Running a bar is a lucrative business, proven by the fact that this industry is estimated to be valued at a whopping $36 billion in 2024. Even better, it is expected to grow at an annual growth rate of 5.09% in 2027.
While this could be a rewarding venture, opening a bar is not exactly the same as opening a food business. Since your main focus would be selling alcohol to your customers, you need to take a few extra steps.
From choosing a concept and securing the necessary documentation to hosting your grand opening, we've outlined the complete process of opening a bar.
How profitable is a bar?
The gross profit margin of a bar is usually around 70% to 80%, which is huge, considering the fact that automotive and general retail are only at the 25% mark.
On average, the net profit margin for a bar business is around 10% to 15% (after all the costs have already been deducted). However, note that bar profit margins vary due to various factors like tax rates, licensing laws, customer demographics, and the cost of living in your area.
Locations with high tax rates and cost of living can affect your bar’s profitability, while areas with affluent customers can record higher margins because they can shell out more for premium drinks and services.
Steps on how to open a bar
To open a bar, you have to cover all the bases, including:
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Finding the right location
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Choosing a concept
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Choosing a name for your bar
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Registering your business
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Creating a business plan
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Securing funding for your bar
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Obtaining permits and licenses
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Finding suppliers
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Finding an alcohol distributor
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Designing your bar
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Hiring the right staff
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Advertising your bar
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Hosting your soft opening
We've laid out all the essential steps to help you facilitate this process smoothly.
Find the right location
Location is essential for businesses that rely on accessibility and foot traffic, like bars.
A well-prepared location analysis includes studying the following:
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Target demographics: To be the go-to bar in your neighborhood, you must know the customers you're serving well. For instance, if your bar is more modern and funky, look for a location where most residents are college students or young working professionals.
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Zoning and health regulations: Get acquainted with your location's zoning laws to know what to do, what permits to get, and what laws to follow. These regulations vary from city to city.
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Access and visibility: Your chosen location should be visible to people walking or driving by so you can get as much foot traffic as possible to your business. Having an accessible parking space is also a huge plus.
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Nearby competitors: If you know that your chosen area is already saturated with bars, you can either select a different location or make sure that your bar's concept is unique enough to stand out. Remember that while some businesses flourish when close to their competitors, others require standing out to ensure survival.
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Nearby amenities: The surrounding amenities can positively impact your bar's appeal, especially if it's near other restaurants, public transport, and easy-access parking.
Note that buying or leasing your storefront will be one of the biggest upfront expenditures in starting a bar. Generally, retail stores and restaurants spend around 5% to 10% of their gross income to pay rent.
More importantly, make sure that the real estate agent you'll be working with has wide experience.
While anyone can purchase a property, a licensed real estate agent specializes in this field and knows what paperwork must be prepared, documents that must be signed, and taxes that must be paid.
More importantly, they can do it more efficiently than someone with no experience when it comes to purchasing property.
Name your bar
Aside from choosing a concept for your bar, one of the most exciting things you'll do is choose a name. With approximately more than 69,000 registered bars in the United States alone, how can you ensure that your bar's name stands out?
First, make sure it's catchy.
Generally, your bar name should reflect the overall vibe and ambiance you wish to create. It also helps to research your target customers' age and social status. Are they college students, working professionals, or a more mature crowd?
The reason for this is simple: knowing your target demographic better will help you develop a name that resonates with your target customers.
Remember that your brand name adds intangible value to your business. This means it can either pique your customers' interest or cause them to leave —the worst part is that they haven't even stepped foot into your business yet.
Your business name will also appear on your marketing materials, staff uniforms, menu, social media accounts, and advertisements, so make sure it isn't too long or complicated.
Then, trademark it to ensure it's protected and cannot be used by other businesses. This can be helpful, especially if you're planning to expand your business in the near future.
Choose a bar concept that aligns with your brand
One of the first (and most fun) things you must do when starting a bar is choosing a concept representing your brand. It’s more than just thinking of the decorations, artsy drinks, and custom staff uniforms—you must also consider the type of entertainment you want to offer.
When deciding on a concept, you should ask yourself how you want your customers to feel when they enter your bar. Do you want them to feel relaxed? Hyped?
If you’re fishing for ideas, here are some bar concepts you can consider:
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A cozy neighborhood bar with booths and jukebox playing classic hits so your customers can unwind freely after work hours.
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A barcade (bar + arcade) with pinball and other vintage games so your customers can drink, let loose, and make new friends, especially on Friday nights.
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A martini bar with neon lights display and electric/funky music lets your customers feel like they're in an exclusive club.
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A Tiki Paradise that transports your patrons to a tropical place with your tiki-themed decorations, Polynesian ambiance, and exotic cocktails.
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An elegant wine bar with creative paintings on the walls and modern furniture so your guests can sip their wine and pair it with cheese or other appetizers.
Ultimately, the most important thing to consider here is that your brand and concept should complement your target customers in your chosen location.
As you perform market research, ensure to adjust your concept to meet the needs of your target customers. Otherwise, you can end up losing money by setting up a barcade at an executive village where most people prefer wining and dining over drinking booze and letting loose.
Register your business
The requirements for registering your bar depend on which city and state your business operates in. Ensure you have an employer identification number for the purpose of filing your taxes, and choose what business entity type you prefer.
To give you an overview, here are the different kinds of business entities:
Sole Proprietorship
Small businesses usually establish themselves as sole proprietorships, mainly because this is the most common and easiest way to run one. However, this comes with a huge con: sole proprietors also become solely liable for any liabilities or lawsuits their business might encounter. This means that if your business gets sued, you alone bear the losses and the responsibilities that come with it.
Partnership
A verbal agreement is all that a partnership needs for the business entity to come to fruition, making it appealing to everyone. However, in a partnership, you also become liable for your business partner's mistakes and liabilities.
In this regard, make sure that you make the scope of your profit sharing and assumption of liability clear in your partnership agreement before signing anything.
Limited Liability Company (LLC)
This business entity has become popular thanks to its protection against liabilities. Because it exists as a separate legal entity, business owners aren't held liable for any lawsuits incurred against their business.
Because bars have greater legal risks than other businesses (burns from alcohol trick shots and broken furniture due to bar fights, to name a few), it is recommended that they set up an LLC or corporation.
The downside, however, is that it requires filing proper forms, and a fee should be paid at the Office of the Secretary of State.
Note that LLCs are applicable only to businesses in the United States. If this is something you want to register for, you can look for a similar business structure in your country (one that protects owners from liabilities).
In Canada, for instance, you can register as a co-operative so you can enjoy protection against liabilities and have the profits distributed among the members instead of the shareholders.
Corporation
A corporation is a juridical entity, which means the owners are free from any personal liability unless they encounter rare and extenuating circumstances.
Put simply, the business assumes the risks rather than passing them on to those who run and own it. This means that in case your business gets sued, only your business’ assets will be sought after and your personal properties won’t be affected.
However, if you are just starting out, we suggest registering as a sole proprietor, general partnership, or LLC. This is because corporations require lots of documentation to be filed and have stakeholders, which isn’t something you want to go through as a first-time bar owner.
Create a business plan
A solid business plan should cover your business' value proposition, location, industry you're entering, legal structure, products and services, marketing plan, financial forecast, and other essential information that points toward growth and profitability.
Overall, this plan serves as your go-to guide on how to open a restaurant, a bar, or whatever business you plan to build.
Generally, your bar's business plan should contain the following:
Plus, your business plan isn't only a roadmap to your long-term success plans; you can use it to attract funders and investors and explain your concept to potential investors or partners.
Secure funding
After creating an in-depth financial projection, you'll gain a more detailed idea of how to fund your business without going over budget.
First, list all the start-up costs and the cost of daily operations to get your bar up and running.
These start-up costs can range from the real estate payments you must make to the permits and licenses you need, the supplies you have to buy for your bar, the wages you need to pay your employees, and insurance.
Starting a bar can generally cost between $100,000 and $850,000, depending on your location and business size. If this is something you can't afford out of pocket, you can always take out business loans. Just make sure you pay them back as soon as possible to avoid penalties and surcharges.
Obtain permits and licenses
Remember: selling alcohol is a heavily regulated business. Before you start a bar, you must secure a license from the Alcohol and Tobacco Trade Bureau. Make sure to search for this bureau’s counterpart in your country so you can secure the necessary license.
This entity enforces laws regulating alcohol production, wholesale business, and importation. It also has other functions, such as manufacturing and importing tobacco and advertising and labeling alcohol.
The entire process can take around 6 to 12 months, especially since the Tobacco Trade Bureau needs to inspect your business and conduct a background check on your officers, directors, and owners.
Aside from this, you need to obtain a liquor license at both state/province and local levels. A food seller's permit is also mandated if you plan on serving food.
Here are some of the licenses you must have before opening your bar to the general public:
Employer Identification Number
An Employee Identification Number (EIN) is essential for applying for the other permits mentioned below. This number will identify you as an employer and officially allow you to hire staff.
Liquor License
A liquor license is one of the most important licenses you must acquire to officially and legally start selling alcohol. Not only that, this license will also determine what type of alcohol you can sell to the public and during what specific days and times you can operate.
The process of obtaining a liquor license can be lengthy, so start this process immediately and contact your state's Alcoholic Beverage Control Agency.
Food Service License
If you plan to serve food at your bar, you must secure a license. This will help ensure that your business complies with the laws and regulations regarding handling food.
Alcohol and Tobacco Tax and Trade Bureau
Usually referred to as the TTB, this agency regulates businesses selling alcohol. You can easily register on their website. Business owners must also keep a record of the date and quantity of all alcohol products they have received from their suppliers.
This step is essential because once you have been subjected to a surprise inspection and fail to produce a records book, you can be penalized and receive a fine of up to $10,000.
Other permits you might need in opening a bar include:
Once your permits and business licenses are ready, the next step is to keep your bar up to code because alcohol businesses are subjected to inspection often.
Plus, while you can do all this independently, know that it wouldn't hurt to ask for the help of professionals like legal counsel to assist you in this step.
Look for suppliers
Making your customers happy should be your number one goal, so looking for good suppliers to provide everything your bar needs to function at its peak is a must.
If you can, connect with other bar owners to get a referral to their trusted vendors. It would also help to create a list of supplies you need to budget for them better.
To help you find the right supplier for your business, here's a short checklist you can follow:
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Find out how long they've been in business: Those who have been around for a long time usually have established trust and credibility with their customers.
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References: Who have they previously worked with? What are their previous customers saying about them?
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Minimum order amount: Some suppliers require a minimum order amount, and some give discounts for bulk orders.
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Payment terms: Can you pay in installments? Will you get a discount if you pay for all the supplies you bought in cash?
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Quality assurance process: Did the supplies you bought pass your business' standards? Are the glasses thick enough not to shatter when tipsy customers accidentally drop them?
A good supplier must be willing to work with you and understand exactly what you need.
Find an alcohol distributor
Now that you have gathered supplies for your bar, the next step is to look for an alcohol distributor offering the brands you wish to sell. You should also take consistent liquor inventory to understand how your bar is performing and what brands your customers prefer.
Is your target market consuming more beer than brandy? Do they prefer one brand over the other? Consistent inventory will help you adjust your budget accordingly and change your selection of spirits if needed.
You should also purchase items that will ensure that the booze flows freely since this is what your patrons are after. Here are some items you can't skimp on:
Bottle coolers
These coolers store the bottles and cans that must be chilled. They usually sit under the bar so that bartenders can access them easily.
Ice machines
Opt for a heavy-duty ice machine since you'll always be using it. If you can afford it, go for an industrial-grade ice machine.
Ice bins
Although you can store ice in your ice machine, your bartenders will have difficulty reaching for it if it isn't placed beneath the bar. Get an ice bin and ensure it has no holes and that the amount of ice you'll be putting in is commensurate to the weight it can hold.
Bar blender
A reliable, commercial-grade bar blender is essential when creating popular blended drinks like the all-time favorite margarita and daiquiri. For even better results, look for a model with a cover to reduce the noise while blending.
Glassware
Depending on the beverage you serve, you will need garnishes, cocktail mixes, and drink ingredients. Don't forget the coasters, cocktail napkins, and stirrers for your bar top.
Beer dispensers
No bar would be complete without a beer dispenser. Aside from holding and dispensing beer, a good beer dispenser can add greatly to the aesthetic of your bar.
Design your bar
What could be more fun than designing your own bar? Just like designing a restaurant, you must consider the atmosphere or vibe you want to give off and maximize your space efficiently.
Choose lighting and fixtures to set the mood and tone of your bar and make it stand out. Set up various registers so your bartenders won't get in each others' way as they ring up their customers.
Here are some of the design processes you shouldn’t skimp on:
Create a blueprint
If you are designing your bar from scratch, measure the whole space. You can use design software to create a virtual blueprint or the old-fashioned pen-and-paper method to draft your layout.
Creating a blueprint will help you choose your equipment, fixtures, and seats while ensuring they fit inside your space.
Ultimately, your main goal should be to ensure that your designated space remains functional and that your staff can move around freely and cater to every booth and table. The space behind your bar should have enough room for your liquor display, bottle cooler, and speed rails.
There should also be enough room to accommodate the maximum number of bartenders during your busiest shifts.
Pay attention to your bartops
Another major bar design you need to pay attention to is your bartops, which serve as the centerpiece of your bar. Usually, these bartops are made of stone, glass, or wooden materials. When choosing one, ensure that it will match your bar's overall aesthetic.
Proper lighting
Great bar owners know that lighting helps set the mood for their patrons. For instance, LED string lights create an aesthetic vibe, and dimmable pendants strategically placed above table settings make the space feel more intimate.
If your lighting is too bright or dim, it can end up being unflattering and your patrons will notice this imbalance. As a rule, go for the warmer hue in the color spectrum. Warm illuminations (particularly around 2500K) are great for a lively setting.
This produces a feeling of relaxation and comfort, encouraging patrons to sit back and enjoy another drink or two. The soft yellow to amber shades make any face look flattering and the food more scrumptious.
Remember that as the temperature gets cooler (4500K and above), the lighting becomes bluish and can cast a bright greenish glow, which ruins the ambiance.
Hire sufficient staff
Generally, a bar needs the following key positions to keep its operations running smoothly:
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Bartenders
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Bar manager
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Servers
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Barbacks
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Host/Hostess
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Security
Different bars have varying staffing needs. For example, a popular nightclub will need many employees that a cozy neighborhood bar won't, like a house DJ or a valet. Meanwhile, if you own a wine bar, you will need a sommelier on your staff.
In this essential step, you can use restaurant management software to help you schedule your employees' shifts and ensure that your restaurant is sufficiently staffed during peak hours.
An overall management software with time-clocking and payroll features would also prove useful. This way, you won't have to calculate your employees' wages manually, which can take up a lot of time and lead to unintentional computation errors.
Additionally, creating training programs outlining clear expectations is essential to ensuring that your employees have an opportunity for growth within your organization.
You can host a training program to help your staff identify who among your patrons is exhibiting signs of visible intoxication. Train your employees on how they can guide your customers and ensure their safety at all times.
Advertising your bar
After complying with all the requirements, your bar is ready to be introduced to the public. This is where advertising your bar via different marketing strategies comes in.
Here are some of the steps you can take to ensure you can spread the word about your business and reach a wide audience:
Create a business website
Creating a website for your business is essential, especially now that we're in the digital age. As Toast puts it, "A restaurant website can do lots more than provide info about your bar to customers – it acts as an extension of your brand and is a valuable asset in your marketing toolkit."
Your patrons will research your business online before they even step foot inside your bar. To ensure that your online visitors reach your place of business, add all the essential information about your bar online. This includes your location, opening hours, and even your menu offerings.
Use social media
By sharing high-quality photos of your cocktails and promoting your bar on your social media pages, you can reach 5.07 billion users (without spending thousands on advertising costs).
Approximately 41 million users have used the hashtag #drinks online, which proves that food photos aren't the only popular content on Instagram.
You can also host contests and giveaways and post your events and promotions online to reach new customers and nurture existing ones.
Host a Happy Hour
Attract more customers by hosting a Happy Hour and slashing the price of your drinks during off-hours. For instance, you can give a 15% discount on your drinks from 2 PM to 3 PM (after lunch hours when most people are still at their offices) or 6 PM to 7 PM (before the dinner rush).
Remember that your goal is to drive customers to your bar, so you have to time your Happy Hour when there aren't many patrons around.
Create a loyalty program
Reward your loyal patrons with a free beer in the house if they complete 10 stamps, or a free t-shirt that says "Don't worry, BEER happy!" on their 20th visit to your bar.
Rewarding your loyal patrons will not only make them feel special, but it will also motivate other customers to build loyalty with your business, knowing that they will be rewarded.
Don’t forget to host a soft opening
A soft opening is a practice run that will help your employees practice what they learned during training with a limited number of guests before hosting your grand opening.
This will give you a general idea of what to expect, what areas of your service need more attention and prepare for what could go wrong during your grand opening. Your employees can also work with actual customers without the sudden pressure of a busy opening day.
One easy way to do this is by inviting close friends and family so you can introduce your business to them and give your employees the real-world application of everything they have learned in theory.
Bottoms up!
It may sound fun and easy, but running a bar and catering to patrons can leave you physically and mentally exhausted.
After working on your permits and licenses, securing funding, sourcing suppliers, creating an in-depth business plan, and hosting a soft opening, your dream of becoming a bar owner officially comes to life.
However, the essential steps don't end there—you have to ensure that your newly established business is well-staffed and that employees have a clear schedule of when and how long they should work on any given date.
Thanks to 7shifts, you don't have to spend hours manually creating a schedule for your staff. The best thing is that it has time-clocking software that allows you to track exactly how many hours your staff has worked. This ensures that you're paying your employees the right wages and that they're not going overtime when they don't have to.
Additionally, its ease of integration with over 86 applications, platforms, and software makes it easy to transfer your data or use other tools you may need for your bar without switching from one app to another.
All you need is this one super-tool to manage your team and grow your business.
FAQs
How do you open a bar with no money?
To open a bar with no money, you can use a restaurant incubator or shared spaces with all the kitchen facilities you need. This will give you space to practice while gaining expertise. Aside from that, you can also apply for business loans, find an investor, or start small (like a pop-up bar).
What permits do you need when starting a bar?
Some of the permits and licenses you'll need when starting a bar include a business license (from the Alcohol and Tax and Trade Bureau) and a state business license, an Employer Identification Number (EIN), a Certificate of Occupancy, food service license, liquor license, and fire department permit.
How much does it cost to start a bar?
The gap is huge, as the costs of starting a bar can range from $100,000 - $800,000.
The total cost depends on what type of bar you’re planning to open, your location (are you in the city or in rural areas), and the size of your bar as you would need to hire staff and buy equipment.
Add to this the budget you will allot for marketing, licenses, supplies, and furniture and fixtures.
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Vahag Aydinyan
Hello! I am Vahag, Content Marketing Manager at 7shifts. I am writing about content marketing, marketing trends, tips on restaurant marketing and more.