Research Effectively Before Opening Your Own Bar

So you want to open a bar. Hopefully, you haven’t come to this decision while tossing back a few of those tasty alcoholic concoctions that you hope to sell by the barrel to your prospective customers. In order to start a successful business, you’ll need to do your due diligence. You’ll need to learn the bar trade, understand the ins and outs of your local market and customer base, acquire a liquor license, and then actually build your bar. All of this may seem daunting, but for those drunk on the idea of starting their own bar, it is doable if you research effectively ahead of time.

Steps

Learning the Bar Trade

  1. Get a job at a bar. Probably the best way to get a handle on the bar trade is to actually work in a bar. Try to advance to the level of manager. The view from this position will quickly disillusion you. Owning a bar won’t consist of all-night bingers with your clients, but rather will be hard work. You’ll need to schlep kegs in the basement and unclog toilets in addition to serving drinks to the inebriated.[1]
  2. Talk to the owners of your favorite bars. If they're too busy, make an appointment. Offer to take them to lunch, because they're going to do you a big favor.
    • Once you've got the attention of a bar owner and at least half an hour to talk together, ask him how he started and what it takes to open a bar and run one. Take lots of notes. Come back several times, if possible. Be nice and buy things at their bar so they won't be too annoyed with you hanging around. Don't bother them with questions when the place is busy.
    • Keep in mind that if you plan on opening a bar in the area, the bar owner might not be inclined to talk to you and reveal his secrets. If you suspect this to be the case, visit other bar owners in different areas.
  3. Subscribe to industry magazines. Bar and Beverage is a great example of a bar trade magazine that covers the most exciting developments in the field including news on new brews, bar strategies and themes, new drinks, and even new technologies.[2] Nightclub and Bar magazine is another option and it is free. These magazines are great resources to help you figure out and hone your bar’s theme.[3]
    • Whether you want a “flight of fancy”, futuristic bar filled with flashing lights or a dimly lit, quaint gastropub with a hint of dive bar, you’ll find design tips and tricks in these trade publications.
  4. Attend trade shows before opening your bar. Trade shows have an advantage over trade publications. They get you in touch with other retailers and distributers. You can learn for the experiences of others, try new alcohols, see the latest trends in the bar industry, and get special deals that will help make your business profitable in the future. Not to mention, they are just fun.[4]
    • Each year the Nightclub and Bar Show is held in a different city. In 2016, over 600 booths will be set up for their thousands of visitors. In addition to this annual conference, there are smaller trade shows held around the country every month. Check out 10 times website for a list of dates and details on each trade show.

Considering the Market in Your Area

  1. Go to several successful bars in your area. Buy a drink at each, and take notes on what you like and don't like. Try at a busy time, and then come back later at a quiet time. Understand how these businesses operate and what attracts customers to them. Do they have themed nights? Do they have discounted drinks? Do they have a comfortable atmosphere? Do they attract your “ideal” customer?
  2. Find out how much money locals typically spend at bars.. Do not operate under the assumption that “if you build it, people will come and spend a lot of money.” There will be rough times and good times, but your consumer base won’t appear out of thin air just for your business. Contact your municipal government and ask for tax statistics on entertainment, dining, and bar services in your area.
    • For example, let’s say that roughly $1,000,000 was spent on dining, entertainment, and bar options last year and there are 10 establishments in your area that cater to these needs, then you can start off with a base assumption that each business brought in around $100,000 last year.
    • It is possible that one or two businesses attracted far more customers so these numbers would be screwed greatly. These heavy-hitters might even take up to 80% of the market, which would leave the remaining eight businesses to fight over $200,000. If there isn’t enough room for profit in your area, consider moving your bar to another more profitable part of town.[5]
  3. Find a place to open the bar. Ideally it should be a place that gets lots of people in your target demographic passing by, and ideally it should be a place that already has the bar and restaurant stuff in place. If you have to purchase fewer things (e.g. bar stools, booths, and chairs) then you’ll have fewer start-up costs.
    • Don’t be afraid to think outside the box. In some cases, it might be cheaper to outfit a space that was not originally intended to be a bar. This might even help you settle on a theme. Look at disused spaces like old churches, fire stations, or even houses in built-up areas with a healthy nightlife. Some people might be attracted to the quirky atmosphere of a bar more than the actual drinks served there.[6]
  4. Make sure that your lease allows the sale of alcohol. If you get a liquor license, but your contract prohibits the sale of alcoholic beverages, you will be in a bind. You’ll need to either renegotiate with your leaser or you’ll need to move. Make sure that your contract is ideal for a bar.[7]
  5. Choose a theme that meets your customer’s interests. While you’ve always dreamed of opening an English-style pub of your own, it is possible that bar-goers won’t be interested in such an establishment. Maybe there are already five other English-style pubs in your area to choose from. You don’t want your bar to be white noise, do you? While you research your area, see what kind of bar is missing and what might attract your chosen demographic.[8]
    • There are dozens of themes to choose from. Many bar owners agree that zany themes often attract customers to their bar counters. Pirates, spies, zombies, fairy tales, and tropical beaches have brought in business for bar owners around the world. Why not consider creating a theme bar?[9]
    • Decorate according to your bar's theme. Don’t just slap up a couple of signs on the wall or paint the entire place the same shade of brown. Carefully consider your bar's theme and then carry that theme throughout the place. It will create a more unique experience for your customers. You can even carry the theme down to the drinks and the foods that you sell.
    • For example, if you wanted to have a jazz bar, you'd want to build a stage for jazz musicians to play on. You could put pictures on the walls of jazz legends. You could incorporate your theme into the drink menu. Offer "jazzy" gin and tonics or drum-roll rum and cokes.

Doing the Math

  1. Figure out your budget. Most likely, you'll need well over $100,000 dollars to open your bar. This number could be reasonable if you plan to open in a small town in rural Mississippi, but if you plan to open up shop in New York City or Los Angeles, you'll need to be prepared to raise five times that amount or more.[1] Remember that roughly 75% of bars/restaurants that open close within the first year.[6] Don't let your bar go out of business because you didn't anticipate the exorbitant costs of starting a successful bar.
    • If your budget can't survive at least startup plus a few months running without netting a dime before you have to give up, then forget it. The last thing you want is to start the bar and then run out of money before business builds up to a profitable level. If necessary, choose a different location or find some other way to cut expenses. Remember, this should all be planned out before you take any other steps.
  2. Take into account construction costs. If the bar you want has not been constructed yet, add several months and thousands of dollars on top of your other costs to build it. Remember that construction is a timely process and most likely will take longer than projected.
  3. Calculate how much you'll need to spend to stock your bar. There is no formula for a perfectly stocked bar. It all depends on how many people you attract to your bar and how much they consume. Some bars that focus on “beer crowds” will want to have a variety of beers on hand, while a wine bar will want to have a great selection of wines. This being said, there is a standard set of drinks, liquors, liqueurs, and mixers that every bar will want to have. Saying “we don’t sell that drink here” to a customer could cause them to leave, so be ready for anything.
    • Be sure to have gin, vodka, rum, whiskey, tequila, and brandy in addition to beer and wine. These are starter liquors. They can be consumed by themselves or combined with various other ingredients to form thousands of drinks.[10]
  4. Take into account your prospective employees wages. This isn’t going to be a one-man operation. You’ll need bartenders, waiters/waitresses, a host/hostess, chefs, a janitorial staff, book keepers, managers for while you are away, and bussers to keep the place looking clean. All these people need to be paid. When you are calculating your budget, take into account your workers. You might hire a person for each job, a jack-of-all-trades employee who can take care of many of these tasks, or you might even subdivide each job between workers. It all depends on how big your bar gets and how much personal effort you want to put into the bar yourself.[11]
  5. Figure out where you’ll get the money. Once you know how much money you are going to need, figure out where you're going to get it from. You will probably need to borrow it, so get busy studying up on loans and credit. There are a number of small business loan agents around the country. Work with them to start a line of credit or to get a loan that will cover the projected costs of starting your business.[12]

Get the Appropriate Liquor License

  1. Figure out what license you need. Every state/country is different. Depending on your space, operating hours, and types of beverages sold, you’ll need a different license. Consult the Alcohol and Tobacco Commission’s website for the specific license you’ll need.[7]
    • In some areas, you simply have to fill out paperwork and pay a fee, but in other areas, inspections, detailed-lists of beverages being sold, and a projected ratio breakdown of food to alcohol sales are needed.
  2. Purchase an existing license. In some areas like San Francisco, new liquor licenses are not distributed by the city; instead, you have to purchase a license from someone else — probably a competing bar owner. In this case, you have to buy another bar owner’s business in order to open your own. In order complete the transfer, you’ll need:
    • A “Consent of Transfer” form from the current owner
    • 4 copies of your floor plans signed by you, the owner
    • A signed lease or proof of ownership of the building where the license will be used
    • Property tax clearance from your county treasurer[7]
  3. Submit the paperwork. Under ideal circumstances, your application may be approved or rejected in 8 to 10 weeks, but may take up to 12 weeks for processing if the local authorities are backed up.[7]

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Sources and Citations

  1. ↑ 1.0 1.1 http://www.slate.com/articles/business/buy_a_small_business/2014/10/buying_and_running_your_own_bar_how_to_discover_your_inner_sam_malone.html
  2. ↑ http://www.barandbeverage.com
  3. ↑ http://www.thegreenhead.com/2009/02/nightclub-bar-magazine.php
  4. ↑ http://www.ncbshow.com
  5. ↑ http://www.entrepreneur.com/answer/222351
  6. ↑ 6.0 6.1 http://www.inc.com/guides/2010/12/how-to-open-a-bar.html
  7. ↑ 7.0 7.1 7.2 7.3 http://www.in.gov/atc/2458.htm
  8. ↑ http://www.cocktailmixingmaster.com/opening_a_bar.html
  9. ↑ http://www.businessinsider.com/best-theme-bars-in-america-2014-2
  10. ↑ http://www.drinksmixer.com/guide/1-1.php
  11. ↑ http://www.entrepreneur.com/article/232498
  12. ↑ https://cdcloans.com/small-business/faq/

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