Imagine walking into a place where everybody knows your name. Now imagine making a boatload of money doing it. That's what opening a bar can be like.
Starting a bar can pay off big, but getting from this article to everybody knowing your name takes a lot of work. This guide will help you estimate what it costs to open your bar, and it’ll help you start thinking about bar concept possibilities.
So let’s first look at the profitability of the average bar, and the financial reality of opening one. Then let's get into the types of bar concepts you can open and what you’ll need to specifically consider for each of them.
Are Bars Profitable?
In general, yes, bars are profitable. The bar industry experienced annual growth of almost 3% from 2013 through 2018. The profitability of opening and owning a bar depends on more than industry trends, though. We must factor in how much it costs to open and get up and running and how much it makes. Here are some numbers to give you a ballpark for how much it costs to start a bar and how much owning a bar can make you.
How Much Does it Cost to Open a Bar?
According to Investopedia, the total startup costs for opening a bar are:
- $110,000-$550,000 for a bar that rents or leases its location
- $175,000-$850,000 for a bar that purchases its location and pays a mortgage
- As little as $25,000 if its an established bar already for sale
Beyond initial startup costs, opening a bar requires other recurring operating costs of about $24,200 per month, which include:
- Staff (to give you an idea of what to pay a bar manager, here's, on average, how much bar managers make)
The average cost of opening a bar is $420,000. Opening a bar and running it for the first year clocks in at about $710,400. Remember to invest in good accounting software to keep track of these costs.
How Much Do Bars Make?
Now we know the average cost of opening a bar. The next step is figuring out how fast we can get that money back. Investopedia suggests the average bar revenue is $27,500 per month. So, how much do bar owners make, then? It's hard to answer how much bar owners make. It depends on factors like how much they invest back into the business and how much they choose to pay themselves. But, we can extrapolate:
- The average annual bar revenue is $330,000
- Average annual expenses are $290,400
- The annual amount a bar owner could make based on our averages is $39,600
That's based on a 12.5% net profit margin. This, of course, is only meant to give you a ballpark idea of how profitable owning a bar can be. In practice, it depends entirely on specifics. And one of those specifics is the type of bar you plan on opening.
The Different Types of Bars You Can Open
If this all sounds up your alley, then you’re ready for the next step. It's time to decide on the type of bar you want and its concept. There are tons of bar types, from standard taverns to canine cantinas, and we’ll touch on the more popular types. That includes wine bars, sports bars, lounge bars, pubs, craft beer bars, and cocktail bars. We’ll also give you tips on how to make each type of bar the best it can be.
How to Open a Wine Bar
A wine bar, wait for it, is a bar dedicated to serving wine. Maybe not exclusively, but that’s mostly what it focuses on. If you’re thinking of opening a wine bar, here are some tips to make sure it’s top-notch:
- Understand that wine is a community. The best wine bars don’t shun you for ordering a Chablis in the dead of winter, or pairing a big-bodied red with whitefish. Sure, they’ll have recommendations, but they’ll understand that wine is meant to be enjoyed, not stressed over.
- Staff your wine bar with people knowledgeable and enthusiastic about wine. Sadly, a standard bartender won’t cut it. Being passionate about wine is pretty much the definition of sommelier, though. Maybe you can find a level 1 or level 2 somm for your bar. Of course, not every wine bar or wine program can hire a sommelier. But there are plenty of people out there who would love the chance to pour and talk about wine all day. Your job is to find them.
- Have a variety of wines. Don’t go too deep on obscure varietals. Offer reasonably-priced, popular varietals. Organize by geography or grape, not by style.
- Offer some light fare that pairs well with wine and fits the vibe: charcuterie plates, cheese, olives, and fruits will sell like mad.
How to Open a Sports Bar
Opening a sports bar is the cheat code of bars: there’s a built-in reason for people to come drink at your place. If you’re opening a sports bar, your goal is to give the people what they want: sports. You must make sure that there is never a moment that sporting has stopped. Otherwise, your bar loses its identity. Here are some tips to open the sportiest bar of all:
- Invest heavily in TV and sound. This is going to be an added expense beyond what other bars are shelling out. This is the cost of the cheat code.
- Become a team’s bar. Let’s say you’re in Chicago. People are going to come watch the Bears every Sunday. But if you brand yourself as a Steelers bar, you’ll get an automatic second set of fans banging down the door. If you’re not keen on forsaking the local pro club, this strategy also works well for college. Show the Bears, sure, but raise an Ohio State flag up outside the door and you got Saturdays covered, too.
- Don’t get too fancy with your menu. We’ll touch on this in a forthcoming market research section, but people expect a certain type of thing when they go to sports bars. Wings, nachos, fried pickles, burgers, etc. Keep it simple, and make sure it pairs well with lots of Miller Lite. Your customers may not want, or understand, a table d hote menu.
How to Open a Lounge Bar
A lounge has a more relaxed physical setting than a venue with high-tops, booths, and tables, and a slightly trendier feel. If the bar in your mind’s eye has a cultivated tone, you may just be opening a lounge bar. Here are some ways to do it right:
- Unless you’ve got design chops, invest in a seriously talented interior designer. Try this: next time you’re in a club or lounge you like, look at the floor and walls. They completely set the tone. You must make them sing. For example, wood can set a hunting club vibe. Silvers and whites paired with ornate lighting fixtures and mirrors feel modern. Deeper colors like red and violet summon a swank, retro energy.
- Think of seating in terms of areas and not individual pieces of furniture. Create combinations of sofas and loveseats that make that section of your bar feel totally unique. Choose uber-comfortable upholstery that complements the interior design.
- Be thoughtful with lighting. Invest in a smart lighting system like Philips Hue so you can adjust the color and brightness of every bulb in your bar. Lounges are all about ambiance, so use dim lighting, angles, and—sparingly—color. And since seating in lounges is typically lower, make sure no bulbs from traditional table lamps are directly visible from any seats.
How to Open a Pub
The good old pub. The inn, the alehouse. The local watering hole. Pubs typically have a working class feel and if you want to open a pub, you should lean into that. Try stuff like this:
- Have pub games! Games like darts, pool, table shuffleboard, and Golden Tee are crowd pleasers. Remember, people don’t necessarily come to pubs to enjoy the wine, watch sports, or sit on a plush couch. They come because the day is over and they want to unwind.
- Give yourself the pubbiest name possible. A great way to do this is with an absurd pairing of two nouns: Shovel and Gherkin, Fork and Boot, Slug and Clam.
- Offer a shot-and-a-beer special. “$5 for a shot of Jameson and a can of Hamm’s? Don’t mind if I do.” – Everybody ever.
- Pub. Food. Look across the pond for inspiration. Fish n’ chips, shepherd’s pie, bangers and mash, and even a ploughman’s lunch. They'll go a long way to making your pub feel like the real deal.
- Get an interactive digital jukebox like TouchTunes. With no sports, no lounge music, and little pretension, a pub is a great place for people to throw on the tunes they want. It adds nicely to the community aspect of the tavern.
How to Open a Craft Beer Bar
Much like opening a wine bar, opening a craft beer bar should be about the joy of drinking the stuff. Your bar should be welcoming, celebratory, and inspirational. Don’t overload folks with information; give them just enough to educate them but keep the menu accessible. The idea isn’t to weed out folks unfamiliar with craft beer, it’s to turn them into beer devotees. Here are some tips that’ll get you there:
- Don’t just be a reseller of craft beer, be a part of the craft beer community. Go to brewery tours and introduce yourself. Go to tastings and network. This give you a much better feelings for the local beer scene and how to sell beer in it. It will also open up opportunities to get some limited-release brews that will sell like mad.
- Which is a nice segue into the next point: Get limited-release brews! Breweries make lots of cool, limited-release stuff and it usually takes a while to get it. There are lots of other bars asking for it too. Put your name in the hat and wait in line. You may even be able to skip a few spots if you’re networking well.
- Accept the fact that you will be paying a premium on orders. Embrace the quality. Once you make peace with the fact that making craft beer isn’t cheap, you won’t have a problem forking over more for it. Your guests won’t care. If they did, they wouldn’t have come to a your beer bar.
How to Open a Cocktail Bar
A good cocktail bar must embrace mixology. Some folks think a cocktail bar is basically a lounge bar, but it’s not. Atmosphere makes a lounge. Cocktails make a cocktail bar. Here’s the best way to go about opening a cocktail bar:
- Hire people passionate about mixology. “People passio...huh?” you may ask. These people exist, and they exist because mixology is modern day alchemy. Some bartenders love nothing more than putting on their mad scientist hats and tinkering around with potions and salves. Find those people.
- Create your own take on classic cocktails. Cocktail recipes aren’t set in stone. There are many ways to make a Negroni or an Old Fashioned. The way to get people to leave your bar and say they make a fantastic Old Fashioned is to make it your own. Everyone has had an Old Fashioned before. Now give them your Old Fashioned.
- Create your own signature cocktails. Before every popular cocktail was a cocktail, it was not a cocktail. Mixology is a creative profession, and this is why mixologists get into the game: to create new drinks. Bars can create tons of buzz in their city with signature cocktails. Who knows, you may even be the next Count Camillo Negroni.
- Embrace menu engineering. Your cocktail menu is central to your identity and is the primary access point for every guest to interact with your business. Get strategic with the way it’s structured and designed. Become familiar with drink menu engineering.
And They're Always Glad You Came
Opening a bar can be a richly rewarding experience, both financially and socially. Just ask Sam Malone. But there are a lot of moving parts when you're trying to figure out how to start a bar. Get a grasp on the financials and decide if opening a bar is realistic for you. If so, settle on the type of bar. With those out of the way, you'll start hammering out the concept, putting together a restaurant business plan, and making operational decisions.
And those are all things we'll get into right here as this guide grows, so stay tuned. There will come a time when you're thinking about liquor inventory management and analytics instead of bar dimensions and bar equipment layout. When that time comes, look into BinWise Pro, a bar inventory software solution. It can make your bar more profitable once you get up and running. Because in the long-term, proper bar management is how you're going to make way more than $25,000 per month.