As a creative entrepreneur and a social butterfly at heart, you may have always dreamt about opening a bar. Whether it be a swanky lounge or a laid-back sports bar, the liveliness and social aspect of the industry have always captured your interest, and now you want to take the plunge.
Table of contents
Starting a Bar Checklist
The Cost of Opening a Bar
Understanding Bar Inventory
Making Money at Your Bar
Deciding to open a bar is exciting, but you probably have some questions. After all, the complexity of opening up can be tricky, regardless of your expertise or natural business demeanour.
This guide helps you put your daydream into action and lays out everything you need to know about how to open a bar.
A Checklist for Opening a Bar
Here is a checklist of the actions to take before you open your bar’s doors.
Research which licenses and permits you need. Aside from declaring a buiness entity, registering your business, and obtaining a business license, all bars need a liquor license, which is awarded by your state’s Alcohol Beverage Control (ABC) agency. Be sure to research state alcohol policies to determine what you need to obtain a liquor license. You also need to think about food-handling licenses, music licenses, and various other building permits if you are making renovations to your current space.
Research funding options for your bar. Think about the initial starting cost as well as the ongoing costs that factor into how to run a bar. Chances are you need capital to get the business up and running, and some bar owners rely on investors when first opening an establishment. Getting a business loan is another option many business owners look into. A business loan isn’t just handy for opening costs, it can also be used later for growing your business by investing in inventory, marketing, or renovations.
Find the right location. The success of your bar depends on its location. When you’re looking at locations, think about how much foot traffic you are aiming for, what your clientele looks like, and the average time a customer will ideally spend at your bar. These help you determine the size of the space needed as well as the best neighborhood. Make sure to avoid areas that are consistently under construction.
Create a business plan. When you are starting any business, it is essential to create a roadmap for your success. Creating a bar business plan outlines the vision you have for your bar and a strategy to grow the business. It’s a management tool that can help you reach your short-term and long-term goals. Your business plan should include your market and competitive analysis, a description of your products and services, financial costs, and an operations plan.
Trademark your name and logo. When you start a bar, the name leaves an impression on potential customers and can influence whether someone wants to give it a try. Make sure you take time naming your business and then make sure you trademark the name.
Payments are just the start
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The Economics of Opening a Bar
Every aspiring bar owner dreams about a popular establishment that makes great money for their pocket. But before you jump ahead, you have to plan for the startup costs of your bar.
While the initial cost of your bar depends on the type of establishment you open, there are a few essentials every bar needs:
- A location
- Equipment (ice bins, blenders, mixers, dishwasher)
Unfortunately, expenses don’t just disappear once you open a bar. You need to think about operating costs as well. Examples of operating costs include:
All of these costs require careful oversight and management so your budget doesn’t balloon. So why not think about clever ways to minimize your costs from the get-go?
Don’t overthink your drink menu. Create a simple menu by offering a few drink options. Complex drink lists often fluster customers and create more inventory to carry.
Use analytics software to run sales reports regularly in order to make cost-effective decisions when opening a bar. You can assess which drinks are selling and which drinks aren’t, then make appropriate menu changes. You can also assess your busiest and slowest hours to create a more efficient employee schedule.
Minimizing waste at your bar can save quite a bit of money. Spilled drinks, drinks made incorrectly, and spoiled ingredients are considered waste and can really add up. If you see a rising trend in these, it might be time to reassess employee training.
Guests at your bar expect short wait times and quick service. Lousy payment systems with painstakingly slow processing times won’t cut it, so it’s important to invest in a robust POS system for your bar.
Your point-of-sale system should be integrated with a payments processor and use hardware that can take any form of payment, whether it’s cash, magstripe card, EMV chip card, or mobile payments (like Apple Pay).
Additional POS features designed for bar operations can improve your daily processes. Specific things to look for in a point-of-sale system for your bar include:
- The ability to create open tickets that allow you to offer customers open bar tabs. A bar POS system also has the capability to add items to a ticket, as long as it remains open.
- A built-in tipping system that is easy for customers to use and encourages tipping on every order.
- Inventory management that allows you to set up your bar menu on your POS and track inventory to determine stock levels. Many bar owners set alerts on inventory so they are flagged when stock is low.
- Handle complicated modifiers and multiple menus to ensure accuracy and happy customers.
After you open a bar, it’s time to talk to suppliers about ordering inventory.
Start off by determining what type of alcohol you need. Whether you’ve decided to serve beer, wine, liquor, or a combination of the three, most bars offer three levels of quality in their selection: well/house, call, and premium.
So if you are making a drink that is vodka based, you can offer three different brands of vodka to your customer. You can also apply this to wine: Have three different kinds of pinot noir on the menu, so customers have options at different price points.
Next, evaluate your drink menu and create an ingredient list of additional items you need, aside from the alcohol. This gives you a better idea of your inventory’s breadth and where your ingredients overlap.
Now it’s time to think about how much to order. You need to forecast the amount of drinks ordered each night for the week and calculate the alcohol and other ingredients that will be used. This may be difficult when first starting a bar, but after the first week you can use your POS analytics to forecast inventory on an ongoing basis.
While it may be tedious, you should keep a close eye on the inventory life cycle and learn how to improve your inventory at the bar to cut costs and prevent waste.
Making Money at Your Bar
With everything laid out, you may begin to wonder how much a bar owner makes. When first starting a bar, the money you make is likely to go right back into running the bar. And that’s okay.
As you begin to build your brand and watch your bar grow in popularity, you start to reap the benefits and see your bar profit. But you can also actively tweak your day-to-day operations to boost your profits:
Examine drink costs. It is essential to calculate drink prices that are reasonable for customers but will still yield profits when you first open a bar. To do this, break down the price point of each ingredient in a single drink and total this cost. That means finding the cost per ounce or the cost per garnish of each drink. While it might sound tedious, it gives you a better idea of how much you are actually making. You can then raise or lower your prices appropriately.
Value customer service. Customer service is a major determinant for success, especially at your bar. If your bartenders have an aloof attitude, you could be losing money. Make sure you are clear about the type of service you expect when you are training your employees. Learn more about great customer service tips from our sellers
Improve upselling. Upselling can be challenging in a fast-paced environment like a bar, but it is necessary to improve profits. Use a soft upsell approach by mentioning different brands when customers order or showcasing top-shelf liquor at eye level behind the bar. You can also motivate employees to upsell with incentives like additional vacation or gift cards.
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