Owning a Bar: Everything You Need to Know

Opening and owning a bar is one of those unique life experiences; you have no idea what it will be like until you actually go for it. And while it can be enjoyable, rewarding, and, yes—even profitable, it also requires long hours and hard work.

In this guide, we're covering everything you need to know about owning a bar to prepare as well as you can for the big opening day.

The Pros and Cons of Starting a Bar

Pros:

• Bar's profit margins are high, especially on alcohol. Expect to make anywhere between 200% to 400% on drinks
• There are superb networking opportunities to meet people for both business and pleasure
• You're your own boss and can live and work on your terms

Cons:

• High startup costs to pay for licensing, a location, and even equipment
• Running a bar is expensive and includes rent, salaries, and various unforeseen expenses
• Long working hours are common. You'll have late nights and have to work on weekends and public holidays
• The market is saturated with loads of competition. You're not only competing against many other bars but establishments offering entertainment, food, and drink.

How to Start a Bar in 14 Steps

You understand the pros and cons of owning a bar, the costs involved, and what you can expect to make, but how exactly do you open a bar, and what are the steps? You focus on these 11 essential elements of opening a bar:

1. New Bar Options

You'll need to decide on the exact business structure. Buying into a franchise can be a good option because it provides support and brand recognition. However, it can be expensive and you may not have as much control over the business.

An alternative is to buy an existing bar that is up for sale. This could be a good choice if you find a business that is already established and has a loyal customer base. However, you will need to carefully evaluate the financials of the business to make sure it is a sound investment. You also need to be prepared to deal with any challenges that come with taking over an existing business.

2. Creating a Bar Business Plan

Want more clarity into your bar's concept? If you're thinking of starting a bar, one of the first things you'll need to do is write a business plan. This document will outline your bar's concept, menu, marketing strategy, and financial projections. It's essential to have a well-thought-out business plan before starting a new bar as it will help you secure financing, attract investors, and ensure that your business is successful.

• Your unique selling proposition
• Market need: Maybe there's a neighborhood bar in your area that doesn't offer much entertainment
• How you're solving the need: You could provide live music, pool tables, and other special events
• The competition: Think about direct (other bars) and indirect (other establishments offering entertainment) competition
• Target audience: The demographics and psychographics
• Marketing strategies: Will you have an official launch?
• Your team: Who do you need to make this work?
• Equipment: What equipment will you need?
• Bar startup costs: Create a bar startup costs spreadsheet.
• Location: Will you be in the city's center or in a remote location?
• Funding: Options include family and friends, the bank, and outside investors

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3. Get Funding (If Required) Before Starting a Bar

One way to get funding is to opt for a loan from a bank. Another option is to look into government programs that might offer financial assistance for small businesses. You might also want to find investors who are willing to put money into your business. Whatever route you decide to take, be sure to do your research and explore all your options before making a final decision.

If you opt for a loan, make sure you qualify for it before you meet a bank lender. Don't forget to consider the alternatives to opening a line of credit with your existing bank [e.g. borrowing from your 401(k) retirement plan, taking out a second mortgage on your home, taking out a home equity loan.

4. Choosing Your Concept & Bar Type

Defining your concept

Your concept is the main idea or theme and includes service style, cuisine, menu, and music. These elements need to work together to ensure your customers understand what you're about.

Perhaps you want to create a craft brewery, or maybe you'd prefer a trendy, urban winery that appeals to the yuppies? Alternatively, you could opt for a common bar type such as a neighborhood, specialty, brewpub, or sports bar. Regardless, your success will ultimately depend on your execution.

Looking for some inspiration? Here are cool and unique restaurants to ignite your creativity.

Common bar types to consider

There are many different types of bars to consider when starting a bar.

Sports bars are a popular choice, as they offer a fun and festive atmosphere for watching games and enjoying drinks with friends. Specialty bars focus on a particular type of drink or theme, such as wine bars or cigar bars, but can be much more expensive to manage.

Lounges tend to be more upscale and provide a relaxed atmosphere for enjoying cocktails and conversation. Comedy/show-based bars often feature live entertainment, making them a great choice for those looking for an enjoyable night out. When selecting a bar concept, it is important to consider the type of atmosphere you wish to create and the clientele you hope to attract.

5. Selecting Your Business Structure

There are a few different business entities you can choose from when opening a bar: sole proprietorship, partnership, or limited liability company (LLC). Each has its own set of pros and cons that you'll need to consider before making a decision.

• A sole proprietorship is the simplest and most common type of business entity. It's easy to set up and doesn't require much paperwork. However, you as the owner will be personally responsible for all debts and liabilities incurred by the business. This means your personal assets, such as your home or savings account, could be at risk if the business fails.

• A partnership is similar to a sole proprietorship in that it's easy to set up and there's not a lot of paperwork involved. However, unlike a sole proprietorship, you'll have one or more partners who will share in the profits (and losses) of the business. You'll also need to draft a partnership agreement that outlines each partner's roles and responsibilities.

• An LLC is a more complex business entity than a sole proprietorship or partnership. This type of company offers personal liability protection for its owners (known as "members"). So, if the LLC incurs any debts or liabilities, the members' personal assets will not be at risk. Setting up an LLC requires filing paperwork with your state government and drafting an operating agreement that outlines the LLC's rules and regulations.

6. Sourcing the Right Equipment

Your budget, target market, and concept will dictate your equipment needs. That being said, here is a list of the equipment a bar typically needs:

• POS system
• Bar chairs
• TVs
• Music system
• Ice bins and scoops
• Blenders
• Frozen drink machines
• Pourers
• Cocktail shakers and strainers
• Pour tops
• Speed bottles
• Glass racks
• Glasses
• Corkscrews
• Bottle openers
• Knives and forks
• Plates
• Ovens
• Fridges and freezers
• Cutting boards
• Ice buckets
• Washing racks
• Wine cooler
• Keg storage
• Beer taps
• Reach-in coolers
• Dump sinks
• Soda guns
• Champagne flutes
• Glycol system (specialized refrigeration systems often using antifreeze)

7. Finding Suppliers

When it comes to finding reputable and trustworthy suppliers for your bar business, there are a few key things to keep in mind.

It's important to do your research and read reviews from other bar owners who have used the supplier before. This will give you a good idea of their product and service. Make sure to get quotes from multiple suppliers so you can compare prices and services.

8. Choosing the Perfect Location

There are many factors to consider when choosing the perfect location for opening a bar. The first step is to decide what type of bar you want to open. Will it be a casual neighborhood bar or a more upscale establishment? Once you've decided on the type of bar, you need to find a location that meets your needs.

The size of the space is important, as you'll need enough room for customers and all of your bar's equipment. You'll also want to make sure the location is easily accessible and visible to potential customers. If your bar is in an area with high foot traffic, it's more likely to be successful than if it's hidden away on a side street.

Another important consideration is the surrounding businesses. If your bar is located near other bars and nightclubs, it can benefit from the increased foot traffic. But if there are too many other bars in the area, competition can be fierce. You'll need to decide if the location is right for your business before signing any leases or making any final decisions.

9. Hiring a Strong Team

You'll need a manager, bartenders, waiters, and security. These employees will be the first point of contact with customers, so you must ensure you have the right staff to deliver exceptional customer service.

Find these candidates by hiring slowly: Use platforms like Poached Jobs and AllBartenders.com and ask for referrals by reaching out to family, friends, business partners, and other connections in the hospitality industry.

Hiring tips

When hiring for a bar, there are certain qualities that you should look for in an employee. First and foremost, they should be passionate about the industry and have a strong knowledge of cocktails and beer. They should also be outgoing and able to socialize with customers. Finally, they should be responsible and reliable, with a strong focus on customer service.

The best way to find candidates with these qualities is to post a job ad that specifically mentions the qualities that you are looking for. You can also ask for recommendations from other bar owners or employees who may know someone who would be a good fit for your establishment.

When interviewing candidates, be sure to ask interview questions that will help you gauge their knowledge of the industry and their customer service skills. Finally, do a background check to ensure that they are responsible and reliable

Bar job description templates

Use our tried-and-tested templates depending on the role you're hiring for:

• Bartender job description
• Bar manager job description
• Server job description

10. Planning Your Menu

Here are a few bar menu design tips:

• Your food should match the concept and theme. For example, don't offer Mexican dishes if you're a Thai restaurant or bar.
• Pricing should match your target market and theme. A cocktail bar can have higher prices while a local neighborhood pub probably can't.
• Keep it simple. Menu engineer, Gregg Rapp, suggests we limit the choice of dishes to 7 or fewer items per menu category.

Your menu is more than just a list of food and drink. Bar menus, just like restaurant menus, they can be valuable tools to grow your revenue.

11. Sorting Out Paperwork and Licensing

Below is a breakdown of the licenses and documentation you'll need:

• Business license: The cost of registering your business will vary by state and includes a registration and filing fee. Expect to pay anywhere from $100 to $1,200
• Liquor license: The cost of a liquor license also varies vary by state and type of license. For example, to serve beer and cider in New York City, you'll pay $960 (plus a $100 filing fee), and a full on-premise liquor license will cost $4,352 (plus a $200 filing fee). To apply for a liquor license, consult the Alcohol Beverage Control (ABC) Agency) in your state.
• Employer Identification Number (from the IRS)
• Zoning permit from your local zoning commission (LZC)
• Sales tax permit
• Alcohol tax permit
• Food service license
• Food handler's permit from your state health commission (HC)
• Building permit from your LZC
• Sign permit from the LZC
• Health permit
• Music licenses like an ASCAP license or BMI license

12. Planning Your Bar Design

The bar design needs to fall into what the bar concept is and for operational efficiency and customer/staff flow. The size, shape, and location of the bar will dictate how well it functions.

If the bartenders have to walk too far or weave through customers to make drinks, it can impact both efficiency and customer service. If the bar is too small, it may not be able to accommodate all of the customers who want to order drinks. And if it's located in a spot that's difficult for customers to get to, they may not even bother trying. All of these factors need to be considered when designing a bar so that it can function well and provide a good experience for both bartenders and customers.

Create a floor plan by either working with an architect or using free floor planning software like Floorplanner and Gliffy.

Example of a retreat beach bar floor plan

13. Marketing Your Bar

Developing a marketing plan

You can have the best concept, but customers won't come if they don't know you exist. It's worth thinking about your bar and restaurant marketing. A marketing plan helps you figure out your target audience, what kind of marketing campaigns will work best to reach them, and how much you should budget for marketing. Without a plan, it's easy to spend too much or too little on marketing, and to waste time and money on campaigns that don't work. Find out how to develop the perfect marketing plan.

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Branding and choosing a name for your bar business

The first step in choosing a name is to decide on a theme for your bar. If you're going with a more traditional Irish pub setup, then a name like O'Connor's or The Mighty Ploughboy would be appropriate. Deciding on your theme early on can help you find the best name possible—for example, if you're going with an Irish theme and the name of one of your founders is Connor, then "Connor and O'Caoimhe's" might work nicely for you.

Launch and opening plan

It's finally here: the big day when you'll officially open your bar. Whether it's a new business venture or a remodel, you want to make sure you're ready for your first customers and that everything goes smoothly from start to finish. When creating your opening plan, think of this as one of the most important days in your entire business, so make sure to put plenty of time and effort into making it go well.

Here's some more steps to help you create a successful bar opening plan:

• Print off a copy of the menu and decorate it in the style of an old-timey newspaper.
• Make sure there is enough seating for everyone who's coming, including staff.
• Bring all of your staff up to speed on what they're doing on opening night by having them walk through their roles.
• Start setting up hours before your opening—you'll need plenty of time to get everything ready!
• End with a launch party!

Continuous marketing

Continuous marketing is one of the most important things to understand. It's easy to focus on getting customers through the door with advertisements and discounts, but if you're not working on keeping them there—and bringing new ones back—then your business could be at risk.

Here are some marketing strategies to consider:

Social media

There are several ways that social media marketing can be used to promote your business from launch day onwards. You can use Facebook and Instagram to post updates about new products, showcase events you're hosting, or give coupons for people to try out new items on the menu.

People love coupons because they allow them to try something they might not have otherwise tried. You can also create social media pages specific to your bar and link them together so people can see all of the things that you are promoting—this way they won't miss anything!

Google/Website marketing

You have all the things that are required of you to make the bar look appealing. You've got affordable booze or outstanding recipes, but still no customers.

So what do you do? Do you put up huge neon signs saying "Come in, we're cheap and good"? No! That's not how it works. That just draws in a bunch of drunks and rowdy customers.

The best way to get people in your bar is by using website marketing and SEO. This way you can reach out to people who are interested in your bar but don't know it exists yet. Learn how to add your restaurant to Google Maps.

Email marketing

You can use email marketing to entice people to come in and try something new. Alternatively, you can get customers that usually come in once or twice a week to show up at least three times a week. This will help your business stay afloat while also keeping your customers happy.

If you're still not sure about this whole email marketing scheme, here's how it works: every month, send out an email with a coupon for any appetizer from your bar on any night of the week. The next month, send out another email with a coupon for any appetizer from your bar on Friday nights only. Months later, send another email with a coupon for $3 off any drink on Monday nights only. Then start the cycle over again with the first type of coupon.

Other ways to market your bar:

• Create a loyalty program from day one
• Write press releases you can publish in your local newsletter
• Introduce happy hour promotions
• Use social media: Create a unique hashtag for special events and encourage customers to share your posts by offering perks likes discounts and free drinks.

Recommended Reading: 22 Advertising Ideas Driving Guests To Tables

14. Investing in the Right Tools for a Smooth Operation

Finally, you need systems and procedures that provide structure for employees and your operation. These will include systems and processes for:

• Opening and closing
• Communication software
• Employee scheduling software
• Tip Pooling
• Task Management
• Order processing
• Inventory management

Economics & Costs to Open and Run a Bar

Costs of Starting a Bar Business

High startup costs are a significant hurdle of opening a bar and vary depending on several factors:

• The type of bar. Buying an existing neighborhood bar will cost less than purchasing a brewpub which requires expensive equipment
• The size. Larger bars are generally more expensive as you need more staff and equipment
• Location. Buying and renting property is more expensive in certain areas.
• Business and liquor license costs. These costs vary widely by state. The cost of a liquor license in Alabama, for example, will be anywhere from $300 to $1,000, whereas in Wyoming expect to pay $1,500 to $10,500. The average, according to ContractsCounsel, is approximately $3,000.

Below is a cost range for opening a bar depending on whether you're renting or leasing, creating a bar from scratch (buying a location and paying a mortgage), or purchasing an existing bar.

• Renting or leasing: $110,000 to $550,000
• Creating a bar from scratch: $175,000 to $850,000
• Purchasing an existing bar: $25,000

The Operating Costs of Running a Bar

Expect to pay an average of $24,200 per month to run a bar. These costs will include your monthly alcohol and food purchases (roughly $2,500-6,000/month), salaries and wages (at an average of $16.35/hour), rent, and various miscellaneous expenses.

Funding bar opening costs

There are many ways to get funding for starting a bar. One way is to take out a loan from a bank or other financial institution. Another way is to raise money from investors. Finally, you could use your own personal savings to finance the startup costs of your bar.

The process of taking out a loan to open a bar may involve completing a loan application and providing financial information such as business revenue and expenses, as well as personal financial information. The bank may also require collateral, such as a lien on the property where the bar will be located.

Using investors or your own money will generally be the route to take for funding a bar, since banks may be hesitant to loan money without any business or income history to review. To raise money from investors to open a bar, you will need to create a business plan and pitch deck that outlines your concept, target market, and financial projections. We'll cover all of this later in this article.

How Much You Can Expect to Earn?

Binwise estimates suggest the revenue of the average bar is between $25,000 to $30,000 per month. These estimates are based on certain assumptions: An average price of $8 for drinks, $6 for appetizers, and $13 for mains.

Your profits will depend on how well you run your bar and manage your operating costs. However, assuming your monthly operational costs are $20,000 and your revenue between $20,000 to $30,000, you will pocket anywhere from $5,000 to $10,000 per month.

How Do I Run a Profitable Bar?

Focusing on the previous 11 elements will undoubtedly help you run a profitable bar from the start. However here are 7 tips to ensure your remain profitable.

1. Maintain a Firm Handle on Your Finances

You need to track financials to assess your financial health and make better business decisions. Important financial reports include:

• Food and beverage sales report: You should generate this report daily, weekly, and monthly
• Prime cost report: Prime costs are the total cost of goods sold (food and liquor) plus labor costs
• Inventory reports: Run these reports weekly to keep track of your inventory (alcohol is an exception—run reports daily)
• Cash flow statement: This report identifies cash inflows and outflows for a certain period.
• Profit and loss statement: Profit (or loss) is calculated by subtracting expenses from revenue

Recommended Download: Free Profit and Loss Statement Template

2. Keep Your Bar Stocked

Ensure your bar is stocked so you can move sufficient volumes. What you stock will depend mainly on your target market and sales volumes. For example, if a particular beer is popular make sure you have enough of that item to meet the demand.

3. Measure Pouring

Overpouring means you're throwing money down the drain which impacts your revenue and profits. Use measured pourers for accurate pours and train bartenders to use jiggers for a consistent cocktail each time.

4. Optimize Your Menu for Profits

Update and optimize your menu over time. For example, track the sales of menu items to see which dishes are the most profitable and place these items in the Golden Triangle.

The Golden Triangle is the center block of any three-column menu. This high-rent area is where customers' eyes naturally gravitate to first.

5. Run Promotions: Happy Hour and Special Events

Consider introducing happy hour where you offer drinks and meals for discounted prices. The idea is simple: Lure customers into your bar with specials, and they'll likely purchase something else when they're there.

You can also host events like bingo or have a quiz night. These events usually run over a long period, so customers invariably buy more drinks and food during this time.

6. Train Staff to Deliver Exceptional Customer Service

Train staff, so they feel empowered to do their jobs properly and treat them well, so they want to stay. This treatment goes beyond the paycheck. Stand up for them when customers are rude and show them empathy and respect.

Training and treating your staff well will ensure they deliver stellar customer service. Your customers, in turn, will be more inclined to return and recommend you to others.

7. Invest in the Right Employee Team Management Tool

Earlier, we mentioned the importance of investing in the right tools and systems for a smooth operation. Woodwork Restaurant learned the importance of these systems the hard way. In the early days:

• The owner, Ryder, used Excel to create schedules before transferring the information over to Google Calendar.
• All employee requests and shift trades were handled on the fly, which meant that Ryder was always heavily involved.
• Ryder would have to go in and check availability in spreadsheets to determine if he could give an employee the day off. The whole process was time-consuming and labor intensive.

Ryder knew things had to change and after testing 6 different software products, he eventually chose 7shifts bar employee team management software. With 7shifts, Ryder was able to improve processes, while saving time and money. He was able to:

1. Better manage staff requests for time off and optimize his labor operations..
2. Improve employee retention by leaving all service staff on the schedule despite individuals' schedules being complicated and dynamic. The results? The staff could pick up a shift here and there, and Woodwork only had to hire 1 to 2 extra service staff a year.
3. Stay connected with his staff through 7shifts' built-in communication tools.

“All I needed to do was move a shift here, move a shift there. It's completely pain-free. So easy." - Ryder Prat, General Manager, Woodwork

Here's the Bottom Line

Opening, operating, and owning a bar can be exciting. You can be your own boss, network with others, and make a pretty penny. However, bar ownership is not for everyone—the long work hours, high startup costs and already saturated market mean opening and running a bar can be a considerable challenge.

The good news? If you decide to become a bar owner, you now know how to get started and run a profitable business. You have an “opening a bar” checklist with 14 critical elements of starting a bar and understand what's needed to run a profitable bar, thanks to the elements shared here.

The only remaining question is: Are you ready to become a bar owner?

Frequently Asked Questions

How profitable is a bar?

Quite simply: it depends. There are so many factors that go into answering this question, such as location, sales volume, customer base, cost of goods sold, and labor costs (just to name a few). If you're renting space for your bar or club, for example, you'll want to consider the cost of rent (or mortgage) itself as well as any additional expenses that come along with the lease. Restaurant utilities alone can cost hundreds per month if your space is large enough.

How to start a bar business with no money?

The good news is that bars are one of the cheapest types of businesses to start. However, think of other costs that you might not even realize are associated with running a business. For example, do you have to buy insurance? If so, how much would that be and how often would it have to be paid? What about a lease on the location of your business? Do you have to pay for utilities or other services? There will be some costs involved.

Is owning a bar stressful?

Owning a bar can be stressful if you have a lot of customers and you don't have enough staff to serve them all. You also need to make sure that your prices are competitive with the other bars in your area. The most stressful thing about owning a bar is hiring the right staff. If you hire the wrong person, it can lead to problems with customer service or even worse, someone getting injured on the job.