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How to Open and Run a Local Bar in 5 Steps

Vivian Giang

Contributor at Fundera
Vivian Giang is a freelance journalist who covers strategy, leadership, organizational psychology and gender issues for Fast Company, Marie Claire, Fortune, Slate, among others. Previously, she was the lead entrepreneurship editor at Mic.com. Prior to that, Vivian launched the Careers vertical at Business Insider, which focused on the evolving office, emerging industries, and the most current employment trends. You can find her on Twitter at @vivian_giang.

If you’ve ever spent an evening at a fun local bar, you’ve probably thought about whether you could run your own drinking establishment and be successful. Now that you’re wondering how to open a bar in your neighborhood, you should know that you’ll need to treat it like any other small business—plus, serve alcohol to people.

When you walk into the Whiskey Tavern in Chinatown, New York, it’s quite like walking into an episode of “Cheers” because everyone knows your name, the bartenders often clap as you enter, and your drink is poured before you can take a seat.

To make patrons feel part of the family, Rob Magill, a partner at Whiskey Tavern, says learning patrons’ names is one of the first lessons emphasized during employee training.

“I know why I go to a bar,” he tells Fundera. “I go to bars not because the food is the best or the drinks are the best. Because they remember my name. They go out of their way to make my night great whether it’s Monday or Friday night.”

Bars require around-the-clock maintenance, a good chunk of change in the bank to start, and aren’t recession-proof.

As a result of Americans tightening their purse strings during the downturn years, bars saw their revenue slashed by 10%, according to MarketWatch, from $20 billion in 2007 to $17.9 billion in 2009. Fortunately for bar owners, the market outlook looks much better today, but surviving the small stuff takes some big strategic planning. Below is what to consider if you’ve ever dreamed of owning a neighborhood bar that’s “home away from home” for its patrons.

how to open a bar

How to Open a Bar in 5 Steps

Step 1: Create a Business Plan 

A business plan is an important document for any kind of small business. When planning how to open a bar, it’s practically a requirement.

Your business plan is a written plan that takes you from inception to success, and will cover your company’s value proposition, the location and team, the industry you’re entering, your legal structure, products and services, how you plan to market yourself, financial projections, and any other additional information that will point you toward long-term success.

This plan will help guide each of the other steps in the process of how to open a bar. Refer back to it often and tweak it as necessary as plans change or pivot.

You’ll use your business plan as a roadmap to long-term success, but also to woo investors and funders, to explain your concept to potential partners, and as a reference point as you get further along in your startup process.

Step 2: Find the Right Location

Just as with any small business, choosing your location is integral to your short-term and long-term success.

If you’re going to be the neighborhood bar, you better know the people you’re serving. During planning, consider contacting your local chamber of commerce to get information on your target market. Are you catering to college students, blue-collar workers, the art crowd, or conservative suburbanites?

In the Lower East Side where fashion and art mingle on every corner, Beverly’s wanted to be “a platform for all different kinds of creatives and like-minded people,” explains Gabe Schulman, founding partner of Beverly’s, a bar in New York’s Lower East Side neighborhood that’s known for its retro vibes and hybrid space for both bar and art.

Beverly’s hosts regular art shows chosen by curators, “probably a show every six weeks,” says Schulman. It’s this art community that he says “makes the place” what it is today. Art installations are often seen hanging in the bar’s narrow corners from the latest shows.

To cater to this crowd, Beverly’s keep things simple. There is one beer on tap, a few bottles to choose from, and basic mixed drinks. Schulman says this is because the bar is “all about the environment.”

“I think that when bars close down, one of the reasons is that they tend to overcomplicate a concept,” he says. “[Another] is because there’s not a unified vision between the people running the bar and the people working there. Sometimes, it’s hard to foster a sense of community.”

Step 3: Secure Funding

From booths to point of sale software to insurance to licenses, getting your bar idea off the ground requires some serious bank. You can easily spend tens of thousands of dollars in a small town, or millions in a bigger city.

“For New York businesses, you always run over budget and you have to be aware of the difficulties in operating a business in this city, especially if you’re trying to get a liquor license,” says Schulman.

While the popular notion is to have one year of rent saved up, Atlanta bar owner Nick Diascovis, who’s been in the business for over 20 years, told The Man Guide bar owners should have at least double that amount to get their operation off the ground.

If you don’t have that kind of startup capital, look into financing options for your venture. A good place to start is a business credit card, which can help cover the costs of small- to medium-sized purchases while also helping you rack up reward points. But you may also want to look into startup small business loans, short term loans, and other forms of business funding from either your local bank or an online lender. Whatever costs you have and your ability to pay them back should be covered in your business plan.

Many people wondering how to open a bar get stuck at this step and never go further. Those planning how to open a bar should spend plenty of time on this aspect.

how to open a bar

Step 4: Obtain Licenses and Permits

Nobody thinks about the hassle that comes with permits and licensing when they’re dreaming up their bar concept. Make no mistake: Alcohol is a heavily regulated business.

First, you’ll need a license from the Alcohol and Tobacco Trade and Tax Bureau (TTB), the entity responsible for enforcing laws “regulating alcohol production, importation, and wholesale businesses; tobacco manufacturing and importing businesses; and alcohol labeling and advertising.” This process will take anywhere from six to 12 months to complete. The TTB will need to inspect your business and conduct background checks on directors, officers, and owners.

Next, you’ll need to get liquor licenses at the state and local level. If you plan on serving food, you’ll need a food seller’s permit.

“There are just so many different departments,” says Magill. “It’s a business but you’ll also have to deal with the Department of Health and Mental Hygiene, the fire department, and criminal background checks.”

Once you obtain the necessary permits and licenses, be sure your bar is kept up to code as these businesses are often subjected to inspection. It’s one thing to learn how to open a bar. It’s another to learn how to re-open one after shutting down for health code violations.

Step 5: Prepare to Work Tirelessly

It may look easy, but running around making life fun for patrons is physically and mentally exhausting. There are many long days and nights. In short, the bar business is no path for those easily burnt out.

“I always say to any of my bartenders, Fridays and Saturdays are busy, but on Mondays when you have five customers and you’re not making any money, that’s when you need to do your best,” says Magill, who’s been in the bar business for 24 years.

Magill runs from one Whiskey bar to the next to check-in. He calls the industry “a seven day a week machine.”

“[The bars are] opened a long time,” he says. “During the day, most people check in at 9 and check out at 5 and there’s nothing after that. For us, we’re opened at 10 in the morning until 4 in the morning. You’re never off. Someone can call you at 3 in the morning with a problem, and when you do repairs or fix problems, you have to do it during your downtime.”

“You don’t check in or check out,” continues Magill. “You’re on all the time, which is tough. It’s hard to have normal relationships or make plans.”

At the same time, if you’re exhausted, you still have to be a people person. Because that’s the secret to your business: You’ve got to know how to treat people well. That’s why they’ll come back. That’s how you’ll start generating word-of-mouth buzz. And that’s when you’ll take over your ‘hood as the next “It” bar.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Vivian Giang

Contributor at Fundera
Vivian Giang is a freelance journalist who covers strategy, leadership, organizational psychology and gender issues for Fast Company, Marie Claire, Fortune, Slate, among others. Previously, she was the lead entrepreneurship editor at Mic.com. Prior to that, Vivian launched the Careers vertical at Business Insider, which focused on the evolving office, emerging industries, and the most current employment trends. You can find her on Twitter at @vivian_giang.

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