Today, bars are one of the most profitable businesses a person can own. Not only that, but they're a fun business model with many opportunities to make it unique. However, much more goes into opening a bar than meets the eye.
You'll need to write a business plan, decide what type of bar you want to open, complete a competitive analysis, choose a location, and get a wholesale license. More than this, you’ll need to start thinking about your desired bar layout, and craft a bar supplies list.
Knowingly, the process becomes overwhelming and time-consuming, especially if you don't know where to start. So, if you're looking to learn how to open a bar, keep reading to learn tips, tricks, and what you need to get started.
What Is a Bar?
Just about everyone knows what a bar is. However, when thinking of bars, it wouldn't be surprising if everyone has different visions of what that looks like. Some may think of nightclubs, while other people may think of a pub or sports bar.
When you're looking into how to open a bar, make sure that you identify what type of bar you want to open. Here are some of the most common types of bars:
- Neighborhood bars
- Sports bars
- Specialty bars
Neighborhood bars are typically the most common type of bar you'll find. They are small, quaint establishments packed with locals. The neighborhood bar atmosphere is friendly, and it's not uncommon for you to begin to recognize regular customers.
Startup costs for a neighborhood bar depend on the location and business license you choose (beer and wine only or all liquor). One advantage of opening a neighborhood bar is that you can easily expand and multiply across different locations.
Compared to neighborhood bars, sports bars typically offer different options. Starting with the restaurant menus, a sports bar offers anything from pizza to sandwiches and a comprehensive appetizer list. As sports bars are meant to cater to large crowds, it would be unusual to find one that doesn't offer food options.
Opening a sports bar does come with extra costs, however. You'll have to purchase items like TVs, quality audio equipment, and a satellite. A sports bar's main purpose is to allow people to come together and watch sports games.
As an added bonus, you can even include games inside your bar to keep the crowds entertained. Sports bars do tend to make large amounts of revenue, but this depends on the location and size of the bar.
Beer bars–often referred to as pubs–are similar to sports bars in that they offer a menu with various food and snack options. At a pub, you'll also find specialty draft beers and other popular beer brands to select from. Another benefit of pubs is that you have the sole ability to control your beer price and the amount you serve.
Generally speaking, the cost of getting a liquor license is cheaper for a pub too. While you might think serving beer only will result in fewer customers, the opposite is true. Young adults and men drink beer far more often than other alcoholic beverages, so you'll never worry about having customers.
Even though there are many benefits to opening a pub, there is one downfall. The cost of opening a pub tends to be high. The initial investment is where the high costs come in, but if you produce and sell popular beers you can pay off the investment that much faster. As always, the size and location of your pub will have an influence on your revenue.
Specialty bars focus on certain themes (cigars), or specialty drinks (wine, martinis). Even so, specialty bars still offer a wide range of products. For instance, at a martini bar, you'll still find a range of martini-based cocktails and mixes.
Costs for starting a specialty bar depend on the types of drinks you offer as well as the location. As best practice, when looking to start a specialty bar you need to conduct extensive research to ensure that the theme you're going for has a significant customer base.
Clubs are the most popular option when it comes to opening a bar. Clubs vary in size--ranging from large dance clubs to small lounges. Regardless of the size, clubs take a lot of work to get started and are a large investment.
If you want to open a club be prepared to market 24/7. Club revenue heavily depends on creating buzz and being trendy. Without that, you won't see much success.
Now that you understand what a bar is and the different kinds of bars there are, it's up to you to decide the concept for your bar. Once you've made a decision, stick with it. This way, you have a clear vision, and you can begin to market and spread the word.
From there, you'll complete a competitive analysis to see where the competition is falling short or doing well.
How to Create a Business Plan for Your Bar
Business plans are a vital part of any startup. They serve as a guideline to help you stay focused on important tasks and outline your next steps. When you're crafting a business plan there are a few tips you'll want to follow to ensure it's as comprehensive as possible.
Those tips include:
- Outlining your concept in as much detail as possible
- Include profit and loss analysis to help you envision potential profitability
- Highlight the benefits your bar will bring to the region
- Include a detailed overview of your staff structure and salary expectations
- Outline any potential risks
While this may seem like a lot, including these details gives you an overview of what you're going to do and how you're going to do it.
Analyze Your Competition
When learning how to open a bar and craft your business plan, you'll need to complete a competitive analysis. You can do this in many ways.
Lots of aspiring bar owners like to visit bars in their area to scope out potential obstacles, including:
- The number of visitors (especially on Monday, Tuesday, and Wednesday). Historically, these three days are low traffic days for most pars and pubs.
- Buying habits of the competitor's customers
- Menu items that customers like and dislike at existing bars
Don't be afraid to talk to bar owners, too! Surprisingly, most bar owners are open to talking about their business and providing you with tips.
On the other hand, you can use proven business tools (like SEO terms and keywords) to aid you in the research process. Either way, once you complete your research you should be left with an idea of who your target customers are, their ages, and their interests.
What Paperwork Do You Need to Open a Bar?
Once all other entities are in place, it's time to handle the most dreadful aspect of becoming a bar owner--getting licenses and paperwork. The alcohol industry is heavily regulated. As such, there are mounds of paperwork you'll need to handle before officially opening your doors.
First, you'll need to obtain an alcohol license from the Alcohol and Tobacco Trade and Tax Bureau, or TTB. This is the business entity responsible for regulating and enforcing alcohol production laws. In addition, TTB regulates wholesale alcohol sales and manufacturing.
If you planned on opening your bar soon, then you'll need this license yesterday. It takes anywhere from six to 12 months to complete this process. Why? Well, that's because TTB has to inspect your business and conduct necessary background checks on all owners and operators.
After this is complete, you'll then get your state liquor license (state and local level). Don't forget to get your food handler’s permit too. This applies not just to you but to anyone who'll be working for you.
Once all is said and done, it's up to you to keep all licenses up to date. It's no surprise that alcohol businesses are frequently inspected because the government has to ensure no illegal alcohol sales or distribution is taking place.
How to Find Suppliers for Your Bar
Satisfying patrons can either make or break your business. That’s why finding good suppliers for your bar is an absolute must.
When you begin the search for suppliers, we suggest making valuable connections with neighborhood bar owners. Often times they're able to connect you to their go-to vendors. It's also a good idea to make a comprehensive list of the supplies you need and want and then create a budget for these products.
Now, it's time to begin shopping. Many suppliers sell online, so don't forget to check what's available. Online suppliers often have discounts--however, not all online suppliers can be trusted.
Here are some things to consider before choosing an online supplier:
- How long they've been in business
- Their references and reviews
- Their minimum order quantity (MOQ), lead time, and order processing methods
- Payment options, payment processing companies, and terms (many online wholesalers require a minimum purchase amount)
- Customer service and assurance process
- Whether they’re listed in a wholesale directory that’s compatible with your hospitality software or hospitality procurement software
Keep in mind that any supplier you choose should be willing to work with you without issue and understand your specific needs. If you have a bad experience with a vendor, cut ties and look elsewhere.
The Bottom Line
Learning how to open a bar can be daunting, but over time it gets easier. You'll experience many long days and nights, but in the end, the results are rewarding.
Once you've completed your paperwork and obtained your licensing, the process becomes much easier. Coming in with a clear vision and dedication is key to making your bar a success.
After all, customers love to see bar owners that truly care about the needs of customers and the success of their bar. Once you've built a reputation you'll begin to reap the benefits of word-of-mouth marketing--the best way to promote your bar.
Frequently Asked Questions About How to Open a Bar
How Do I Open My First Bar?
You can open your first bar by doing the following:
- Create a business plan
- Form a business entity
- Secure a location
- Secure funding
- Register and apply for a permit with the alcohol and tobacco tax and trade bureau
- Obtain an alcohol license
- Obtain other licenses and permits
How Much Does It Cost to Open a Bar?
You can estimate that it'll cost anywhere from $100,000 to $850,000 to open a bar. As with any business, the startup costs are going to be your first hurdle when looking to open a bar.
Is Owning a Bar Profitable?
Bars are one of the most profitable businesses you can own. Generally speaking, profit margins are high when it comes to alcohol and if done right, you can expect to make anywhere from 200 to 400% on drinks alone.