How to Open a Bar Concept to Inception
Insight into How to Open a Bar
People go to bars to drink an alcoholic beverage, have fun with friends, and listen to good music. Maybe they want to celebrate a special occasion with colleagues. There may be a sports bar or local neighborhood bar for people to watch games and root for their team. Regardless of the type or size of a bar, most people agree that they are a great place to relax and find community.
So, what does it take to open a successful bar? While many entrepreneurs dream to become a bar owner, doing so takes skill and a comprehensive business plan. It sounds like a fun and easy-going job, but the bar business can be tough. Any business owner has a lot of hats to wear, but bar ownership is a unique challenge in itself.
A bar owner needs to work late hours, purchase bar equipment, manage operating costs, optimize inventory management, and more. With new restrictions from the health department due to COVID-19, it's become even more challenging to open any type of restaurant business. However, with dedication, time, and intelligence, a person can succeed in the bar industry.
What to Know About the Bar Industry:
Grand Opening vs. Soft Opening
After an owner has purchased a liquor license, found the right real estate, and made other preparations, it's time to open to the public. This is an exciting and unique next step for the bar owner to showcase a new brand to customers. To prepare for this special day, stakeholders need to decide whether they want a soft opening or a grand opening. Not quite sure what that means? Here are the details
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What is a Soft Opening for a New Bar?
A soft launch occurs days or weeks before when the bar opens to the public. It serves as a test run for the bar business. Owners typically invite a specific group of guests through an invitation to see how they like the bar concept, menu, and alcoholic beverages.
A soft opening provides an opportunity for the owner to resolve any bottlenecks before a grand opening. While there is no requirement to use a soft opening, more owners continue to do so. The many benefits include -
- Creates Excitement - Hopefully, the majority of guests will enjoy the new bar and will tell their friends about it. This generates excitement before the big launch, which creates more business.
- Prepares Wait Staff - A soft opening provides an opportunity for wait staff and cooks to test their skills.
- Obtain Feedback - This is a fantastic way to obtain feedback from guests. Ask what they like, what they don't, and what they would do differently. It provides a chance to fine-tune the restaurant business before opening to the general public.
- Increase Revenue - When customers enjoy the soft open, they will probably come back. This will result in greater revenue and profits.
What is a Grand Opening for a New Bar?
A grand opening is an alternative option for bar owners. It is the official opening day of a new restaurant to the general public. Many owners prefer this path because a soft opening can cause numerous problems. These include inventory shortages and expediting food to the level it needs to be.
This can lead to a bad first impression that is difficult to overcome. A grand opening takes greater preparation because there will be more guests. Therefore, the bar owner is usually more prepared. It may include a party, special pricing, beer/wine, and even food service, depending on the type of new bar. The top benefits include -
- Attract More Customers - With a soft opening, bar owners rely more on word of mouth from their VIP guests. Because a grand opening is available to everyone, it can encourage passersby to enter. Some owners pass out promotions outside or around the bar location to attract new patrons.
- Gain Media Attention - A grand opening typically gains more media attention than a soft opening because it pertains to the general public. This provides greater exposure for larger bars. Sometimes there is even a ribbon-cutting ceremony that further showcases the event.
- Build a Relationship with a Nearby Small Businesses - A grand opening is a fantastic way to build relationships with an adjacent small business. Bar restaurant owners can talk with the local coffee shop and ask to put up some flyers for the big day. There are many ways to join the local business community and increase profit.
Bar Owner Responsibilities
All business owners wear different hats, but bar owners are in a special category of their own. Bar owners need everything from an identification number to a business license to even a food service license (if food is served). They need to obtain necessary permits/licenses and ensure the facility complies with any health regulations from the local government.
Most owners need to acquire a business loan to pay for startup costs unless they have an enormous amount of capital on hand. But it's not enough to meet these requirements. The owner must know how to manage the bar, provide good customer service, and market the business. Here are all of the duties of a bar owner
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1. Inventory Management
The most critical requirement is to ensure all stock is on hand before the grand opening. After that, the owner needs to regularly optimize and streamline the reordering process to make sure there isn't a shortage of food/beverages. The owner typically orders the drinks that are popular and profitable most often.
Some use an inventory spreadsheet such as Excel, while more use an optimized software solution. A good inventory management system integrates with a POS system, which enables the owner to reorder based on exact sales.
2. Train Staff in the Best Way
Bar managers must streamline the onboarding process and hire the correct people for the job. This typically requires the owner to create training documents and supervise new employees.
He/she also needs to schedule shifts properly, assign stations, and ensure staff knows how to handle large events. If it is a specialty bar or wine bar, the owner may require bartenders to take special courses.
3. Manage Day-to-Day Restaurant Bar Duties
While it's impossible to generalize about all of the operational duties, the majority of owners need to do the following -
- Create a checklist for cleaning and opening the bar
- Generate weekly and monthly checklists to clean
- Create checklists of bartender duties
- Write training documents for new hires
- Document the order of service
- Create guidelines for shift changeovers
- Document protocols for emergencies and ensure they are easily visible to staff
- Create policies regarding sick time, vacations, and benefits
- Document the entire liquor list in the bar
- Optimize inventory management to make sure the bar area is stocked
- Create a layout for bar equipment
4. Generate Marketing Campaigns for New Bar
The owner needs to market the existing bar to the public to generate profit. This includes anything from social media posts to happy hour promotions to advertisements on television or online.
The owner can improve marketing campaigns if he/she invests in automated software that collects sales and online data. Bar owners can compare and contrast promotions to sales numbers over certain periods and use predictive analytics to tailor future campaigns.
5. Provide Excellent Customer Service
Bar owners need to build relationships with many people, including customers. Why should customers visit this particular bar over others? The majority of patrons prefer going to restaurants where they feel comfortable and at home.
Bar owners need to talk to customers, ask how they are, and get to know them. They should remember their names and even what they prefer to order. This will increase brand loyalty and encourage customers to view the establishment as better than the average bar.
Tips to Improve Customer Service in a Bar:
6. Increase Sales for Long Term Success
For long-term success, bar owners need to create pricing strategies and analyze the data they collect from POS systems. After they analyze beverage inventory each day, owners know exactly which drinks patrons prefer. They need to then create a strategy to generate the most profit from those cocktails.
This may require a better menu design, up-selling, unique mixes, or special pricing deals with vendors. Restaurant analytics and automated solutions optimize this process as they collect valuable data and extract insights. Bar owners can then test pricing plans to see which ones generate more profit without hurting brand loyalty.
Pros and Cons of Bar Ownership
To prepare to open bar businesses, entrepreneurs need to know exactly what they are getting into. Some personalities may not be suited for this type of role. An owner must be patient, friendly, good with people, organized, dedicated, and creative.
Bar ownership is a unique role that is full of surprises. While the majority of bar owners enjoy the experience, the job requires long hours and strenuous labor. Here are some of the top pros and cons of bar ownership.
Pros of Being a Bar Owner
Alcohol is expensive, and so are cocktail menus. If a bar serves hard liquor or craft beer, it can expect to make a huge profit. Most owners make anything from a 200-400% margin on their beverages.
Bar ownership is also a fantastic way to meet new people. Owners can network with small business owners in the area, talk to customers and exchange information, and make new friends.
Finally, a bar owner answers to nobody but himself. He runs the business, makes the decisions, and chooses what menu items to include. While this is an enormous responsibility, it is an excellent opportunity for the right person. It requires creativity, hard work, and organization skills.
Cons of Being a Bar Owner
Bar ownership comes with very high startup costs and operating expenses. There are permits, licenses, and high real estate costs, depending on the bar location. There are also labor costs and unforeseen costs to save for, which is strenuous for any startup.
A bar owner needs to be physically able to be on foot for long hours. New owners typically work 6-7 days per week for 10-12-hour shifts, unless they have help. Unlike offices or other business types, bars are usually open on some holidays and all weekends.
Bar owners need to expect stiff competition. They do not just have to compete with other bars, but with restaurants that serve alcohol, small diners, or other similar establishments. It can be difficult to create a unique brand and convince customers to change their drinking preferences.
The Average Cost of Opening a New Bar
In the United States, bars and taverns continue to grow. While it's exciting and profitable to run a bar, it can also be expensive. To start, it helps to see how much each product brings in profit. Here are the average percentages of total sales per item -
- Beer and Ale are 35% of sales
- Distilled Spirits are 35% of sales
- Wines are 10% of sales
- Average Revenue per Employee is $64
Depending on the state, licenses and permits can be expensive. For example, the New York Liquor State Authority charges a fee of $4,500 for Alcohol Beverage Control licenses.
Finally, the owner needs to maintain and run the bar. He/she considers these as operating costs. Most alcohol is more than $5,000 per year, depending on the size and scope of the bar. The average bar requires roughly $13,000 a month to staff and run everything. This means that the owner must make much more than that in revenue to see any sort of profit.
How to Open a Bar
Who doesn't dream of opening a bar at some point? How nice it sounds to run a beach-side small tavern, with locals who know the owner's name and long-term staff. While there are certainly many benefits to bar ownership, it is still a difficult job.
However, a person who is creative, dedicated, and intelligent can open and run a bar, so long as he/she has the capital. If successful, bar owners enjoy high profits, a fun environment, and customer relationships. If this sounds good, then see ahead for the next steps
1. Write a Bar Business Plan
A strategy is required to succeed at bar ownership. It's not important to know all the details because they will probably evolve as time goes on. Successful owners provide enough time in their plan to meet goals. For example, no owner should plan to break even in a year or less.
A more realistic timeline is 25 months. A good plan helps to pinpoint any concerns before they become bigger problems. It can also help to map out sales strategies, the onboarding process, and more.
2. Establish the Structure of the New Bar
A bar owner needs to figure out how he/she plans to operate the bar. Will it be a sole proprietorship, an LLC, or perhaps a corporation? These are all questions that need to be answered. Sole proprietorship and partnership are easier processes, but the owner is more liable for things that go wrong.
To mitigate liability, most owners opt for an LLC or corporation status. An injured patron/employee can then sue the company rather than the individual bar owner.
3. Trademarks for Name and Logo in New Bar
Bar owners should register all trademarks with the United States Patent and Trademark office. This will prevent anyone who wants to use the logo/name outside of the bar's geographic location. Because this is a complex process, many owners hire a well-versed intellectual property attorney.
4. Acquire Business Licenses
The bar must be licensed before the grand opening. Otherwise, the bar may be open to litigation. These licenses are necessary for owners to serve drinks, food, or play songs. Most of them are expensive and time-consuming. It's critical to get a service license and other permits, or the bar can easily be shut down by authorities.
5. Find the Right Location
It can be challenging to find the right location for a new bar. There are pricing concerns, startup costs, and more. The owner should consider what kind of style the existing bar or new establishment is. Is it formal, casual, or elegant? He/she needs to think about what type of guests will attend.
Various locations in the city will be better for certain demographics. College bars should be by a college. Sports bars should be in high visibility areas with other shops. The bar should also be accessible with enough parking room. Owners should see whether there are any zoning restrictions before any investment. Finally, it's critical to consider the cost and compare it to on-hand capital and projected profit.
6. Design Bar Layout
For the design bar layout, owners need to ensure everything is synchronized. For example, an Irish pub should have green with a certain type of music that plays. Some owners hire an interior designer to map out the bar design. Pinterest is also another option for those with less to spend. It's always important to consider what the target market needs and wants.
7. Inventory Management and Accounting
Owners should invest in a POS system that integrates with other technology providers to streamline operations. It's also important to properly track inventory and monitor temperatures with a software solution. Owners can collect data and use it to make improvements, decrease inefficiencies, and offer promotions.
They also need an effective accounting system that integrates with time tracking software. This streamlines payroll and prevents overpayments or compliance problems. Owners will also need to design their menu properly to ensure profitability.
8. Hire Staff for New Bar
A bar can't succeed without the right staff. Good bartenders are knowledgeable, enjoy their craft, and are dedicated to working. Owners need to provide alcohol training for all servers to ensure compliance and good customer service.
Effective employees are skilled and people-oriented. Owners also need to maintain morale and motivate workers to avoid high turnover. Pay incentives raise, and recognition goes a long way to create a good work culture.
Traits in an Effective Bartender:
Key Takeaways of How to Open a Bar
In conclusion, here is what to know about opening a bar -
- A grand opening occurs when a bar opens to the general public all at once. A soft opening occurs when the owner opens slowly over a few weeks. Both have advantages and disadvantages, though soft openings are usually more popular.
- Bar owner responsibilities include inventory management, hiring staff, managing operations, overseeing marketing campaigns, creating relationships, and increasing profit.
- Pros of bar ownership include high-profit margins, networking opportunities, and working for oneself. Cons include startup and operating expenses, license/permit fees, a saturated market, and long working hours.
- To open a bar, owners should write a plan, set up the structure, trademark the logo and name, acquire the permits/licenses, choose the right location, design the bar, optimize inventory and accounting, and streamline the onboarding process.