- Startup costs: $149,000- $436,500
- Industry trend: Growing
- Difficulty: Moderate
- Profitability: 10-15%
- Time to build: 9-12 months
- Commitment: Full-time
Love the spirit of social interactions, lively places, and a little booze to enlighten the mood?
Well, it’s time to nurture that entrepreneurial spirit and consider starting a bar for your business venture.
Now, you might have a rough idea about how to open a bar. But, nothing concrete enough to venture in the right direction.
Well, this step-by-step guide is articulated to perfection to bring clarity to all your vague ideas. It will guide you precisely as to how and where to place the right foot to mark the beginning of a successful bar venture.
Maybe pop yourself a glass of beer and get started.
How much money do you need to start a bar business?
The cost of starting a bar in the US costs anywhere between $149,000- $436,500 and more. These costs are highly influenced by factors such as location, size, concept, and compliance requirements.
How much profit does a bar make on average?
The gross profit margins for a bar span anywhere around 70-80%. This is extremely lucrative compared to other businesses in different industries.
Bars have a high markup of up to 500% on their alcohol offerings, making it an extremely profitable venture. However, the margins do vary depending on the type, concept, and size of your bar.
As a small business owner of a bar, you are in for a good, profitable ride after establishing a strong foothold in the market. Let’s dive further into the market by analyzing the pros and cons of starting a bar.
Pros and Cons of Opening a Bar
Starting a bar is indeed a profitable venture for any business owner. However, like every business, it has its own set of pros and cons:
- Profit margins: Lucrative profit margins compared to other businesses.
- Recurring revenue: Regular loyal customers build profits for you.
- Exciting environment: Thriving fun environment buzzing with people and networking opportunities.
- High startup cost: The costs for licenses, equipment, rent, and renovations can soar high.
- Compliance: Moderately regulated industry with licensing and safety compliances.
- Competition: Extremely competitive marketplace with saturated players.
Wondering how to open a bar? Let’s unravel a step-by-step guide to set up your bar.
How to Open a Bar Business: The Ultimate Checklist
From determining the right bar type to undertaking appropriate market research to marketing the bar- let’s unravel detailed steps to open a bar.
1. Determine the Right Bar Type
The first step towards starting your own bar business is to determine the right type of bar for your unique idea. The decision you make here will largely influence the startup costs, target market, profit margins, and compliance requirements of your business.
Here are a few different types of bars you can choose from:
- Sports bar
- Specialty bar, i.e. wine bar, cigarette bar, tiki bar, etc.
- Neighborhood bar
- Beer bar
- Nightclub, pub, or tavern
- Cocktail bar
Consider your investment and budgeting needs before selecting a bar type. For instance, starting a nightclub is extremely specific compared to a brew pub brewing its own craft beers.
Don’t try to be everything to everyone. Focus on a particular bar type and carve your niche in it.
2. Choose a Bar Concept and Brand
The most exciting part about opening your own bar is getting to work on its unique concept and branding.
Here are a few questions answering which can help you finalize your bar concept:
- What type of tone do you want your bar to set? i.e. casual, sophisticated, rustic, vibrant, loud.
- What type of music will be played at your bar?
- What type of service style will the bar offer?
- What will be the ambiance of your bar?
- Will the decor be upscaled luxurious or rustic cozy?
- Will you serve an extensive food menu to cater to your guests?
For instance, you can set up a small neighborhood bar hosting low-key karaoke nights for people in the local community to unwind or a sophisticated wine bar for wine enthusiasts.
It’s always the tiniest details, from decor to serving style and customer experience that add up to make a successful bar.
How a customer feels when they enter your bar will largely affect the success of your business. So spend a good amount of time brainstorming the ideas for your bar outlook.
Also, clearly define the value proposition of your bar business and ensure that you deliver a consistent message through every activity, henceforth.
3. Choose a Name for Your Bar
The bar name will be your identity by which the people will remember you. Consider it as a starting point of branding that will subtly and largely influence your business in the bar industry.
Now brainstorm some ideas for your bar name. Ideally, it should match the concept and theme of your bar to make it easily recognizable and recallable.
Keep it short and simple but something really catchy. Adding jargon, slang or complex words isn’t a good idea.
Also, the name should be unique for registration and marketing purposes. If you wish to open a bar from some other name, register a doing business as a (DBA) name as well.
Don’t cancel any idea right from the beginning. Be open and let the creative juices flow in as you brainstorm the banger name.
Take suggestions from experts and your close ones before finalizing a name.
Want a Unique Name for your Bar?
Generate a brandable and catchy business name in seconds with our free business name generator for bars.
4. Find the Right Location for Your Bar
Your dream bar needs an address and this address needs to be near your target market for them to have easy access.
Ideally, start sourcing for your perfect location as soon as you plan to open a bar. It will take months before you find a location that’s strategically right for your bar.
Begin by identifying the space requirement for your bar concept. Generally, 1000-1500 sq. ft. is an ideal spacing for neighborhood bars and taverns. However, if you are planning a sports bar or nightclub, sizing between 2000-5000 sq. ft. and more should remain ideal.
Also, keep in mind your monthly rental budget to shortlist the areas suitable for your bar. However, budget shouldn’t be the only parameter. You need a place that resonates with your bar’s concept and target audience.
For instance, an upscale tavern cannot be placed in an outskirt. It needs a perfect location in a posh locality where the customers can visit easily on regular weekdays.
Lastly, keep in mind the local regulations regarding bars in your region. There may be certain restrictions in regards to where can you not open a bar.
Many bar owners argue that location is not that important in dictating the success of the bar. With the right approach and marketing technique, even the basement bars in hidden alleys can be a huge success.
Well, whichever school of thought you believe in, ensure that you finalize the location as soon as possible.
5. Write a Bar Business Plan
Yes, you do need a business plan to establish a fundamentally strong foundation for your bar business. A bar business plan is like a GPS that will drive your bar to its desired destination.
Now, if you are planning to acquire funding from investors or a loan from a bank, a business plan will indicate your preparedness to start a business. It will show the investors that you have undertaken essential market research and analysis to withstand the competitive bar market.
Want to know what a comprehensive and thorough business plan looks like? Well, here are the key components that a detailed plan includes:
- Executive summary
- Business Overview
- Industry and market analysis
- Bar menu
- Bar design
- Operations plan
- Marketing and Sales plan
- Key management team
- Financial plan
As a bar owner, no one knows your business better than you. So get to the work and write a solid business plan that is an exact but refined reflection of your business idea using a bar business plan template.
6. Design a Bar Layout
How will your bar look and feel?
After finalizing the location, you need an expert who can help bring together your conceptualized ideas into reality.
Get the floor map of your bar ready. Ensure the layout establishes a flow of operations and movement in the bar.
If you are planning to serve food, you might need a kitchen area to undertake the food preparation process. In such a scenario, consider the space and electrical requirements of back-of-the-house as well.
Coming to the visual aspects, you need all the decor elements to come together to create a cohesive welcoming atmosphere. The ambience as we say, must embrace the visitor with a warm welcome as soon as they step in.
Create a Pinterest board and sit with the designer to discuss your ideas. Tell them about your vision and ask them to provide mock-ups of different design samples.
Remember the budget as the decor and renovation expenses can quickly roll up.
Purchasing an existing bar might prove extremely beneficial at this point. Also, talk to some bar owners in your neighborhood and gather their perspectives on design and ambiance.
7. Design Your Menu
A great ambiance can get your target market to your doorstep. But if they don’t like what’s on the menu, they are likely to never return back.
You might have a rough idea regarding what you want to serve. Now, it’s time to elaborate on that idea and seal it.
Decide your core offerings considering your bar concept. For instance, craft beer for a beer bar, a variety of spirits and alcoholic beverages for a cocktail bar, wine for a wine bar, and food and drinks for a sports bar.
Also, choose what snack will you be serving alongside. Will you make those snacks in-house or outsource them from some vendor? This will influence the kitchen and bar equipment you will require.
Check out the menu from competing bars and talk to those bar owners to understand what’s actually working. And lastly, get an expert on board to help you engineer a profitable and viable menu.
8. Secure Funding for Your Bar
You aspire to be a bar owner. But do you have enough funds to start your own bar?
Setting up a bar business is quite expensive. From lease rental expenses to renovation and licensing costs, you need pretty hefty savings to fund your own bar.
Evaluate the initial investment needs of your business by assessing the startup costs and the operating costs for the first few months. Depending on your needs, you can choose one of these funding sources:
- Bank Loans: Bank loans are easy to acquire against mortgages. However, if you are planning a large amount, you may want to consider other options.
- SBA Loans: Perfect for small business owners, SBA-guaranteed loans can be availed by following certain formalities. However, qualifying for these loans is a bit of a challenge.
- Investors: An investor may find it hard to resist a brilliant bar idea. For a certain stake in equity, they can fulfill your capital requirements.
- Venture Capitals: VC firms can review the feasibility of your new bar business and can be a great sourcing fund when you plan to scale.
- Friends and family
Review the pros and cons of each funding source before taking a grant from anyone. Ideally, for a small amount friends and family help should suffice.
9. Register Your Bar
It’s now time to give legal identity to your new bar business. This is essential to avoid any hassles and legal complications in the future.
Hire a specialist to look after registration or follow these 2 steps to complete registration on your own.
Select a business entity
A business structure is essential to legally register your business. The entity or business structure you select will dictate your ownership, taxes, liabilities, and funding options.
Here are a few business entities you can choose for your business in the bar industry:
- Sole proprietorship
- Limited Liability Company (LLC)
- Corporation or S.Corp
LLC is usually the most preferred form of bar ownership that will help you secure your personal assets from business liability. However, assess the pros and cons of selecting different entities before registering your business with the state.
Apply for tax registration & business EIN
Identify the tax regulations for your bar business and apply for tax registration. Also, get your EIN (Employer Identification Number) from an IRS (Internal Revenue System) portal.
EIN is your unique security code that will allow you to apply for bank accounts, and credit cards, and fill out tax forms.
10. Obtain Business Licenses and Permits
Now, determine the licensing requirements for your bar business to make it legally compliant. Acquire these licenses before you open a bar to avoid legal charges and penalties.
The licensing requirements may vary from state to state depending on your bar’s concept. However, here are a few common business licenses you must consider getting before opening a bar:
- Food service license: If you plan on serving food to your customers, a food service license is a must. The cost of licensing may vary depending on the size of the menu and the equipment you will use.
- Liquor license: A liquor license is essential to sell alcoholic beverages to your potential customers. Now, the type of liquor license you require may vary depending on your service style, alcoholic beverage offerings, and the state of operation. Get a professional to help you analyze the requirements.
- Entertainment license: Are you planning to host karaoke nights, musical evenings, or movie evenings at your new bar? If so, get yourself an entertainment license.
- Outdoor seating permit: Bar owners planning to open a bar with an outdoor seating concept must get this permit. It will allow you to serve your customers in outdoor areas.
- Occupancy permit: A building code permit specifying the number of people that can sit in the bar at a time.
Now, hire an expert business attorney who can look after documentation and get you essential licenses.
11. Get Business Insurance
After acquiring the essential liquor license and permits, it is now time for insurance.
Bar businesses are susceptible to a variety of risks and liabilities. An appropriate insurance cover is essential to safeguard your assets and business in case of unexpected events.
Wondering what type of insurance should you get for your own bar?
- General liability insurance: Get general protection against property damage, bodily injuries, and personal accidents. If there is one insurance you must get before you open a bar, this is it.
- Liquor liability insurance: Offers coverage against damage caused by intoxicated customers to property and other customers.
- Property protection insurance: Offers protection against the damage caused to property in case of fire, theft, or natural calamities.
- Workers compensation insurance: Mandatory for bars that employ people on a full-time basis. This insurance offers compensation to cover employees’ medical expenses and sick leaves.
The premium amount might seem overwhelming in the beginning. However, it is advisable to get insurance for every possible business area to get all-round coverage and protection.
12. Find a Liquor Suppliers
After acquiring essential licenses and permits to serve alcohol, it’s now time to explore potential vendors and suppliers for your bar.
Firstly, identify the type of spirits, beers, and wines required for your bar. The need for your bar depends on your concept. For instance, good quality craft beers will attract customers in a brewpub while spirits make a good fit for taverns and clubs.
Now, start looking for local vendors sourcing high-quality authentic products. Explore their brand offerings, payment terms, pricing, delivery timeline, and minimum purchasing requirements to finalize your top vendors.
It’s important to focus on quality and original products instead of pricing entirely. So look out for vendors that promise to maintain cordial business relations for a long time.
13. Purchase Necessary Equipment and Supplies
You need a variety of technologies, tools, and bar equipment to deliver exceptional customer service at your bar.
First and foremost, invest in a reliable POS system that streamlines order management, reservations, payments, and other operations of your bar. Identify the best POS systems in the market and make an investment in a multi-functional technology.
Moving forward, assess the condition of used equipment and tools if you are purchasing an already existing bar. Create a checklist and identify what your bar requires to operate optimally.
- Bar tools: Muddlers, Jigglers, cocktail shakers, strainers, stirrers, etc.
- Glassware: Brandy snifters, wine glasses, beer pints, shot glasses, mixing glasses, etc.
- Refrigeration: Bottle coolers, ice machines, refrigerators, etc.
- Electrical equipment: Bar mixers, blenders, glass washers, ovens, microwaves, etc.
Keep in mind your bar’s concept and needs before purchasing the equipment. For instance, sports bars require LED screens, speakers, and other equipment to host sports-watching nights.
Lastly, visit the nearby established bar and assess their inventory to get a proper understanding of the required equipment.
14. Hire Bartenders and Staff
It is now a perfect time to start assembling your bar team. As a bar owner, you need to figure out what type of skilled professionals you need to hire and how many.
The number of employees required varies for different bar concepts. For instance, sports bars require more employees than neighborhood bars or specialty bars.
To manage the bar perfectly, you may hire for the following positions:
- Bar manager
Train these employees in their roles and help them understand the company culture. After all, only a well-coordinated team can work towards delivering excellent customer service.
15. Pre-launch and Marketing Plan
All these strategic troubles up until now were to ensure that you set up a profitable bar business. Now that you are almost there, you want people to know about this beautiful bar of yours. And that’s where marketing comes in.
Ideally, you should start marketing much before actually opening a bar. Start by creating a healthy buzz for your bar using a tried-and-tested mix of marketing strategies.
Wondering what type of marketing strategies should you try for your bar? Let’s check that out:
- Place signboards: Place the signboards outside your bar even when it’s under construction. This will capture the attention of passersby and create awareness about your existence.
- Social Media: Create a considerable social media base of fan following for your bar by posting fun and engaging content regularly.
- Website: You need a web presence to succeed and a website is one important way of achieving recognition. Develop your site, publish your menu, and keep it interactive by updating the latest events and happenings.
- Influencer marketing: Connect with prominent influencers from the bar and restaurant industry and strike a deal with them to promote your bar amongst their audience.
- Yelp and GMB: Gather as many reviews as you can on Yelp and Google My Business. Customer testimonials work better than your salesperson in winning your audience’s trust.
- Host events: Bring together your local community for fun events like karaoke nights, ping pong games, musical performances, or art evenings.
- Happy hours: Encourage people to visit you at odd hours by offering happy hour deals. After all, who wouldn’t love a discount on alcoholic beverages?
- Launch special deals: Announce special deals and coupon discounts on sites like Groupon.
Now, fix a budget for different marketing activities and test different methods to see what works for you. The initial investment in marketing can soar high, however, if marketed properly, your bar is likely to succeed amongst the right people.
Keep in mind that, marketing will only drive your potential customers to you. It’s upon you to retain them and turn them into repeat customers.
16. Host a Soft Opening
All set? Before you announce the grand opening of your bar, how about a thought for a soft opening? It is like a practice run for your staff to host limited people in controlled settings before the actual grand opening.
Invite your friends, influencers, or family members for a special pre-launch event. Scrutinize the operations, and serving style and collect first-hand reviews from your close ones to make necessary last-minute changes.
Now go ahead and announce the grand opening night of your dream bar.
Kudos!! You now have an innate understanding of everything that is essential to open your own bar.
Let’s take the first step and write a stellar plan for your bar business. Writing a business plan will ensure that there remains no oversight in the planning and execution of your bar idea.
Download our sample bar business plan and use it as a reference point to write your bar plan.