The Perfect Cocktail For Running a Profitable Bar Business
Owning a bar is about more than just making and serving drinks. In order to be successful, you must consistently uphold certain standards. Bars that stand the test of time typically have several things in common: they serve quality products, provide good value for the money spent and offer good customer service. They also have a clean and well-maintained environment.
Defining these standards begins with a well-thought-out business plan, including a strong concept that exploits consumer trends, market demographics and local competition, as well as a financial strategy with cost analysis and revenue projections. Upholding these standards begins with properly setting up your bar, including its design, licensing and staffing, and continues with running it smoothly and maintaining a profitable business.
What sort of design considerations are important for a bar?
Design considerations should start with space flow. Start by defining how you want your customers to move throughout your space. Some questions to consider:
- Do you want to cater to large groups of people?
- How can people safely and easily move through your space?
- How do you want your customers to feel when they enter?
Keeping these questions in mind will help you to define your bar, set the appropriate tone, and make more executive decisions going forward. Before beginning renovations, be sure to document what is good and bad about the current space.
Perhaps the bar you’ve purchased already contains some elements you’d like to see in your own bar, and want to keep them. Work with a contractor to bring your own design considerations in your space.
What are the challenges in getting a liquor license?
For most bar owners, this is their first concern - the brick that can alter their business foundations. Even if you are buying an already existing bar business, this is a step you must spend some time on.
The process of acquiring a liquor license looks different state by state, but there are some similarities that are maintained nationwide.
For a bar, you will need an ‘on-license’, that permits you to serve alcohol within your premises, and your customers to consume it. Bars also require a ‘tavern license’ as the majority of your revenue comes from selling alcohol. To apply for the license, you will need to contact your local ABC agency (Alcoholic Beverage Control) for the appropriate forms and directions on submitting them.
The cost of liquor licenses varies quite dramatically state by state, from $300 to $14,000. Surprisingly or not, the most expensive state for a liquor license in California.
How can you ensure you are hiring a strong bar staff?
The best way to ensure you are hiring a strong bar staff is to take your time. Do not rush through the interview process. Find and interview candidates based on a well-rounded system that incorporates background checks, referrals, and experience. Consider how involved you would like to be and therefore how experienced you need your staff to be.
You will need bartenders, a wait staff, security guards, and a manager. Employees will need to work efficiently and happily together - so be sure to consider how everyone’s chemistry aligns as you expand your team.
What other licenses are necessary for operating a bar?
Other than a liquor license, the other license that is fundamental in running your bar is a business license, a food service license, food handler’s permit and a sign permit. Other fundamentals include occupancy license, which certifies that the building has been inspected and is able to host people, and a resale permit, which allows you to make nontaxable purchases, such as wholesale food inventory.
If you are thinking about hosting musical events, big or small, you will need a music license or cabaret license. Each type of event will have slightly different needs. You can check in with your local SBA chapter (Small Business Administration) to confirm local requirements.
How do bars control costs?
To control costs, start by creating policies and procedures that revolve around cash handling, portion control and price-value relationship. It’s important to make sure these policies stay enforced at all times to maintain consistency. This reduces shortages and contributes to the overall profitability of your business.
First, set financial operations in place such as an accounting system and a bar/restaurant POS system. Since bars tend to handle a lot of cash, be sure to document a proper method of cash handling. For example, guest checks should be written for every order and all servers should reconcile their checks with the cash register or POS system at the end of each shift.
Second, always be aware of your business’s financial position, by preparing daily and weekly accounting reports and monthly income-and-expense statements. Also, regularly take an inventory of all food and beverage items to see if it matches your records. Liquor inventory should remain locked up at all times.
Third, maintain consistency in serving size to control costs, as over-pouring drinks can quickly add up. Train bartenders to follow recipes and exercise portion control. Consider investing in a liquor management system to ensure consistent pouring. Set the price of each item on your menu by first running a cost factor analysis, to maximize profitability.
Finally, offer a great price-value experience to customers to encourage them to remain loyal to your establishment. Curate this based on the type of ambience and level of service you hope to provide. For example, at a fast food establishment, people are expecting to get cheap food, fast.
What sort of marketing will help generate revenue?
- Learn as much as you can about your customers, including their demographic make-up, occupations and culture. Get to know how they spend their time, their favorite types of food, drinks and entertainment.
- Use social media marketing to establish and push your brand forward. Create accounts on platforms such as Instagram, Snapchat, and Facebook and regularly maintain these accounts to accrue a following.
- Have a happy hour, several times a week, as this strategy has been proven to work for a variety of bars & restaurants. The happy hour can not only include lower-priced drinks, but also appetizers. Giving customers a taste of the menu
- Learn (and teach your staff) common up-selling techniques. Simple things like recommending certain drinks, knowing which wine pairs with items on the menu, and selling the mid- to higher-priced items by the power of suggestion.
- Americans are on a health and wellness trend and, as an alcohol retailer, you can tap into this movement. For example, offering yoga or pilates classes on Sunday mornings, before mimosas is great way to draw in health-conscious customers. After all, paying more attention to your health is not equivalent to cutting out drinking altogether.
Owning and operating a bar is often portrayed in popular media as an easy way to sustain yourself and be an entrepreneur. The truth is that it takes hard work, research, and planning- just like owning any other business. The difference here is that it’s a lot more enjoyable to consume your own inventory.
Sources:
Zimmerman, Steve. "Restaurant Dealmaker, An Insider's Trade Secret for Buying a Restaurant, Bar or Club", Steve Zimmerman 2013.
Darlington, Nick. “Owning a Bar: Everything You Need to Know.” Restaurant Management & Growth Blog, Restaurant Management & Growth Blog, 16 Dec. 2019, www.7shifts.com/blog/owning-a-bar/
“Key Considerations for Designing the Best Bar or Restaurant.” Tinto Architecture, 19 Nov. 2018, www.tintoarchitecture.co.uk/blog/key-considerations-for-designing-the-best-bar-or-restaurant
WebstaurantStore. “How to Obtain a Liquor License.” WebstaurantStore, WebstaurantStore, 2 Oct. 2019, www.webstaurantstore.com/article/206/how-to-get-a-liquor-license.html