A Guide to Starting a Bar
To an inexperienced entrepreneur, opening a bar might be an appealing idea because it seems fun and profitable. While that can be true, it's important to come into it knowing that starting a bar requires as much preparation and hard work as any other establishment. Going into the process with realistic expectations and industry knowledge can result in a thriving business and enable you to avoid common pitfalls. Read this guide for tips on how to start a bar.
Writing a Bar Business Plan
As with any entrepreneurial venture, you should start by creating a plan. The U.S. Small Business Administration provides an in-depth look at writing a business plan, but a few bar-specific considerations are highlighted below.
The executive summary provides an overview of your business plan. It will summarize what your business plan contains, and since it would be difficult to describe your concept, target audience, and finances before you figure them out, it will be the final component of your plan. However, including an accurate and polished executive summary will keep all involved in the business on the same page and will help you identify and explain to other people, like potential investors or customers, what sets your business apart.
If you don't have prior experience owning or managing a bar, you may want to partner with someone who does to avoid making rookie mistakes. If you also do not have the capital needed to pay for your bar, you will need to fund your business through business partners, investors, or loans. Creating a budget will help you determine the amount of money to procure for opening a bar, which will depend largely on whether you are acquiring an existing business or starting from scratch. Most projects end up being more expensive than originally expected because of unanticipated setbacks like legal obstacles and construction delays, and it might take a while for your establishment to begin breaking even and longer to begin turning a profit. In addition to those considerations, your budget will need to account for operating costs, licenses and permits, wages, as well as any food or alcohol products. If possible, you should pad your budget with more funds than you anticipate needing to help prevent your business from running out of money.1
To move forward with your business venture, you should decide on a concept for your bar. Do you want to create a neighborhood pub that also focuses on food, a cozy bar that cashes in on the craft beer niche, or a vibrant nightclub in a busy area? Knowing what type of bar business you want to open will help you decide where it should be located, but you shouldn't commit to a location until you can conduct a market analysis. Researching areas in which you are interested in starting a bar will help you identify existing competition and analyze potential customers. This information will help you avoid potential disasters like opening a nightclub in an area better suited to a tasting room or starting a pub in a neighborhood that won't welcome your business.
Once you know what you'll be promoting, you can create a marketing plan. Online platforms like websites and social media are low-cost ways of getting the word out, and when properly managed, they can be used to build a relationship with customers and provide a positive perception of your business. You should begin advertising your bar before you open to ensure potential customers know about the new venue, but make sure to set a firm opening date so they also know when they will be able to visit.
Legalities and Licenses
Obtaining a license to serve alcohol is a legal necessity for any business that wants to sell beer or liquor; unfortunately, that process is not always quick or easy. Alcohol laws vary from state to state, and some areas have a limit on how many liquor licenses can even be issued. As discussed on our blog about obtaining liquor licenses, "[some] states’ prohibition-era quota systems have created highly competitive markets in which liquor licenses are often traded at prices as high as a quarter-million dollars or more." Even if you do not live in a quota state, being approved for a liquor license can take several months and you should apply for yours as soon as possible to make sure your future establishment is not left without libations during your grand opening.
Property and general liability insurance are necessities for any business. Bars and other establishments that serve alcohol should also acquire liquor liability insurance, which helps protect against lawsuits brought against your company as the result of altercations or accidents involving patrons2. Read up on the laws in your area to ensure you get the proper degree of liquor liability insurance to protect your business.
The Alcohol and Tobacco Tax and Trade Bureau offers more information about other legal considerations of starting a bar, like registering your business's name, getting a tax identification number, and securing state licenses and permits.
Equipping Your Bar
After you've secured a location for your business and finalized your menu, you can begin equipping your bar. If you will serve food, whether it's simple fried appetizers or more complex courses, you will need to invest in commercial kitchen equipment. Otherwise, outfitting your establishment with the right drink equipment will be your main concern.
Refrigeration and Ice
Some of the most important pieces of bar equipment are those that keep your drinks fresh and cold. Failure to keep beer cold can be a death sentence for a bar, as can serving watery cocktails. The best way to prevent these business enders is purchasing quality refrigerators and ice makers. Back-of-house and under-bar refrigerators, as well as back-bar units, bottle coolers, and wine refrigerators, will keep beverages at ideal serving temperatures.
With several different types of ice available from commercial ice makers, finding the right one for your drinks can elevate your guests' experiences. Larger cubes are great for presenting high-end liquors and have a large surface area, which provides sustained cooling and slower melting. Half-cube ice is preferred for soft drinks, and nugget and flake ice both work well in frozen cocktails.
Glass chillers can also help push your drinks over the top. Couple a glass chiller with a draft beer system to cultivate a loyal customer base. With the growth in the popularity of craft beers in recent years and Americans’ draw to a frothy brew, draft beer customers might make up a substantial percentage of your patronage. That means they may become your largest source of constant cash flow and will be critical to your bottom line.
Having the right underbar equipment will streamline service and make your bartenders' jobs much easier. From drainboards to sinks with blender dumps, it’s important to have handy access to water and drains. You’ll also want to make sure you have plenty of glass storage available, whether with cabinets, shelves, or hanging racks.
A soda gun and filler station will eliminate the need for soda bottles and cans, leaving your bar space free for more important potent potables. Another vital piece of underbar equipment is an ice bin/cocktail unit. Some models have a sink, providing convenience for efforts to keep the bar area tidy.
Investing in a couple of speed rails for your most popular booze will keep those often-poured spirits within easy reach, making serving them faster. Underbar glass washers will cut down significantly on labor required to keep a steady supply of glassware at the ready. Bottle cap catchers and openers will make serving bottled beers a snap, as well.
Blenders and Mixers
Blenders and mixers are critical components to any good bar setup. Margaritas, daiquiris, and other frozen libations are necessary to keep a large segment of the market satisfied. Offering frozen cocktails is more time-consuming and labor intensive than offering bottled and mixed drinks, and you may be tempted to invest in a frozen drink dispenser. Because alcohol has a much lower freezing point than other beverages, it will be important to do research to ensure you get a unit that will maintain temperatures cold enough to produce a classic frozen cocktail. The temperature at which alcohol freezes depends on the proof of the liquor: the higher the proof, the lower the freezing point. Before purchasing equipment, check the spec sheet to determine whether the unit will be suitable for frozen drinks. Almost all bars, however, will need to invest in at least one quality drink blender. You will want to make sure the blender is rated for crushing ice. There are many brands with models that have powerful motors and specialized blades for ice.
Glassware and Displays
Merchandising liquor displays can provide an impressive focal point for your patrons, but you’ll need to make sure you have a variety of drinkware that is designed specifically for the spirits you plan to serve. Rocks, high ball, pilsner, and shot glasses, as well as beer mugs and pitchers, can be placed on shelves to enhance the effect. Likewise, stemmed glassware for wine, martinis, and margaritas can be hung by the stem in wire or wooden racks for display and easy access. For an extra touch of class, you can beef up your wine service with bucket servers, coolers, carafes, and stoppers.
Finishing Touches and Inventory Control
Liquor portion control pourers help keep inventory under control by metering the amount of liquor that comes out in one pour. The amount of profits that can be lost due to improper pouring is astronomical. The same can be said for wasted product, which can be reduced with store-and-pour units. There are some specifications as to how these can be used, so make sure to check local codes when using these containers for storage.
Adding finishing touches to cocktails can be done efficiently and stylishly with bar top dispensers. Specialty spoons and muddlers help prepare leaves for mojitos and oranges for old fashioneds, while signature margaritas are completed with glass rimmers.
Payment Folders and Trays
Finally, you’ll need to equip your wait and bar staff with the items they need to keep your customers coming back and buying drinks. The convenience with which patrons can check out can add to or detract from their overall experiences. Making sure your wait staff has cash carriers, trays, and coin holders to make the monetary exchange a smooth one will go a long way in making your establishment a popular one.