Friends, laughter, celebrations, entertainment--fun! These
are the things that might come to your mind when you think about owning your
own bar as you imagine rooms filled with friendly conversation, music and
people enjoying themselves. If you're thinking of opening a sports bar, you
might envision an exciting game on big-screen TVs with everyone cheering and
having a great time. Owning a bar sounds like the perfect life to many
potential entrepreneurs, but it's not always fun and games behind the scenes.
Owning your own bar/club can mean long hours, meticulous
attention to detail, giving up vacations and weekends, and sometimes dealing
with unruly customers. But if you have a clear vision, do your homework and
learn the ins and outs of the business, it can also translate into a rewarding
and financially successful enterprise.
The Stats
Although people still gather to socialize in bars, just as
they have for hundreds of years, other factors have come into play for the
industry as well. Problems with driving while intoxicated have changed the
drinking patterns of people in United States. The growing concern with health
and fitness toward the end of the 20th century took its toll on the bar
industry. Keeping tabs on this industry requires a look at the alcoholic
beverage industry as a whole--what people buy in the store doesn't differ much
from what they buy in a bar. The distilled spirits industry generates around
$100 billion in U.S. economic activity annually, according to the Distilled
Spirits Council, a national trade association.
You have some pretty tough competition out there. But you're
not just competing with the other bars in your area these days. You're
competing with every entertainment option from which your customers can choose.
What You Can Expect
Successful new bars can be in the black within the first six
months, and they can go on to recover their initial investment within three to
five years. However, like many new businesses, the statistics for bars aren't
in favor of the startup. Why do they fail? The first reason is they didn't have
enough capital to keep the business going. The second reason is a lack of
knowledge about the business.
From a personal perspective, you need to ask yourself if
you're really the type of person who wants to own and run a bar. Of course, you
don't have to run it if you own it, but you'd better make sure you have a team
of good, trustworthy managers working for you if you plan to be "hands
off." In the beginning, you will probably have to be greatly involved
whether you plan to be an active owner or not. If you're the kind of person who
would rather deal with paperwork or sit in an office where you don't have to
talk to people, this business is not for you. You will need to be out there
talking to people and shaking hands. Getting to know your patrons, even if it's
just to say "Hi," can go a long way for your customer service.
Another thing you should consider is the time commitment and
hours of operation. If you're an early riser, you might not enjoy having to
work until 3 or 4 a.m. at your bar. If you have a family, you need to discuss
how owning a bar will affect them. Many days you will have to be at your bar
from the time you wake up--say, around 10 or 11 a.m.--to the time you go to
sleep--say, around 4 or 5 a.m. As you can see, this could take its toll on your
family life. Eventually, you'll probably be able to have a saner schedule, once
your managers and staff are well-trained, but it may take six months to a year
to reach that point. If this could cause problems for you or your family, you
may want to reconsider the idea of owning a bar.
If we haven't scared you away yet and you're ready to go for
the bottle-in-the-sky dream, read on!
What's Your Bar Type?
Before you get started on the actual nuts and bolts of
creating your dream bar, you have to decide what kind of establishment you'd
like to own. Let's take a trip through the various kinds of bars--from
neighborhood bar to large-scale club--and see which one is right for you.
Neighborhood bar.
Conceptually, the neighborhood bar is still an American version of the English
pub. You'll find them everywhere in the United States. If you own this kind of
place, you can expect to know many of your regular customers. As on the TV show
"Cheers," you may find yourself taking phone messages for customers
or cashing their paychecks. It's because of the friendly "home away from
home" atmosphere that neighborhood bars are successful. Some of these pubs
open as early as 6 a.m., and they sometimes close earlier than other
bars--depending on the clientele. This type of bar is perfect for small-scale
entertainment options, such as darts, pool tables, video games and jukeboxes.
Across the
country, this is probably the most popular type of bar you'll find. There are a
lot of neighborhoods out there, but you might find that there is room for one
more in your area. According to the experts we interviewed, the startup cost
for this kind of bar ranges widely, depending on the size and concept, but
mostly on location. You can buy an existing neighborhood bar in a small town
for $20,000, or you can spend a million dollars building a brand-new one in a
big city. Not coincidentally, the amount of revenue these businesses produce
varies greatly, depending on your bar's location and capacity.
Sports bar.
Depending on the establishment's capacity, sports bars can be a specific
version of the neighborhood tavern, or they can take on a life as big as a
club. You may have the latter in mind, but your market research may point to
the former. It's important to do your homework!
Generally, sports
bars offer some kind of menu options, such as sandwiches, burgers, pizza,
sandwiches and appetizers. Since the main attraction is sporting events, sports
bars have televisions in view of every seat, sometimes all tuned to different
channels. Audio and video technology comes into play, with some owners spending
a large percentage of their revenue on keeping up with the latest in
technology--from satellites to big-screen TVs. As with neighborhood bars,
startup costs and revenue potential vary widely, depending on the size, concept
and location.
Brewpub or beer
bar. Studies have shown that although consumers are drinking less alcohol,
their tastes are becoming more discriminating. As a result, microbrews are more
and more popular. In a brewpub, you can brew your own beer right on the
premises. In a beer bar, you can offer a large selection of different types of
beer, including microbrews produced elsewhere. It's often easier to get a
liquor license for a brewpub or beer bar than a full-scale liquor license,
since you don't need a fully stocked liquor bar.
Most brewpubs only
sell their own beer options on tap (draft beer), with a few selections of
bottled beer options, too. Since you're creating your own product in a brewpub,
you also have the ability to control what you make and sell--from quality to
quantity. The startup costs of a brewpub can be quite high--from $100,000 to $1
million--because of the brewing equipment you need to have. If you produce a
popular beer, you have the opportunity to grow into a very successful
operation.
Beer bars tend to
have lower startup costs, which can often mean obtaining a less expensive,
fixed-price license from your state government. Beer bar startup costs range
from about $20,000 to $100,000, depending on size and location. The revenue
potential depends on the geographical location and drinking trends in the
community.
Specialty bar.
Specialty bars, which concentrate on one type of libation, from wine to
martinis, or theme, like cigar bars, are gaining popularity. Although some
specialty bars focus on only one drink category, there must be a wide variety
available within the genre. Take martinis: They have become very popular due to
the variety they offer. The traditional martini still has a solid appeal if
made with quality vodkas and gins, but other mixes, like sour apple martinis,
have expanded the martini-drinking base, especially among women. But even with
their increased popularity, martinis are still looking up at wine.
Beyond the
traditional glass or bottle with a nice dinner, for many, wine is the drink of
choice. In fact, women order wine more often than any other alcoholic beverage.
Wine bars offer guests the opportunity to taste a variety of different kinds of
wine and the ability to learn more about their qualities.
Specialty bars
tend to stay small and intimate in size and are located in more sophisticated
neighborhoods. The costs and revenues you can expect to find when opening a
specialty bar depend mostly on the type of product you serve and your location.
Club. Like the
neighborhood bar, nightclubs can take on a number of different personalities.
You can open a small cocktail lounge with a jukebox or a tinkling piano in the
corner. A medium-sized club might look like a neighborhood bar during the
lunchtime hours, then spring to life with a popular band at night. Or if you
have a big enough budget, your club might be a large dance club where the most
fashionable people and hippest celebrities hang out every weekend
Whichever path you
take, you must be prepared to spend a great deal of time and money on promotion
to create your "buzz." Clubs can make plenty of money if they're
managed properly. Most successful clubs draw on a city population of 500,000 or
more. If you're in a small town or suburb, you may not have the customer base
to open a large dance club. Market research is key.
Target Market
As we've discussed, the bar/club industry can be a pricey
undertaking. Because of the high failure rate, you may come across desperate
bar owners willing to take a low purchase price just to get out of the
business. You'll also find that startup costs for bars vary depending on size,
location and target market. So we can't give you a concrete amount for what you
can expect to pay to start your business.
We spoke with one entrepreneur in California who spent
$25,000 taking over someone else's bar business. Another bar owner in Florida
spent several million dollars starting his club (and he didn't even build the
building!). The numbers vary all across the board. Your bar's size, location,
type and concept will make your startup costs as individual as your business.
However, the chart below will give you some idea of what
you'll be looking at--from the low end to the high end. Again, you could buy an
existing bar that would nullify all the numbers on our low-end chart or start a
large-scale club that's off the map from our high-end numbers. You'll have to
do some research to find out what your bar will cost based on your concept,
size and location.
Here are the startup costs for two hypothetical bars. The
first, Night Owl, is a tavern with a maximum capacity of 100 people and serves
only beer and wine with a limited menu. Night Owl has annual sales of $327,416.
The second, Neverland, is a 1,000-person-capacity nightclub with a full-service
bar. Located in the downtown area of a metropolitan city, Neverland has annual
sales of $976,132.
Expenses
Rent (security
deposit and first month) $3,250 $6,125
Leasehold improvements (heating/air conditioning,
electrical, plumbing, painting, carpentry, sign, flooring, smoke detectors) $18,000 $65,000
Equipment/fixtures $43,000 $212,000
Licenses/permits $35,000 $45,000
Beginning inventory $22,000 $38,000
Phone/utilities deposits $150 $375
Payroll $5,550 $18,730
Grand opening marketing $1,000 $3,000
Legal services $425 $1,150
Accounting $250 $650
Insurance $450 $2,350
Miscellaneous expenses (add roughly 10 percent of total) $12,907 $39,238
Total Startup Costs $141,982 $431,618
Planning
Calling your bar an operation fits because of how much
operating it takes to keep it running. Someone will have to mind the store
every minute your doors are open and some minutes when they aren't, and your
place will need some sort of monitoring during the off-hours to prevent
vandalism or break-ins.
Many compare running your own business to raising a child.
If true, then a smooth-running, problem-free, profit-making bar compares to
parenting a happy, well-adjusted, self-assured teenager preparing for
adulthood. But don't worry, the bumps in the road hold the best lessons. And as
with parenting, you succeed with consistency and concern instead of rigidity
and blame.
The Road to Success
The groundwork you lay to operate your bar includes the
systems you use to track liquor and food. How much does the customer owe the
server/bartender, and in turn, how much do they owe you? Also, what liquor and
food do you sell the most? The systems you choose depend on the type and size
of bar you have.
In most bars, only the bartenders and servers handle money.
Cashiers or takeout staff may also have cash-handling responsibilities. Factors
to consider when choosing an accounting system include the level of sales you
expect, both from alcohol and food, and the efficiency needed for your staff to
operate at its full potential. Also, look for holes that your accounting system
might leave open for theft at all levels, not just servers and bartenders. No
one thinks they are hiring a thief. Many people who might steal if the
opportunity arose do not consider themselves thieves, either, so they don't
come off as such.
If you use the cash-and-carry system, where the drink is
ordered by the server verbally and then paid for before the bartender or server
rings it up, you might find many "forgot to ring it up" drinks, as
well as a few given away for free. It is the nature of the system. If your
inventory controls are so tight that you will notice when too much has been
used, or if your manager, who shares in the profits anyway, is your bartender,
then you can use this system without much fear.
Finding Your Perfect Location
Your choice of location will depend on how you want your bar
to look, what you want your bar to contribute to the community, and the kind of
clientele you want to patronize it. Then you need to decide whether you want to
buy the location or sign a lease. Again, that depends on your budget. Finally,
you need to figure out how to fuse your concept with both your name and your
location to your best advantage.
People who know this industry well have polar opinions on
the concept of location. Some owners and experts we talked to put enormous
importance on the bar's location while others refuted its significance
altogether. It all depends on what you want your bar to be and what your
strengths are as an owner. If you want your bar to get impulsive neighborhood
traffic in a particular area, then you should be closest, and most obvious, to
them. If you'd rather spend the time and money saved by more affordable real
estate to develop your establishment's concept and create your own buzz and
destination, your actual location won't matter so much.
You should consider factors such as safety, parking,
accessibility to customers--even the history of the site--when choosing a
location.
Your Bar: The Place to Be
The word "location" can refer to two different
things--what area your bar is in (downtown, uptown, suburbs, etc.) and where
you are in relation to your customers. Are you on their way home from work? Or
do they have to make it a point to get to you?
Michael O'Harro, a National Bar & Restaurant Management
Association board member, explains how he took a bar location nobody wanted in
Virginia and made it work. "It was in an alley," he says. "It
was a 15-foot-wide alley, and we were 128 feet away from the street. No one
would go up the alley--[people] were afraid of it. So the building sat empty
for 50 years. But the bar at the end of the alley was spending $20,000 a month
in rent, while my rent was $500. I figured I had $19,500 to put toward
marketing per month. I made the alley fun and chic. In the alley, I put down
Astroturf that I purchased from a football stadium. I had signs, lights and
banners. It became the alley. Nobody knew it was there, and then all of a
sudden it was the hottest alley in town."
On the other hand, you can have an incredible spot and still
not be successful. For example, if you are lucky enough to have the only sports
bar right outside your town's athletic coliseum, you should be rolling in cash
at least during every in-season homestand. But if your staff is stealing from
you, operating procedures are badly managed, or your service isn't up to par,
you could quickly find yourself out of business--grade-A location and all.
Naming Your Bar
When it comes to naming a bar, experts generally fall into
two major schools of thought. The first says your bar is your dream--your hard
work--so you should name it anything you want. The second approach to naming
says your moniker is the first and greatest form of advertising for your
drinking establishment. A name like Bill's Bar & Tavern doesn't really tell
the public anything about your business, but The Haystack, Romp and 3rd &
Vine give customers something to connect you to. You wouldn't consider going to
bar called Romp if you just wanted a quiet drink. Likewise, you wouldn't travel
up and down 4th Street looking for a place called 3rd & Vine.
O'Harro advises that your name should exemplify your
concept. "First, I would try to figure out what my concept is going to
be," he says. "Sports bar? Discotheque? High energy? Low energy?
Singles bar? What exactly am I going to be? Then, what's the name of this
business going to be? I would do tremendous research to try to come up with a
name that literally fits with the concept."
When coming up with different names, don't stop until you
love at least three. In your brainstorming sessions, keep these three questions
in mind:
How well does the
name fit the concept you want to create?
What types of
customers will the name attract?
What will people
expect based on the name?
It's time to start planning how you're going to get people
into your bar to enjoy it. Just like any other aspect of operating your bar,
marketing is an ongoing process. Many bar owners think marketing is the most
fun and exciting aspect of running a bar. The entrepreneurs we interviewed
agreed that advertising in the media didn't bring as much reward for the cost
as it does for many other types of businesses. Generating a buzz for your bar
will mostly come from word-of-mouth and the special promotions you set up.
"The only cost-effective way to advertise a bar is
word-of-mouth," says Bob Johnson of the Beverage Management Institute, in
Clearwater, South Carolina. "When you don't have word-of-mouth working for
you, you are in serious trouble. It's not necessarily terminal. There are still
ways to get some advertising and marketing out there without spending a ton of
money. But anytime you reach into your own pocket to buy advertising for a bar,
it's not good.
"Word-of-mouth advertising is priceless," he
continues. "It means everything is right. Everything is happening. The bar
is alive. Your employees love working there. They are talking and saying great
things about the place, and that is passed on to your customers. The customers
love being there, and they tell other customers. If you can get to that point,
it's just priceless."
So what are some ways to generate word-of-mouth buzz? You
can get involved in community events and charity functions to gain exposure.
You can launch a direct-mail campaign with a newsletter for regular customers,
develop a website, and use any other creative marketing techniques you can
dream up.
A great way to promote your bar is to create special
internal promotions. If you fully developed your bar's concept, your promotions
and events will seem so natural you may even take them for granted. R.C.
Colvin, a neighborhood bar owner in Niles, Michigan, got into the bar business
because he loves to play pool. "We have pool tournaments several times a
year that bring in people from all over. We [also] have a couple of hayrides
every year, and people get a kick out of them," says Colvin.
Staging Promotional Events
Once you have established what your promotions will be, it's
time to start making them happen. After you bar is up and running, you'll have
a better idea of what nights need a little boost. Most bars are busy on Friday
and Saturday nights, with Thursdays coming in third place. You might decide you
need to pump up business on Monday or Tuesday, so pick one day and keep it
going until you have established enough regular business to move the promotions
to a different day. Of course, you'll still do your holiday promotions, like
July 4th, Super Bowl, Cinco de Mayo, etc., on the appropriate days.
Here are some ideas to keep in mind when you're working on
promotional events.
Prepare. Work out
a budget. If your promotion continues for more than one day, budget for the
entire time you want it to run. A good goal to shoot for is to make a profit
that's three times the cost of the promotion.
Make a schedule.
Design a planning calendar at least eight weeks before the promotion. Depending
on the size and magnitude of the promotion, you may want to start advertising
it at this point, too. Never advertise an ending date, though, so you can cut
it early if it doesn't do as well as you planned or you can extend it if it
really takes off.
Maintain the
energy level. On the day of the promotion, don't stop the action to give away
prizes or make announcements. You can turn the music down, but don't turn it
off. This will keep the energy level high and consistent. If you absolutely
have to turn off the music, never keep it off for more than 10 minutes, or you
risk people getting impatient and leaving.
Party all night.
Schedule your prize giveaways, contests and entertainment to run throughout the
night. If you have a grand prize to give away or a finale planned, don't do it
until after midnight so your guests stay in your bar as late as possible.
Promoting your bar
can be fun and creative. During a promotion and after it's over, ask your
customers and your employees for feedback and critiques. Of course, your sales
will give you a lot of the information you're looking for, too.
Compiled by Desmond
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