Running a bar is not for the faint-hearted.
You will need to know a lot about drinks. You need to connect with your patrons. You need to develop an atmosphere that keeps guests coming back for one more pint.
According to MarketWatch, bar revenues dipped by 10% in the midst of the financial downturn a decade ago, but the market outlook for bars appears much better today.
Despite the positive market news for current (and wannabe) bar owners, there are lots of obstacles out there to trip up even the smartest entrepreneurs embarking on the journey to opening a new bar.
Facing those challenges head on takes a bit of planning.
Here’s a quick breakdown of the steps you should take to start a successful bar:
From choosing your location and getting the required licenses to hiring the right team and setting up key systems (like your POS), there's a lot to consider. But we've got you!
Step 1: Learn The Industry
The very first step is getting a handle on the expected startup costs.
Can you even afford to open a bar?
If you can fork up somewhere in the range of $110,000 to $850,000 (the average is $480,000), then you’ve got a starting point. Costs can vary widely, so it’s important to know what you’re getting into from a cost perspective. If you’re taking over an existing bar, you could be looking at startup costs as low as $25,000 with adequate planning.
If you’re considering a specialty bar like a microbrewery or winebar, costs could run between $25,000 to $100,000 since it’s cheaper and easier to secure beer and wine licenses than permits for hard liquor.
Once you’ve determined that your wallet can handle the financial pressure of getting your bar off the ground...
Dive into research:
- Check out local spots that are popular and well-reviewed by guests
- Take a peek at the less successful establishments to understand why they’ve struggled
- Talk to local bar owners about their achievements and mistakes
- Jot down notes about the do’s and don’ts in the industry
- Learn your area and what types of decor, drinks, meals, etc. that might be trending
- Keep a library of images you take while walking in, or that you stumble across on social media for interior designs that inspire you
With all of your necessary homework done, you can put that new knowledge to work in getting started on your vision for your bar.
Step 2: Build Your Plan
Armed with some essential knowledge, you’ve set yourself up to build a strong business plan for your bar. The first part of a great business plan is setting your vision and explaining it clearly and concisely.
Clarify your concept:
- What is the atmosphere of the bar?
- What are the bar’s surroundings like? (More on this later when we consider location.)
- Who are you attracting? Who are the people you’d like to attract?
- What will you name your bar? (This will influence your logo)
- Be creative. Make it memorable and catchy.
Once you’ve answered a few key questions, you’ll want to summarize the concept behind your bar in a few crisp sentences that will serve as your pitch to potential partners and investors (if you’re not self-financing, that is).
Set your financial strategy
Run the numbers to determine how much startup capital you think you’ll need. Then add on 20-40% on top of that.
We’re not kidding. Round up.
Those incidental costs will add up once you get rolling and you’ll want the cushion. Once you’ve figured out how much you can contribute from personal funds (assuming it doesn’t cover everything), you’ll then know how much you need to raise from other sources.
Here are some questions your bar business plan should strive to answer:
- When do you plan to turn a profit (monthly)? [Goal: 6 months to 1 year]
- When do you plan to break even? [Goal: 2-4 years]
- How will you track financial goals and benchmarks?
- How much will you save along the way? [Ideally 2-4% of weekly operating costs are saved for emergencies with the remainder invested back into the bar]
- How will you exit if things go wrong?
These are all top line questions that must be addressed in your business plan for potential investors and partners to take you seriously.
Calculate startup costs
Thinking more tactically, you’ll want to build a startup budget in your business plan that spells out how you’ll tackle upfront costs such as:
Having a solid plan for what these costs will be and how you’ll afford them is a major piece of getting your bar off the ground.
Determine your ongoing costs
Building your foundation is just the start. You’ll want your business plan to account for how you’ll actually run the business once you open your doors.
Costing out how much your bar needs to run on a day-to-day basis is critical.
In some cases (as with rent), you’ll want to have a few months worth of startup capital on hand to ensure some runway for your bar as you get rolling. Creating both startup and ongoing budgets as part of your business plan will ease the pain of future spending and help you reduce costs over the long run.
Develop your business strategy
There’s a lot that can go into the strategy portion of your business plan.
For this part, you’ll want to outline how you will address the challenging aspects of running a bar. From choosing an ideal location, to determining your atmosphere and design, to hiring talent, to menu planning and obtaining permits, the bar business can be a tricky one to navigate without a solid plan in place.
Addressing these concerns early in your business plan will help you execute down the line when you’re in the midst of all the chaos and excitement that comes with opening a bar. This portion will also ensure that you stay true to your original vision by breaking it down step-by-step in your business plan.
Step 3: Choose A Location
Your location will be a huge part of your bar’s appeal. Selecting the location for your bar will be one of the biggest decisions you’ll make as a bar owner.
As you dive in, here are a few things you’ll want to consider:
- Estimate how much you can spend on rent and which neighborhoods are within range
- Think about the neighborhood that best suits your vision
- Understand where your target guests are in your area
- Clarify zoning restrictions
- Determine the requirements for your space and where your renovation capital is coming from. Will the space require a lot of work to get it where you need it to be?
- Keep in mind any accessibility and parking considerations when selecting a location
Grabbing a lease that works in your desired location is a big part of the process.
One tip, from top restaurateur Danny Meyer no less, is that you should look for a lease that is easy to get out of or reassign should things not go very well. It’s an easy way to reduce your long-run costs by being proactive at the outset.
Step 4: Get Licensed
Once you’ve locked in a great location, you’ll want to make sure you’ve got all the permits you need to actually run a bar there and serve alcohol - as well as the permits you will need to complete any renovations (see Step 5).
Here’s a tip from a local bar owner in Toronto:
In short, give yourself adequate time before you open to get those licenses and permits taken care of. Also make sure that you’ve hired a quality contractor to lead the renovations that will be taking place as those licenses and permits get approved.
Step 5: Design Your Space
As you’re locking in those permits, you’ll be digging into making the new space your own. This is your chance to take your concept and put it into practice with how you design your bar.
The challenge here is creating a space that serves multiple purposes.
Your staff need a comfortable place to work in. Your guests want a place that they can enjoy and keep coming back to. You (the owner) will want a space that speaks to your original vision.
And lastly, but most importantly, those licenses and permits may come with limits on what and how you design your bar in terms of zoning, space usage, etc.
All of that will go into the final design of your bar. Working with a good contractor, you’ll want to keep costs as low as possible while ensuring that quality work is completed and you’re staying true to your initial concept.
Step 6: Build Your Dream Team
What’s the big difference maker for your guests?
Who you hire speaks volumes about your leadership as a bar owner and your overall concept. Your staff make your place come alive so you’ll want to hire with care. Especially when it comes to your initial team, you’ll need a strong crew to help get the business off the ground.
At the end of the day, you’ll want staff members who treat guests well and by doing so, make it more likely that they’ll return to your bar.
Consider looking for team members locally who have experience starting a bar and are excited by the prospect of doing it again. Loop them into the actual startup strategy to ease your burden as the owner and to get them excited about putting their mark on the place.
When determining where your concept meets the team you are building, think about how you’ll be serving guests. If you’re a specialty bar like Cloak Room in Montreal, you’ll need bartenders who can take a guest’s preferred flavor palette and make a specific drink for them. Other fancier venues may include entertainment with their cocktails that will require a special kind of hire.
If you’re launching a more typical beer and casual cocktails type of place, then you’re likely looking for solid team players who can pour good drinks and keep guests happy.
Step 7: Set Up Your Systems
Your bar doesn’t just run on people alone.
You need reliable technology systems to keep the wheels running.
For one, you’ll need to find a great point of sale (POS) system for your bar. (Here is a guide on how to find a good one.) Your POS is a critical piece of the puzzle to keep everyone back-of-house and front-of-house on the same page while giving you the data you need to better understand and improve your business.
You’ll also want to set up a strong system for ordering your restaurant supplies too. Make sure that you’re able to tap into the best local suppliers while taking into account price, quality, delivery, and service in your interactions with suppliers.
Remember that restaurant tech is changing the industry rapidly, so you will want to stay on top of technology trends in the restaurant space as you build your business.
Step 8: Market Your Bar Before and After You Open Your Doors
Before you even open those doors, engage your potential guests with top-notch marketing.
Build their excitement about the new local bar that is coming their way.
Build a “road to opening” on your website and social media, allowing guests to following along as you post new design elements during renovations (show before and after pictures here). Send them updates about your progress on hiring and new items added to your menu as you build it. Maybe even get their input if you’re stuck between two different menu items!
To help get the word out, work with sponsors in your area such as breweries to host a launch party that increases the hype around your impending opening. If you’re successful, you’ll get yourself a great start on getting people through the door and developing some loyal guests from day one.
Once you’ve succeeded with your grand opening, there’s no shortage of ideas out there for marketing your restaurant on an ongoing basis. Don’t be afraid to get creative with how you reach guests and get them into your bar.
Step 9: Always Be Working
You’ve put in the hard work and your bar is up and running. Guests are filling those seats and your staff are happy with the steady work.
Now your reward is to keep up the hard work and keep your ship afloat.
The mission now is to keep up your marketing efforts to keep guests coming, continue to hire and retain the best staff, and maintain those systems that allow your bar to thrive.
Congrats - and cheers to your successful bar!