How to Open a Bar?

Restaurant Success Tips

If you’ve always dreamed of having your very own Cheers, but were previously discouraged by the plethora of possible ways that you could fail, here’s a guide of things you need to be aware of, things to avoid, things to seek out, and everything else you may want to know before setting out to turn your bar dream into a reality.

Preparation

Every dream starts with a vision-and turning that dream into a solid business plan with a clear concept is the first step in your preparation process. Boil down your vision to what type of bar you’ll be, what vibes you want to exude, and, most importantly, the type of customer you want to attract.

Don’t try to please everyone: You can’t be a hipster-laid back-rowdy sports bar-college hub-surf themed-Texas bar. Narrow down your ideal customer, and create the ideal bar for them. Once you get past the initial hurdle of the dream-phase, it’s time to craft your business plan.

Creating a Business Plan for your Bar

Summarize your concept in a few tight sentences that you’ll eventually use when you start pitching to investors.

What are you going to name your bar? This is the beginning of your dream – becoming a household name, and it’s more important than you may think. Let the name espouse your vibe, and make it catchy and memorable.

Determine how much capital you need for your bar: You need 20-40% more capital than you think in the initial startup costs for your bar. Include the amount of capital you’ll pull from personal funds and how much you’ll need to raise through outside sources.

Solidify your first hires: There are a few essential staff members you’ll need for your bar right off the bat:

  • Bookkeeper
  • “An accountant with a backbone who will make you do what you need to do-like pay your taxes.” -Scott Perez, Walkers
  • A legal team
  • A plumber you can consistently count on (you are opening a bar, after all)
  • A bar manager (unless you choose to manage everything yourself)

Solidify the space you’ll need to bring your bar’s vision to life: Think about the square footage you’ll need. Do you need a full kitchen? What equipment requirements will your bar have?

Food and Beverage Program: What will you serve, and how much will it cost? What’s your pricing strategy: industry-focused or customer-focused? Who will be your suppliers/distributors? Calculate drink costs, beyond the cost of liquor. Think about garnishes, napkins, mixers; your total cost shouldn’t exceed 20% of your menu price.

Outline your financial strategy

  • When do you expect to be in the black? [Goal: 6 months-1 years]
  • When do you expect to break even? [Goal: 3-5 years]
  • What is your exit strategy if things go wrong?
  • How will you keep track of your financial goals and checkpoints?
  • How much should you be saving? [Put away about 2-4% of your weekly operating costs for emergencies, and invest the rest back into improving your profitability]

Miscellaneous key points for your bar’s business plan

  • Choose a POS and payroll system
  • Create training and operating manuals
  • Rent and renovations costs
  • Location
  • Liquor License

Choosing a Bar Location

Once your business plan is fleshed out with an identity for your bar, you’ll need to find the perfect location. Take these steps to help determine what location is the right fit for your new business.

  • Determine how much you can spend on rent and which neighborhoods are within your price range.
  • Think about where your vision will fit best, and where your target consumers are concentrated.
  • Delineate all the requirements for space, things that are absolute must-haves, things you can add on later, and what your renovation capital is.

Find vacant spaces: Once you have a general idea of which neighborhoods are your preferred targets, your space search begins. Keep your eyes and ears open; ask if your friends can refer you to a landlord; inquire about that empty space on your block that you’ve been walking by on your morning coffee runs; get on your bike and go a block to block, collecting contact information for listed spaces. Websites like Loopnet or Craigslist are great places to look too.

Negotiate the Bar Lease: You’ve found your space, now it’s time to sign a lease. You’ll want your lawyer in on this deal. Having your lawyer present ensures that someone who understands the process and has your best interests at heart can help you navigate negotiations.

More time is your friend when you sign a lease for your bar. Avoid rent hikes by signing a longer lease, and increase profitability. Steer away from signing a lease under 10 years; if you can get 15, take it. It may take 5 years to break even on your initial investment, and negotiating a new lease at that time will become burdensome.

If any renovations need to take place before you open, try negotiating a few months rent-free with the landlord. Show the value of the renovations to the landlord to justify the decrease in rent.

Get the Liquor License: Once you’re in the lease signing stage, you’re in for the long haul. Now it’s time for the dreaded but crucial liquor license. Your lawyer will play a critical role in negotiating with the State Liquor Authority to ensure all of your paperwork is in order in terms of zoning and state laws.

Outline and draw attention to job creation your bar will provide. Emphasize that you are a respectable business owner who will take responsibility for future issues and will maintain an open dialogue about their concerns—and follow through on what you promise.

Lavu Pro Tip: If you fail to receive a liquor license, and your concept doesn’t hinge on hard alcohol, apply for a beer and wine license first. Reapply for the liquor license after one year with a clean record on the books.

Raise the Capital

It’s time to start financing your dream, networking with potential investors, and consider your funding options. Talk to investors in your network first, such as family members and friends who have an interest in your business success. Branch out to find interested investors, and look into loan options.

Financing Options

Equity Financing: With equity financing, investors gain part ownership in your bar, and receive future stakes once the business hits a profit. Estimate the worth of their investment in comparison to your future worth to come upon an agreeable owner percentage for the investor. When bootstrapping isn’t a viable option, and you have minimal collateral, equity financing is a strong option for financing your first bar.

Debt Financing: With debt financing, you’ll receive a lump sum and agree to a repayment schedule with interest. This is the most common financing plan for a new business, but can often require significant collateral, so you may run into financing issues to obtain a business loan for your bar.

If your bar is also a restaurant, the Small Business Administration may have loans and funding you’ll qualify for.

Convertible Debt: Convertible debt functions as a synthesis of debt and equity financing; you receive a loan, and your investors agree that the loan will either be repaid in the future or converted into equity once the business reaches a certain value. You’ll need to set an interest rate for investors in order to repay until they either convert the loan to equity or the loan is paid in full.

Create a Pitch Deck and Present to Investors

Your pitch deck is what you’ll present to investors to tell them, investors, who you are, what you want to do, how you’ll do it, and what you’ll need. Pitch decks are typically presented in a program like PowerPoint or SlideShare. It’s important to be clear and concise, but you’ll need to incite an emotional response through your bar’s story.

Your deck is your business plan once it’s distilled down to the essential points. Introduce yourself, your bar concept, and why you are targeting these investors as a starting point. Delve into your concept and what sets you apart in the industry. Tie this to your target demographic of consumers and how you’ll market to them.

It is imperative that you address your local competition In your pitch, as well as the general market you are entering. Outline the amount of funding you are seeking, and include the terms of investing with your new bar.

Hiring Your Bar Staff

Choosing a Manager: Many owners choose to manage their own bar, but getting the right person to manage your team while you take care of behind the scenes tasks makes life much easier than doing it all on your own. Just as you can’t spend your nights at the bar being drunk and rowdy, your manager must present a responsible character and set an example for the entire staff. When interviewing, you want to look for previous management experience, knowledge of the industry and market, and, most importantly, a ready-to-take-on-the-world attitude. Walking through some pseudo-problem situations and asking your candidates how they would handle them is a solid tactic. Choose wisely: Your manager is your right-hand person, and as such, they are essential to holding your establishment down

Hiring Bartenders and Waitstaff: A good bartender isn’t just the bartender who can make the best drink; anyone can be taught the art of mixology. What you can’t teach is personality, and a personable bartender makes all the difference. Choose someone who fits in well with your target customers and makes them feel welcome. Try attending festivals like Tales of the Cocktail to recruit talent.

Hiring Security: How many bouncers you hire—or if you need a bouncer at all—is going to depend greatly on your concept. If your bar is a small-scale wine bar, you probably don’t need a bouncer; if you’re opening a massive sports bar, you’ll need a bouncer on game nights. Many bars choose to only have bouncers on busier nights (such as Thursday to Saturday).

Marketing

Start marketing before opening day. Word of mouth, local newspapers, and flyers are a great place to start, but you’ll need a strong internet and social media marketing campaign to get the ball rolling. If social media isn’t your forte, invest in a social media manager to kick off your marketing.

Instagram is the new newspaper and has great ROI for advertisement fees, and it also gives you a platform to bring your concept to the internet. Create a unique hashtag for your bar, and encourage guests to tag you in their photos. Feature photos of your food, drinks, and bar space. For inspiration, see Mother’s Run @mothersruinnyc – this is bar-Insta-done-right.

Create a Facebook page and host events that you can invite members to, such as your grand opening. A Facebook Business Page is a great place to showcase specials and discounts as well.

Nothing perks up ears quite like the word free. Consider offering a free beverage in return for a Yelp review or Foursquare check-in.

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