How Much Does It Cost to Open a Bar?
If you’re looking into the cost to open a bar, you’re in the right place. Between licensing, finding a space, and buying everything you'll need, the question of how much does it cost to open a bar is answered by a large number. There's sure to be costs you're expecting, like the liquor license and taxes.
There will also be some costs you might not see coming. Preparing for them is the best way to be sure you have room in your budget. This comprehensive list will walk you through all the basic costs you'll need to be ready for.
Along the way, there will also be some costs that come up after you've opened the doors. Overall, this guide will be your jumping-off point for being fully prepared to open a bar. So, how much does it cost to open a bar? It's time to find out.
Opening a Bar With No Experience
If you’re reading this, this is probably your first time opening a bar. A bar comes with all the startup costs of a regular business, along with bar-specific needs.
You’ll need to have a business plan, money, and backup plans. Planning for these steps will help you see which areas you're going to need the most work in.
You'll also need to understand licenses and permits, as well as taxes. These will vary from state to state, so the best place to start is figuring out your bar's location.
You'll want to find a lawyer who knows bars and restaurants. While everything is important, the best place to start is your location.
Right Building, Right Price
The first step is choosing your bar's spot. Your location might determine this, or you might choose a new location depending on price. The costs can range into the hundreds of thousands for buying a new space.
If you want to buy an existing bar, it can be cheaper but still in the thousands. Be sure to factor in licensing and supply costs, as the price of the physical space is just the start.
Taxes & Licensing
A lot of the cost to open a bar comes in taxes and licenses (including getting a liquor license). Depending on your location, your employees, and your bar, federal, state, and local taxes may factor in. In total, this could get your yearly costs up into the tens of thousands.
Of course, that depends on your situation. Some places are more expensive, while some are much more affordable. Look into the rules in the area you plan to open your bar to be sure.
Taxes, Taxes & More Taxes
You can expect to have to pay federal income tax and potentially state or local taxes. For your employees, you’ll have to factor in federal payroll taxes. You’ll also have to cover state taxes.
To top it all off, you’ll need to keep sales and use taxes in mind. These operating costs depend on state and local government rules, and they’ll sneak up on you if you don’t look them up.
States With Less Taxes
If you are looking into choosing a new spot for your bar, there's a few states that don't have state income taxes. Those states are:
- South Dakota
If moving is an option, or if you're already in one of these states, you'll have less taxes to think about.
Get yourself set up with an accountant right off the bat. You can check everything off the list and stay organized for the sake of you, your employees, and your business.
Your accountant should have experience with bars and restaurants. Hiring an accountant may be new for you, but there are resources out there to help you find the right one.
With both the lawyer and the accountant, it would be helpful to have them on the team. However, having them on a consulting basis is a good start. If you know any bar owners in the area, you can reach out to them for advice and recommendations. You could also consider doing a swot analysis to get ideas into your competition and the local market. Check out a bar or restaurant swot analysis example for insight on how to do one.
The Liquor License Cost
One of the most asked questions in opening a bar is: how much does a liquor license cost? This is a big question because it can impact if you can open a bar and where you’ll want to open for business. Depending on your state, a liquor license can range from $25 a year to hundreds of thousands yearly. The question of how much does it cost to open a bar takes a large chunk of its number from the liquor license cost.
To be fair, that top price is pretty high up there and not true for everywhere. It’s more likely you’ll be paying a few hundred to a few thousand each year.
Liquor License Renewals
While the liquor license cost is a starting expense, it also needs to be part of your yearly costs. You'll have to pay to renew and keep it updated.
The overall cost you figure in should also include licensing fees, as those can add quite a bit to the base cost. The liquor license cost is something else you’ll want to check out your location for. Be prepared to spend quite a bit for this expense.
Cost of Supplies
The cost of supplies for your bar will range into the thousands. From starter costs to regular needs, it's a long list.
The pre-opening cost to open a bar includes many tools and appliances. The following list is a good place to start, but you may find that you need more than:
- Drainboard (and glass rack)
- Soda gun equipment
- Ice bin setup
- Ice machine
- Waste containers
These items are all good to start with, but you may need more along the way. And, if you’re opening a niche bar, you might need specific items.
While you're setting up your pre-opening needs, make sure to get situated with a point of sale, or POS system. This may be a cost as well, depending on what POS system you choose, but it'll make everything easier once you open for business.
Buying an Established Bar
If you’re purchasing a pre-existing bar or property, these costs won't necessarily all apply to you. You may find you only need a few specialty items, or you may need to upgrade everything.
Liquor & Drinks Cost
Naturally, you’ll need to buy beverages to keep the bar open. The cost will depend on what you serve (and your cocktail ingredients), but knowing your liquor cost will help you keep the drinks flowing. You should also know how long does a tapped keg last.
The amount you spend on liquor and other beverages will vary and will take some math on your part.
A good place to start is the liquor cost calculator:
Liquor cost = (Inventory Usage ÷ Total Sales) x 100
That may seem daunting, but keep in mind that your bar profit margin will offset the costs once the drinks start flowing.
Having a good way to take inventory for your liquor will also be important. If you're not keeping track of your bottles, there's a good chance you'll end up losing money between pours. A barcode scanner app for inventory will be a huge help.
Supplies Beyond Beverages
Beyond the cost of beverages, the cost to open a bar also includes supplies like foods to serve, ice, and other general needs, like cleaning supplies. Your cost could be anywhere from a few hundred to several thousand dollars regularly based on what type of bar you open.
When looking into general supplies, make sure you:
- Go wholesale whenever you can.
- Optimize as much as possible.
- Look into what is available in discounts and deals for bar owners in your area.
If you're going to serve food outside of regular bar snacks, working with restaurant food suppliers will also be helpful. In the same way you'll want to set up liquor inventory, setting up food purchasing automations will ease the process.
For cleaning supplies, a good list to start with includes:
- Floor mat cleaner
- Glassware cleaner
- The best ceramic tile floor cleaner
- Restaurant hood cleaning supplies
- commercial restaurant cleaning supplies
- A restaurant cleaning checklist
That'll get you off to a clean start.
Location, Location, Location
While I've said it many times throughout this guide, I can't say it enough: your location is key to finding the right cost. With the current cost of liquor licenses and taxes, there are some locations where owning a bar is a constant uphill climb. The cost to open a bar in one of these locations may be worth it, but you can choose a new place as well.
If you want a pricey spot, make sure you do your research. The highest costs of opening a bar are the ones you don't see coming.
Frequently Asked Questions About How Much Does It Cost to Open a Bar
The costs to open a bar can seem never-ending. Technically, the opening costs go on for several years as you pay off loans and really get your bar off the ground. We’ve covered a lot of info, but these frequently asked questions will give you even more help along the way.
How Profitable is Owning a Bar?
Owning a bar is very profitable if you know what you’re doing. Bars have some of the best profit margins, because of the low cost to purchase alcohol in relation to the prices you can charge. As you plan your menu with menu engineering, implement marketing strategies, and get to know your customer service plan, your bar can bring you a lot of profits over the years.
How Do Bars Make Money?
Bars make money from the sale of food and drinks. The largest chunk of a bar’s profits comes from alcoholic drinks, as alcohol can be purchased cheaply and sold at a great profit margin. You can charge fair prices, and still make a killing on cocktail drinks, well liquor, types of wine, the best sparkling wines, and everything else.
What Type of Bar is Most Profitable?
The most profitable type of a bar is the bar that understands its customer base and constantly works to be the best. You can run a cocktail bar, a wine bar, a dive bar, or anything else. What really matters is that you are devoted to improving your bar every step of the way.
The Cost to Open a Bar & The Reward
In answering the question: how much does it cost to open a bar, you’re going to have a long list of necessary expenses. This may be daunting, but don't let it get you down. If owning a bar is your dream, it’s worth it. You can check out some of the best bar books to make it easier. Also, now's the time to decide if you're into eco-friendly restaurants or bars, so you can start making those plans.
If you’re looking for extra motivation to keep you going, take a look at the average amount of money you’ll make. On average, a bar makes about $330,000 each year. After expenses, the profit is about $39,600.
While that won’t be your full salary, it’s a great number to keep in mind. Like all small businesses, the cost to open a bar may be high. However, the reward of being a bar business owner is well worth it. Once the cash flow begins, you'll see your dream turn into a reality.