ON THIS PAGE
- How to Start a Bar
- 15 Steps To Start a Bar Business
- How Big is the Bar Industry?
- What are the Key Segments of the Bar Industry?
- What External Factors affect the Bar Industry?
- What are the Key Customer Segments in the Bar Industry?
- What are the key costs in the Bar Industry?
- What are the typical startup costs for a New Bar?
- Helpful Videos
- Additional resources in the Bar Industry
How to Start a Bar
If you’re looking to start a bar, you’ve come to the right place since we’re going to show you exactly how to do it.
We’ll start with key bar industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.
Then we’ll discuss keys to not only starting a (insert name) business, but succeeding in it!
And definitely check out our bar business plan template if you need a business plan to start or grow your bar.
15 Steps To Start a Bar Business:
Starting a bar can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful bar.
1. Choose the Name for Your Bar Business
The first step to starting a bar is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your bar:
- Make sure the name is available: Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also, check to see if a suitable domain name is available.
- Keep it simple: The best names are usually ones that are easy to remember, pronounce, and spell.
- Think about marketing: Come up with a name that reflects the desired brand and/or focus of your bar.
2. Determine the Type of Bar Business You Will Launch
When determining the type of bar to launch, consider your interests, target market, location, and the atmosphere you want to create.
Here are several types of bares you can consider:
- Sports Bar: Sports bars are known for broadcasting sporting events on large screens. They often offer a variety of beers, cocktails, and pub-style food. Sports memorabilia and a lively atmosphere are common features.
- Craft Beer Bar: Focus on offering a wide selection of craft beers from local and regional breweries. Craft beer bars often appeal to beer enthusiasts and connoisseurs.
- Wine Bar: Wine bars specialize in offering a diverse selection of wines, typically by the glass or bottle. They may also serve small plates of cheese, charcuterie, and other wine-friendly snacks.
- Cocktail Lounge: Cocktail lounges are known for their craft cocktails, creative mixology, and sophisticated ambiance. They often feature a lounge or speakeasy-style setting.
- Karaoke Bar: Karaoke bars provide a stage for patrons to sing their favorite songs while enjoying drinks. They’re popular for group gatherings and entertainment.
3. Develop Your Bar Business Plan
One of the most important steps in starting a bar is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary: This section should summarize your entire business plan so readers can quickly understand the key details of your bar.
- Company Overview: This section tells the reader about the history of your bar and what type of bar you operate. For example, are you a sports bar, craft beer bar, or wine bar.
- Industry Analysis: Here you will document key information about the bar industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis: In this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products and services like the ones you will offer?
- Competitive Analysis: Here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your bar? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- What startup costs will you incur?
- How will your bar make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
You can download our bar business plan PDF template here. This is a business plan template you can use in PDF format.
4. Choose the Legal Structure for Your Bar Business
Next you need to choose a legal structure for your bar and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the bar and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a bar together. The partners share in the profits and losses of the business. The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a bar include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a bar is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations, including the number of shareholders they can have, among others.
Once you register your bar, your state will send you your official “Articles of Incorporation.” You will need this, among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Bar Business (If Needed)
In developing your bar business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a bar to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a bar that they believe has high potential for growth.
6. Secure a Location for Your Business
Finding the right space for your bar is crucial to its success. When considering potential locations, take the following factors into account:
- Demographics: Research the local population to understand the age, income levels, and lifestyle preferences of your potential customers. Choose a location that aligns with your target market.
- Foot Traffic: Assess the volume of foot traffic in the area, both during the day and in the evening. High foot traffic can attract more patrons to your bar.
- Competition: Analyze the existing bars and nightlife establishments in the vicinity. Consider how your bar can differentiate itself in terms of theme, offerings, and ambiance.
- Accessibility: Ensure that the location is easily accessible by public transportation and has ample parking options, as convenience is a significant factor for patrons.
- Licensing and Zoning Regulations: Check local licensing and zoning regulations to ensure the chosen location allows for the operation of a bar. Be aware of any restrictions on operating hours and noise levels.
- Safety: Investigate the safety of the area, including crime rates and the presence of security measures. Patrons should feel safe when visiting your establishment.
7. Register Your Bar Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your bar’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use.
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address).
- Complete the bank’s application form and provide all relevant information.
- Meet with a banker to discuss your business needs and establish a relationship with them.
9. Get a Business Credit Card
You should get a business credit card for your bar to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
Starting a bar involves obtaining various licenses and permits to operate legally and serve alcohol. The specific requirements can vary depending on your location and the type of bar you plan to open. Here are some common licenses and permits you may need:
- Business License: You’ll typically need a general business license from your city or county government to legally operate any type of business, including a bar.
- Alcohol License: The most critical license for a bar is the alcohol license, which allows you to serve alcoholic beverages. The type of license may vary based on the alcohol you plan to sell (e.g., beer, wine, liquor) and whether you plan to serve for on-site consumption, off-site sales, or both.
- Food Service License: If your bar serves food, you’ll likely need a food service license from your local health department. This ensures compliance with food safety regulations.
- Entertainment License (if applicable): If you plan to host live music, dancing, karaoke, or other forms of entertainment, check if you need a separate entertainment license or permit.
- Occupancy Permit: An occupancy permit specifies the maximum number of people allowed in your bar at one time. It ensures compliance with fire safety regulations and building codes.
- Signage Permit: If you plan to display signs or banners advertising your bar, you may need a signage permit from your local government.
- Zoning Approval: Ensure that your chosen location is zoned for a bar or restaurant business. Some areas have specific zoning requirements related to alcohol sales.
- Health Department Permits: Aside from the food service license, you may need additional permits related to food preparation and handling, depending on your menu.
Depending on the type of bar you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Bar Business
Operating a bar comes with various risks, and having the right insurance coverage is essential to protect your business, assets, and reputation.
Here are key types of insurance you may need to operate a bar:
- Liquor Liability Insurance: This insurance is critical for bars since it specifically covers claims related to alcohol-related incidents. It protects you if a patron consumes too much alcohol at your bar, causes harm to themselves or others, and holds your business responsible.
- General Liability Insurance: General liability insurance provides coverage for bodily injury, property damage, or personal injury claims that occur on your bar’s premises. It covers incidents unrelated to alcohol as well, such as slip and fall accidents.
- Property Insurance: Property insurance covers damage to your bar’s physical assets, including the building, furniture, fixtures, and equipment. It also typically includes coverage for events like fire, theft, vandalism, or natural disasters.
- Business Interruption Insurance: Business interruption insurance provides coverage for lost income and ongoing expenses if your bar is forced to close temporarily due to a covered event, such as a fire or natural disaster.
- Workers’ Compensation Insurance: If you have employees, workers’ compensation insurance is usually required by law. It provides coverage for medical expenses and lost wages if an employee is injured on the job.
- Commercial Auto Insurance (if using vehicles): If your bar uses vehicles for deliveries, catering, or other business purposes, you’ll need commercial auto insurance to cover accidents, liability, and vehicle damage.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Bar Business Equipment
Running a bar requires a variety of equipment to serve drinks, create cocktails, and maintain a welcoming atmosphere.
Here’s a list of essential equipment you’ll need to run your bar:
- Bar Counter: A well-designed bar counter provides a workspace for bartenders to prepare and serve drinks. It should be equipped with storage for bottles and glassware.
- Bar Stools and Seating: Provide comfortable seating for your patrons at the bar counter and throughout the bar area.
- Glassware: Stock a range of glassware, including pint glasses, highball glasses, cocktail glasses, wine glasses, shot glasses, and martini glasses.
- Bar Tools: Essential bar tools include shakers, jiggers, strainers, muddlers, bar spoons, and bottle openers.
- Refrigeration: Refrigeration units are crucial for storing perishable ingredients, such as fruits, mixers, and garnishes. Types of refrigeration equipment include reach-in coolers, under-counter refrigerators, and ice machines.
- Ice Maker: An ice maker produces ice for drinks. Ensure you have a sufficient supply of ice to meet demand.
- Blenders: Blenders are used to make frozen and blended cocktails, smoothies, and other drinks.
- Drink Dispensers: Dispensers for soda, draft beer, and other beverages help streamline service.
- Bar Sink: A bar sink is essential for washing glassware, utensils, and bar tools. Consider a three-compartment sink for washing, rinsing, and sanitizing.
- Cash Register or POS System: A point-of-sale (POS) system or cash register is used to process payments, track sales, and manage inventory.
13. Develop Your Bar Business Marketing Materials
Marketing materials will be required to attract and retain customers to your bar.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your bar. Your logo will be printed on company stationery, business cards, marketing materials, and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional bar website provides potential customers with information about the products and services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn, and/or other social media networks will help customers and others find and interact with your bar.
14. Purchase and Setup the Software Needed to Run Your Bar Business
Running a bar efficiently and effectively often involves using various software tools and platforms to manage orders, inventory, customer relationships, and finances.
Here are some essential software types for your bar:
- Point of Sale (POS) Software: POS software helps you manage drink orders, process payments, and track sales. It can also generate reports for analysis and inventory management.
- Inventory Management Software: This software helps you track liquor, wine, beer, and ingredient stock levels. It can also provide insights into purchasing trends and order optimization.
- Liquor Cost Control Software: Specifically designed for bars, these tools help you monitor and control your liquor costs by tracking pours, shrinkage, and inventory usage.
- Bar Management Software: Specialized bar management software offers features like drink recipe databases, pricing management, and real-time inventory tracking.
- Employee Scheduling Software: Employee scheduling tools help you create staff schedules, manage shift changes, and track labor costs.
- Customer Relationship Management (CRM) Software: CRM software helps you manage customer data, track customer preferences, and build loyalty through targeted marketing and promotions.
- Reservation and Booking Software (if applicable): If your bar offers reservations for events, parties, or private gatherings, reservation software can streamline the booking process.
- Accounting and Bookkeeping Software: Accounting software like QuickBooks or Xero helps you manage finances, track expenses, and prepare for taxes.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your bar. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
How big is the bar industry?
There are 64,354 bars in the U.S. that generated $25 billion in revenue last year. This represents an annual growth rate of 1.0% in the past 5 years.
What are the key segments of the Bar Industry?
The main segments of the industry are mixed drinks and beer. The other segments of revenue include:
- Sale of meals and nonalcoholic beverages
- Sale of wine drinks
- Other (accommodation, cigarettes, rentals and packaged liquor)
- Admissions to special events and nightclubs, including cover charges
What external factors affect the Bar Industry?
A number of factors affect the performance of the Bar Industry. These drivers include:
- Consumer spending: This year, consumer spending is expected to increase which means that Americans would tend to spend more for products and services, which includes goods and services in the bar industry.
- Consumer Confidence Index: A raise in consumer confidence index is expected this year. This means that consumers will tend to increase spending for entertainment and leisure.
- Per capita expenditure on alcohol: This means increased alcohol consumption by the consumers. This is also expected to increase slowly in the present year.
- Healthy eating index: As health awareness increases, there is also a growth in the healthy eating index of the consumers. This means there is an increasing number of people who limit their alcohol consumption. This is expected to increase this year and will negatively affect the bar industry.
What are the key customer segments in the Bar Industry?
The key customer segments in the bar market are as follows are all relatively equal amongst those aged 25 to 54. Those aged 55 and over and those aged 25 and under also account for a small portion of industry revenue.
What are the key costs in the Bar Industry?
Purchases – This category eats up the largest portion of the industry revenue.
Wages – It is estimated that more than a quarter of the bar industry’s revenue account for wages.
Other – This includes expenses like insurance, accounting, office, licensing, rent, etc.
What are the Typical Startup Costs for a New Bar?
Bars startup costs range from $140,000 to $450,000.
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Additional resources in the Bar Industry
For additional information on the bar market, consider these industry resources:
- National Club Industry Association of America: www.nciaa.com
- Nightclub & Bar Magazine: www.nightclub.com
- US Census Bureau: www.census.gov
- Distilled Spirits Council of the United States: www.discus.org
- Alcohol and Tobacco Tax and Trade Bureau: www.ttb.gov
- American Beverage Licensees: www.ablusa.org
- The Bar Mavericks: www.thebarmavericks.com
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