How to Open a Bar
Opening a bar is a dream for many entrepreneurs, sports fans, and let’s be honest, just about anyone who loves a stiff beverage. Still, for every one successful bar, there are many other failed attempts. Just as opening a restaurant can be challenging, opening a bar successfully will come with immense responsibility, planning, and creativity. In learning how to open a bar, we’ll examine the history, costs, and details that you need to get started. Cheers!
The History of Bars
Bars, also known as saloons or taverns, have been around for quite some time. The earliest forms of drinking date back to 2700 BC mostly consisting of wine and mead. From there, drinking became more of a social event with the earliest establishments coming from Ancient Rome and Greece. These locations were meant to serve travelers making their way through the region in the 8th century.
Some of the oldest bars include Sean’s Bar established in 900 AD located in Ireland, The Bingley Arms established in 953 AD located in England, and Ye Olde Trip to Jerusalem established in 1189 AD located in England.
FAQ: How to Open a Bar
As our history has illustrated, bars have been a cultural mainstay around the globe for nearly as long as civilizations have thrived. Before we get into the particulars in learning how to open a bar, let’s examine a few of the basic questions any prospective restaurateur might have.
When planning to open a bar, you might be wondering how much it’s going to cost. While there is no exact number that you can place on the construction and inception of your dream bar, there are a few guidelines that can help you budget for your new pursuit. After all expenses and considerations, the startup costs to open a bar for a new construction location can amount to anywhere from $175,000 to over $1 million. If you plan on leasing space for your operation, these numbers can be lowered to anywhere from $100,000 to $500,000.
Are You Building or Leasing Space?
As with any establishment, one of the most expensive components will be the cost of the space you will operate in. If you plan to lease a space for your bar, this will require much less capital upfront, but you will lose the ability to gain equity in your space and there might be some limitations on your design options and layout.
How Long Does it Take to Open a Bar?
Just as you can’t build a restaurant overnight, opening a bar will also take some time. Depending on the type and size of your bar, it’s wise to give your bar 6 months to over 1 year to fully open. The length of time it takes to open your bar varies widely based on numerous factors. For example, if you choose to lease your space instead of constructing a building – this can cut down on time spent opening your bar. If you are planning to open a smaller bar or a franchise, this number can be lowered to closer to 6 months. In the weeks leading up to your grand opening, check your operations again to ensure everything is in place.
How Much Money Do Bars Make?
Owning a successful bar can bring a lifetime of income for yourself and your family. Profit margins vary, with some averages claiming that a well-operated bar can make anywhere from $25,000 to $30,000 per week in revenue. Since alcohol provides extremely attractive margins, it’s possible to profit over $1 million annually from your business for a popular, established bar. These numbers can be dramatically lowered to less than $100,000 annually for new, unestablished bars.
Step by Step Guide on How to Open a Bar
Learning how to open a bar requires significant planning. Below are some steps to follow to enable the successful launch of your bar.
Pen to Paper
The first step in your journey to how to open a bar is conceptualizing what type of establishment you want to operate and getting your ideas organized. Whether your bar is a neighborhood bar, sports bar, beer bar, or specialty bar, each type of establishment has certain characteristics that give it a unique atmosphere and environment. For example, most sports bars will be equipped with large televisions featuring a variety of sporting events for fans to observe. You’ll likely find the bar outfitted with patrons wearing casual attire and perhaps their favorite team’s jersey.
On the other hand, a specialty bar might consist of a more formal environment featuring high-end alcohols and spirits as well as more luxurious seating arrangements. Knowing what type of bar you want to open will inform everything effort that you take moving forward, so spend as much time on this step as you need.
Create a Business Plan for Your Bar
Once you’ve defined the type of bar you want to open and outlined the characteristics you’d like to emulate, you’ll need to craft a business plan. Creating a business plan is an essential step in your path to learning how to open a bar, as your plan will identify how you operate and earn. It should include an assortment of business principles including the structure of your business, your operations plan, sales and marketing strategies, financial plans, and more for your bar.
A well-defined business plan can be over 50 pages in length but it can be shorter. If you are obtaining outside funding for your business, a well-composed business plan is essential to get the cash you need. The necessary sections to include in your business plan are:
- The Executive Summary – identifies the main components of your business
- Business Overview – lays out the business structure, location, and other basic information about the business
- Operations Plan – defines how your business will operate on a day-to-day basis
- Market Analysis – enumerates your competitors and the overall market for your business
- Products and Services – outlines what services you will offer to customers
- Sales and Marketing – details how your business will attract new customers
- Management – an internal document used to illustrate your leadership structure
- Financial Plan – accounts for all financial information about your business including projections, funding options, and business expenses
Define Your Business Structure
As with any business, you’ll need to have a defined structure, such as an LLC or sole proprietorship. There are several main business structures including sole proprietorship, partnership, LLC, and corporations. Each type of business structure has its own set of benefits and drawbacks. All things considered, most businesses are formed as LLCs because of the legal protections it provides business owners.
Obtaining funding is an essential step for starting any business including a bar or restaurant. While there are myriad funding options, you’ll want to spend some time analyzing which options would be best given your circumstances. Depending on the amount of funding you need, you might be capable of utilizing any savings you might have. If you’re planning on a larger bar that requires more funding consider taking out a business loan to fund your operation.
You can qualify for many types of business loans, but the interest rates on these loans can be quite high. One of the most common ways to find capital for your venture is via the Small Business Administration that is sponsored by the federal government. If you prefer another method of funding, consult a local bank to see what options they might have.
Finally, partnering with another investor can be a great method to limit interest payments that occur when taking out a loan however, it does come with one cost: equity in the business. Because your partner must front the money to fund the venture, they will expect a certain amount of ownership of the bar. With this method, you can work with investors to find the best partner for your bar.
Decide a Name for Your Bar
An often overlooked aspect in how to open a bar is finding the right name. While this task might seem simple, you’ll likely run into questions surrounding the name. Does the name resonate with your target audience? Is the name unique enough to separate your establishment from others? Is the name something you’re proud of? All of these questions need answers before moving on to the next step.
For help, it’s wise to consult friends, family, or an outside agency to get opinions on the best name of your bar. Once you’ve landed on the perfect name for your bar, you’ll need to decide if you want to trademark it. Failing to trademark your business name can have a costly impact later, including protecting your brand name from outside use and possible dilution.
The Look and Feel
The administrative work is an integral step in how to open a bar. Now let’s turn our attention to how you present your operation. Part of knowing how to open a bar is learning to work within your means to make the aesthetic choices that will make your customers want to come back for more. The look, feel, and location of your bar can cause a huge bump in your revenue, so keep that in mind as you plan your next steps.
Location, Location, Location
Finding the right spot for your bar is imperative. As with many retail establishments, you’ll want to analyze the foot traffic and demographics of the location being considered. With your name and business plan realized, your next step is finding the ideal location. Don’t be afraid to lean into the strengths of your concept.
For example, placing a sports bar next to sporting facilities can help to drive traffic to your business and grow revenues. The size of your operation will also decide which locations may or may not work. For larger bars, you’ll need a more spacious layout with parking capable of handling a crowded Friday night. Remember to analyze the traffic patterns around your location to ensure your location is easy to navigate.
If you decide to lease a space, you’ll get some benefits that can help to lower your costs. Most importantly, building maintenance will typically be provided but you’ll want to note what pieces are covered in the terms.
Similar to naming your bar, you’ll want to spend some time defining what the interior of your bar will resemble. The interior design decisions you make here are an extension of your brand. While this step in how to open a bar is fun, it also has the potential to dramatically increase your sales. Interior elements of a bar include items like:
- Seating & Tabletops
- Entertainment Options
- Paint & Color
With the margins on alcohol already so robust, adding food to the menu only enhances your appeal to incoming guests. Crafting the perfect menu requires research and planning, but can pay off. Pairing your food and drink options further delivers on the identity of your establishment. Sports bars likely feature some type of buffalo wings, hamburgers, or other so-called finger foods that are casual. More luxurious bars might feature upscale options like seafood or premium meats.
By this point, you know much about how to open a bar. You have your financials in order and you’ve put in your efforts to make your bar inviting to potential guests. Let’s look at a few more essentials you need before opening your doors for the first time.
Permits and Licenses
Obtaining the necessary permits and licenses can be an exhausting step in opening your bar. Federal and state regulations make obtaining the permits to sell alcohol difficult, but for good reason. Before opening your bar, you’ll need to be approved for some of the following permits and licenses:
- Food Service License
- Liquor License
- Food Handler’s Permit
- Employer Identification Number
- Certificate of Occupancy
- Sign Permits
- Music Licenses
- Building Health Permits
- Dumpster Placement Permits
Many of these licenses and permits can be obtained through the area in which you operate. The nuances of this documentation are unique to your location, so make sure that you ask your local government exactly what you need.
Acquire Business Insurance
As with most businesses, insurance is required to limit your liability in the case of an emergency or disaster. There are several types of business insurance you might consider. The two most common are a business owner’s policy (BOP) and a workers’ compensation insurance policy. Insurance costs will vary depending on various factors including the value of your assets, the number of employees, and more.
Purchase Inventory & Equipment
Finally, we’ve reached the fun part: the alcohol! This list of the most popular bar drinks can be extremely helpful for new bartenders or bar owners looking to get started. By partnering with distributors you can get favorable prices on your drinks and food options. Remember Tied House Laws are designed to protect you from distributor coercion.
This is also your time to purchase any essential tools and supplies for your bar. Think takeout packaging, cutlery, or paper towel for your front-of-house (FOH), but also draft systems, coolers, and measuring devices like jiggers to ensure that you can take care to manage your stock.
Hiring employees can be one of the more challenging pieces of any operation including a restaurant or bar. You’ll want to start sourcing employees 6-8 weeks before opening your bar to ensure you have adequate staff when opening day comes.
Training your staff should take place 2-3 weeks before opening day and costs approximately $5800 per employee. During this time, you will guide staff members to understand how the business operates. Depending on the size of your bar, you might want to hire a bar manager to help train staff and keep your bar functioning when you are not there.
Depending on the style of your bar, some essential staff includes:
Finalize Branding and Marketing Efforts
You’ve likely already worked through some of these efforts, but before opening, make sure you’ve got a marketing plan in place. This step can involve an assortment of tasks ranging from designing a logo and website to exploring promotional ideas for your business. Remember that around 59.5% of the global population is online, with 3.14 billion users on Facebook alone. Consider starting on social media and word-of-mouth, but don’t be afraid to reach out to local media for an added push.
Before We Go
Because opening a bar can be such a demanding process, here are a few additional tips and resources to help you stay the course. These are enhancements to any operation that can better realize your vision while improving your profit margins.
Technology for Your Bar
Having a strong kitchen display system and staff training system can help to coordinate orders from the kitchen to your bar. These tools eliminate bottlenecks in your operation and reduce communication and ordering errors. Outside of these pieces, you might consider quality POS to track orders as well as payroll software to keep your employees paid on time. For quality control, you can use recipe viewers to ensure that each cocktail is made the same every time. Altogether, these products form a rich restaurant management platform that can help you with business intelligence and data analytics to further streamline your business.
Finally, it’s time to open your bar! It’s wise to plan your special day ahead of time to coordinate with any marketing efforts you might have. If you can, take pictures and share them to help spread the word.
Some common day-of tasks to complete include: promoting your bar on social media, greeting new customers, and checking in with staff to ensure drinks are being poured and food is being prepped. Many restaurants and bars will choose to have a soft opening in which the number of guests is limited. This can be completed 2-7 days before the official opening to the public.
Dram Laws vary by location, but they all address your liability in over-serving your patrons. Before you get anywhere near the last call, make sure that you have a plan in place to address public intoxication, to keep your guests happy, healthy, and safe.
How to Open a Bar Conclusion
Learning how to open a bar involves a lot of planning, but the pay-off can be a rewarding experience. It comes with many benefits if you can handle the hardships that come with owning a business. With enough planning, creativity, and hard work your bar will be set for success.
Subscribe to the blog for more interesting restaurant content!
About the Author
Forrest was the Digital Marketing Manager at QSR Automations, where he oversees all things in the digital realm. He graduated from the University of Kentucky with a bachelor’s in Marketing. Forrest enjoys the challenges of the evolving digital landscape. In his free time, he has strong passions for both fitness and finance. You can find him running in the park or keeping up with the latest financial trends.