurant or bar as an LLC or corporation to avoid personal liability. These business structures act as their own entity and take on liabilities, limiting your liability. If someone trips and falls in your bar and sues, they sue the business, not you personally.
Choose a Bar Concept and Brand
The fun part of opening a neighborhood bar is creating a concept and brand. Your bar's concept includes all your ideas for your bar. Your brand's identity and mission are more defined. Your bar should reflect your brand, from service to bar equipment and ambiance. To ensure your customers understand what you're about, these elements must fit together.
Here are some ideas for your own bar:
- There is a neighborhood bar with comfy booths and a jukebox of classic hits where people can unwind.
- A barcade with vintage pinball games where guests can have fun on Friday nights.
- Elegant martini bar with hypnotic music and neon lights.
Choose a business name
Choosing a name for your bar can feel like a dream come true, but what do you prefer? It should be catchy, reflect your brand, and be unique. Remember that your name will be on all marketing materials and merchandise, including menus, uniforms, and ads. Long, complex expressions are bad.
Here's a quick rundown on how to come up with a bar name or get some inspiration.
- The goal, vision, purpose, and basic values of your bar should all be written down.
- To generate new ideas, use a restaurant name generator.
- Request restaurant name suggestions from your neighborhood.
- Use your location to describe yourself.
Types of bars
Bars have long been a part of human society, dating back to Babylonian times. Alehouses back then served pricey, watered-down beer-like drinks. Initially, alcohol and wine were drunk for their therapeutic benefits.
What are the different types of Bars?
- The Hole in the Wall
- The Full of Itself
- The Pub
- The Plastic Bar
- The Sports Bars, etc.
What type of bar is most profitable
The type of bar that is the most profitable is the Sports Bars and the Beer Bar. Depending on its location, it can expect to make between $20,000 and $30,000 per week, depending on the site and size of the operation. That works out to more than $1 million a year in expenses.
Choosing the Right Type of Bar to Open
It's exciting to work with products you care about, to share your interest and experience with employees and customers, and to add your own unique touch to the bar industry.
While there are several types of bars, it is suggested to start with the basics. A full liquor license is required for a bar to offer spirits, wine, and beer. A pub, which was once a public house for social drinking, may have a complete license, although it generally serves beer, ales, and ciders, as well as snacks and light meals. A tavern, which comes from the Roman taberna, was once a wayside inn; today, it's more commonly associated with pubs, although it still exists in rural roadside bars.
Design your bar
As a business owner, your bar depends on your style. These can make the customers interested in the atmosphere and socialize, so music, pool tables, décor, and furniture matter.
Make sure your bar design is cohesive. For example, don't open an Irish pub and play top-40 music. You can check Pinterest for some unique ideas or hire an interior designer.
After making your financial projection, you'll know how much money you'll need to make your dream bar business. List your bar's startup costs. Then add alcohol, salaries, utilities, and rent, including the cash and carry system. You can create a budget and estimate how much money you'll need next year.
Next, calculate your startup costs and additional funding needs. Once you have a number, you can apply for loans. If your bar is successful, you could recoup your initial investment in a few years.
How Much it Costs to Open and Run a Bar
The average cost of starting a bar in the United States is $425,500, according to Restaurant Owner. According to their survey, it takes an average of six months for a bar to become profitable, but it can take up to two years. The initial investment varied from $174,000 to $850,000.
This includes renting/leasing, and documentation of additional costs, such as supplies, labor costs, and insurance. They're meant to give a ballpark figure regardless of how your business operates secure a property and play a significant role in your P&L restaurant statement.
How much does it cost to open a small bar
According to Investopedia, opening a small neighborhood bar can cost anywhere from $110,000 to $850,000. This range is determined by whether the establishment is rented, leased, or purchased. Purchasing an already established bar can result in significant savings.
You can acquire an existing bar for as low as $25,000 startup cost in some areas of the country.
When opening a bar, the additional costs and expenses for many bar owners can include, but are not limited to:
- Financing the purchase of equipment
- Lease or purchase of a real estate
- Operational costs
- Licensing and certification
- Inventory and resources
Having a thorough business plan and understanding of the factors and costs involved in starting a bar is essential to avoiding costly mistakes.
Most bar owners already have a choice in mind, or you can research local favorites. The concept of your bar may influence this decision, mainly if you'll specialize in craft beer or small-batch wines and spirits.
Find an alcoholic beverage distributor that carries your desired brand and products. Wholesalers' websites feature product portfolios and pricing. When choosing a distributor, consider the following:
- Brand Selection
- Minimum Purchase Requirements
- Payment Terms and Discounts
- Delivery Dates
Once you stock your bar with alcohol, take inventory to maintain the right amounts. Regular liquor inventory will tell you how your bar is doing, what your par levels should be, and which products are selling.
Buy Your Equipment and Supplies
Everything works better when you have a clear strategy in mind, and operating your bar is no exception. A checklist of required bar equipment, similar to standardized recipes and bar cleaning practices, can help you be a better business owner.
Most bars prepare and invest in equipment to serve drinks. It's important to consider space and electrical requirements for these items:
Cocktail Bar Equipment List
We recommend starting with the most obvious items on the list. These are the bar glasses, bartending tools, and bar supplies that you and your team would use when bartending.
- Brandy snifters
- Champagne glasses
- Highball glasses
- Mixing glasses
- Rocks glasses
- Pint glasses
- Shot glasses
- Wine glasses
- Martini glasses
- Other specialty glasses
Bartending Tools and Supplies
- Cocktail shakers
- Cocktail spoons
- Citrus Juicers
- Cap Catchers
- Bottle and can openers
- Cocktail strainers
- Garnishing tools
- Muddling supplies
- Straws and stirrers
- Cutting boards
- Pourers for liquor bottles
- Garnishes and bitters containers
- Ice cube trays, ice molds, and ice buckets
- Bar mats
- Wine openers
- Clean towels (our recommended towels are in our bar and restaurant cleaning supplies post if you're in the market)
Your checklist should also contain your choice of the best bar liquor and liqueur, as well as any cocktail mixers and other alcoholic beverage. Review your standardized recipes and match the ingredients to what your bar serves for this level.
Equipment and Supplies for Bar Refrigeration and Dispensing
Because your bar will have numerous perishable fruits and garnishes, refrigeration is absolutely essential. Items that cannot be maintained at room temperature or left outside.
Coolers are also required for beer bottles, cold wine, and champagne. When designing a bar refrigeration system, keep the following in mind:
- Swing door cooler
- Horizontal bottle cooler for beer
- Chilled wine and champagne cooler
- Garnishes and mixers cooler
Hire the Right Staff
When opening a bar, you must employ and establish a team from the bottom up. This entails conducting interviews for each and every position available at your location. It also includes establishing training programs and training everyone in an unfamiliar setting.
It will take longer and cost more money to hire and train your initial team than it will to recruit and train workers in a working venue. However, when you need to hire additional staff and already have all the processes in place, your efforts will be rewarded.
Your bar ownership will fail without the right team. Great bartenders respect their artistry and are imaginative, motivated, and excited to come to work daily. And if you have table service, juice bars, and alcohol training for servers is vital.
Many potential employees are excited to start a new venture and get in on the ground floor of a new bar. Here are some key positions you'll need to open most bars:
- Bar Managers
- Security/ ID Checker
Train Staff to Deliver Exceptional Customer Service
As a small business owner, you must train your staff to spot signs of intoxication. Your training program should emphasize these signs and provide tips on dealing with drunk customers. This means you must ensure your customers' safety both inside and outside your establishment.
In addition, showcase your bartenders' creations on social media or enter them in bartending competitions and awards. Never stop learning: bartender training helps aspiring bartenders grow into hospitality pros.
Taking bar inventory is the process of counting everything twice.
Use those numbers to determine how many goods you used during that time and your inventory usage. That number helps to calculate other valuable metrics. Metrics you can use to make your bar's profitability decisions.
Establishing par levels, reducing excess inventory, and defining pour cost and pricing structure.
Pick a reliable POS system
You must invest in a reliable POS system. It will protect against employee theft and speed up bar and kitchen workflows. Even if you own a busy bar or nightclub, the bar's POS systems are customizable.
A POS system allows you to handle customer tabs and transactions in a more efficient and organized manner. They also notify you when errors happen, allowing you to spot them early and mitigate those risks again.
Time-based Pricing- You should set happy hour prices to entice the post-work crowd. Some POS systems can automate time-based pricing, so you don't have to put it daily.
Pre-authorization- allows bartenders to swipe a customer's credit card, save that information to their bar tab, and verify that the card is legit and has funds.
Plan your menu
Optimize Your Menu for Profits
On-menu success is dependent on the right ingredients and approach. Customers will engage meaningfully, often with premium items, by organizing your menu clearly, using interesting descriptions, and prioritizing your most profitable or signature things. Another way to boost profits is to change your restaurant's menu to reflect current market circumstances.
Decide on the size of your establishment
The amount of space you need depends on the venue type (full-scale club, tavern, brewpub, etc.).
Here are some guidelines to follow:
- For a small bar or pub, consider 1000 to 1500 square feet.
- For a larger pub (tavern or specialty), consider 1800-2000 sq. ft.
Identify your customers
Your bar is planned. You're considering several places. Now it's time to see if it matches your potential customers' demand.
The majority of research materials are already available.
If you DIY, you'll need these tips.
- Trends in alcohol potential suppliers can tell you what drinks your customers like.
- Lifestyle trends, browse local magazines to learn about successful small businesses in your area. A smoothie/juice bar would do well in a healthy, athletic community.
Analyze your competition
Visit local bars and note the following:
- Overall visitors. Monday, Tuesday, and Wednesday are the best days to observe your competition.
- Buying habits of your competitors' customers.
- Preferences for a place.
- Many business owners and employees are willing to talk about their business and give you all the details you need.
What can I do to bring in more customers?
It is possible to track the return on investment of your social media advertising efforts.
Facebook and Instagram, for example, allow you to target your ads to a very narrow audience. Create audiences that fit your bar's buyer personas.
Hyper-targeted audience: women ages 23 to 35 who live within 15 miles of your location and have liked wine-related Facebook pages or posts. If you know your audience and demographics, your ads will be more relevant.
Develop marketing strategies for your bar before and after it opens
Invite online influencers to your grand opening
This is your chance to generate excitement among your community and potential customers. Reach out to every local reporter, blogger, social media influencer, and public speaker you can find. They can deliver a word of mouth advertising, and have a party for them.
Offer a secret deal to social media followers
Distribute “Bounce Back” offers to everyone involved in your grand opening events — social media followers, friends and family, and influencers.
The secret deal offers usually take the form of another coupon valid for a few weeks after your opening period ends.
Staging Promotional Events
Before your grand opening, invite people in your local community. Include a coupon for a limited-time offer redeemable within days (or weeks) of purchase.
Verify that the promotion requires a purchase — "Buy one, get one free" or "free X with purchase of Y" or "X% off all bills over a dollar amount". You need revenue, so don't make a free offer. If you make a good impression on someone, they're likely to refer a friend or family member.
Spread the news via social media
Social media accounts like Facebook, Twitter, and Instagram are other ways to reach customers. Share photos of your signature cocktails and promote specials.
Collaborate with other businesses nearby
Do you have small business owners to partner with for an evening? Pop-up events are a great way to network and collaborate with your competitors. Pop-up events like specialty food nights, craft nights, and more can help your bar neighborhood bars and neighborhood bars.
Run Promotions Happy Hour and Special Events
Happy hours are a great way to attract customers with cheap drink specials. You can also offer free samples and snacks.
What causes bars to fail?
Insufficient funding is one of the significant factors in the demise of bars. In many cases, operators only have enough money in their bank accounts to pay for the previous week. This is a blunder. Having six months' rent in your bank account is a good rule of thumb.
In reality, the subject of restaurant failures is far from simple. When a bar restaurant closes or changes management, it's not necessarily due to financial distress; it might also be due to the owner's personal reasons. When a business do collapse, it isn't usually due to poor management. External variables can still emerge over otherwise great efforts, as the Covid-19 pandemic proved.
Despite this, many bar business face failure because customers prefer to dine or hangout elsewhere and they do not earn enough money. It generally happens for one or more of the following reasons.
- Poor management and lack of experience
- Out of control costs
- Bad food and service
- Bad location
- Lack of clear concept
- Too much competition
- Too little marketing
Starting a bar is exciting, but sustaining one requires guts and commitment. Making your dream wine bar or whiskey den a reality will take a lot of time and effort.
We hope this guide inspires you to open your own bar and empowers you to make the right decisions to build a successful business.