Deciding to open a bar is a big decision. It’s likely the realization of a life-long dream. As exciting as this time can be, it’s important to plan carefully. Your success will depend on it. To make things easier, we’ve put together a brief tutorial on the steps you need to take when opening a bar from scratch.
Choose a Bar Concept and Brand
The first thing you need is a concept and brand. This may be something that you’ve been thinking about for years…or you may be unsure. Do you want to be a friendly, neighborhood bar or do you want to be more upscale — a wine bar, for example? Do you want to offer food or just bar snacks? Are you planning to have live music? What is your decor going to be? There is no wrong answer to these questions, but you need to have a set concept and brand before you continue to the next step. It’s a good idea to commit your plans to writing so you can refer to it as you continue to build your business plan and share it with team members as you bring them in.
Expert insight: Brian Warrener, associate professor in the College of Hospitality Management at Johnson & Wales University said, “A well-defined concept is critical to the success of any food-and-beverage operation and should be considered when making any strategic decisions. For instance, your beverage menu, food offerings, prices and physical space should all support your concept and send a consistent message to your target market about who you are and what they should expect from you.”
Write Your Bar’s Business Plan
Every business needs a formal, written business plan. If you are seeking financing, investors and bank officers will insist on it. Your business plan needs to spell out your concept for the business, what you intend to sell, how you will price your menu items, a description of your ideal customer, how you intend to market your bar and attract customers and an overview of your expected monthly expenses.
Expert insight: “This exercise and the resulting document can help to keep you on brand as you make future critical decisions about your business, helping you to stay on the path that you initially set,” Warrener noted.
Secure Funding for Your Bar
Unless you’ve just won the lottery or have received a large inheritance, you’re going to need financing to make your dream of opening a bar a reality. The most traditional ways to obtain funding are pursuing a small business loan and/or soliciting investors for funding the bar in exchange for a portion of the (eventual) profits. You can also apply for a grant or small business loan from the US government via the US Small Business Administration. Other, less traditional methods include taking out a personal loan, taking a cash advance from your credit card company, borrowing seed money from a family member or friend, or even starting a “Go Fund Me” type of campaign.
Expert insight: “It can take longer than you might think to get your business up and running and generating income.” Warrener noted. “ Be sure to include some funding to pay your bills during this time.”
How Much Does It Cost to Open a Bar?
How much money you’ll need for your bar business varies widely depending on a number of factors. These include whether you are planning on buying a building for your bar, where your bar is located, the type of decor, whether you need a lot of specialized equipment—like a cappuccino machine, for example—and how much you intend to spend on marketing. Investopedia estimates that an average bar business costs between $100,000 to $850,000 to start. However, they also note that a bar can be started for as little as $25,000.
Choose a Location
Once you have a plan and funding, it’s time to find a building for your bar. You will likely have narrowed down your choices to a particular area in your business plan. You now need to enlist the assistance of a good real estate agent to show you properties that match your ‘wish list,’ either to rent or to purchase.
Expert insight: Warrener said, “Locating your bar can be a tricky decision. Conventional wisdom recommends a location where your target market is either co-located or likely to travel. That said there are plenty of examples of operators searching for cheap real estate who located in riskier neighborhoods and ended up sparking a renaissance there. Nearly every urban area can tell a story like this. It can be a significant risk for owners and investors.”
Obtain Permits and Licenses
You’ll need a variety of licenses and permits for your bar. These include a business license, a food and beverage license and a liquor license. The latter may be available to be transferred with the property you buy for your bar if that property had been a bar before. Keep in mind that some localities limit the number of liquor licenses they issue, so make sure that you can get a license before you commit to a specific property. Virtually all municipalities have different licensing requirements for selling beer, selling beer and wine, or selling liquor.
Expert insight: Warrener spoke of this point’s importance, “It’s critical to do your research into the specific requirements of your locale. Almost none of them have the same laws, rules and requirements.”
Equipment You’ll Need
Now that you have a building, it’s time to shop for the equipment you’ll need to run your business. You’ll need bartending equipment, such as blenders, coffee machines and ice makers.
You’ll also need a POS system. POS systems are used by your staff to enter orders and allow you to track your sales and inventory. If you intend to have a kitchen, you’ll need a dishwasher, a commercial range and a walk-in cooler, minimum. Keep in mind that you don’t necessarily have to purchase all of these items new. You can often find gently used commercial kitchen and bar equipment at a fraction of the new price from businesses that have failed.
Expert insight: Warrener noted that it’s important to stay on top of changes in the industry, too. “The pandemic has shifted the way consumers interact with bars and restaurants. There’s an argument to be made that they have become accustomed to highly functioning and convenient technology that forward-thinking operators must now provide in order to maximize their success. The best POS systems include up-to-date menus, ordering, payment and delivery options online.”
Staff to Hire
You’ll need a staff to run your business, even if you intend to be a hands-on business owner. At a minimum, you’ll need bartenders. If you plan on being open for long hours, you’ll probably want a manager to work the hours that you can’t. If you plan on offering food, you’ll need a cook or chef and possibly line cooks and servers. Depending on the size of your business, you may need a dishwasher or porter to help keep the place clean.
Understanding Inventory
Lastly, you’ll need to stock your bar with the beer, wine and alcohol that you intend to sell. Be careful here, you can sink a lot of money in inventory before you even open your doors. Refer back to your business plan and purchase those items that best fit the profile of your targeted customer. A good rule of thumb is to keep two to three weeks’ worth of inventory on hand. Obviously, you will have to guess at these numbers to begin with. Entrepreneur magazine calls poor inventory control the number one mistake that bar owners make.
Expert insight: Warrener agreed that it’s trial and error. “Setting appropriate inventory levels is a delicate balancing act. A good operator will consider the costs of too much inventory vs. not enough. The former results in excessive cash tied up in product and therefore unavailable, the latter in stock-outs that can result in lost sales.”
How to Promote Your Bar
Having set up your bar, stocked the bar and hired bartenders, it’s time to find customers for your bar. You’ll want to refer to the marketing section of your business plan. Ideally, you’ll market your business in a number of ways, both digital and traditional. This includes things like building a website, promoting your bar on social media, creating an attractive and eye-catching sign for outside your business, taking out an ad in your local newspaper, partnering with complementary local businesses.
Understanding the Risks and Pitfalls
A bar business has many inherent risks and pitfalls. It’s important to know these ahead of time and look out for them. Potential pitfalls in the bar business include dishonest bartenders who offer free drinks to customers or even dip into the till, bartenders over-pouring drinks, an inefficient layout that wastes bartenders and servers time by making them travel unnecessarily far to fill orders, inadequate ice-making capability (you’ll likely need more than you think you will), and not dealing with issues between staff members quickly before it can affect your bar’s customer service.
Tips for Long-Term Success
In addition to watching out for the pitfalls mentioned above, some good tips for success in your new bar business include:
- Treating your staff with respect. Happy employees will exude a pleasant vibe to your guests and not be as likely to quit, saving you time and money in hiring and training new staff members.
- Take liability seriously. Make sure that your staff knows when to cut off guests and when to ask for an ID.
- Invest in a good inventory-control system. This can help you make sure that you’re not sinking your profits into inventory that you may not use.
- Stay on top of industry trends. Remember what works today may not work tomorrow. It’s wise to keep abreast of new ideas and adopt them where they will work for your business.
“So many great bars are founded by great bartenders or enthusiasts,” Warrener concluded. “The skills required of a great bartender are different from those of a great owner. It’s important to evolve, to understand and implement the business concepts necessary to run a successful bar.”
Starting a bar business from the ground up can be challenging. Get the education you need by earning your bachelor’s degree in Food & Beverage Entrepreneurship from JWU. For more information, complete the Request Info form, call 855-JWU-1881, or email [email protected].