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How Much Does It Cost to Open a Bar in 2020?

Bars

How Much Does It Cost to Open a Bar in 2020?

March 24, 2020

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It’s no secret that there’s a lot of competition within the food and drink industry – there are more than 65,000 bars operating across the united states alone. If you’re looking to open up a bar of your very own, there are a number of things you’ll need to plan for in order to ensure success.

One of the most important of these is making sure you can safely cover the overall costs associated with starting and operating a new bar.

How Much Does It Cost to Open a Bar?

The cost of opening a bar is between $125,000 and $850,000 on average; these costs generally reflect businesses that are renting facilities or mortgaging and rehabbing a property. Buying an established bar can cost as little as twenty-five thousand dollars. The overall costs associated with opening and operating a new bar are also largely determined by location. 

Because starting a new bar is such a large investment, it typically takes many months to begin making profits and a couple of years to recover the initial investment. You will need to plan and budget appropriately to ensure you can make it through that initial period without a surplus of revenue.

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Breaking Down the Startup Cost of Opening a Bar

So, what types of opening costs are we talking about here? There are plenty. Opening a new bar requires a rental or purchase of a location, licenses and permits, equipment and inventor, and often at least one type of technology or software to assist in the operating and management of the business as it gets off the ground.

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Diving right into researching these costs can be daunting, so we have created this list of some of the most common and important expenses you’ll come across when starting your new bar. 

The Building

This is a big one. Once you have the premise for your new bar, you’ll want to take the location into consideration. This will have a large effect on your target demographics, your marketing efforts, and your business costs overall. 

First, you will need to decide whether you’ll be renting or buying your space, and how much you’ll need to remodel or redecorate to make it fit your vision.

The cost of renting a bar is about $110,000 on average, including costs for both rent and remodeling. This option lessens the pressure in the unfortunate event that the business doesn’t succeed. Purchasing a bar outright can bring on some additional pressure, but can bring down overall costs, in the long run, depending on your circumstances.

Licenses, Permits, and Insurance

You’ll need a number of licenses before you get started, the most obvious of which is a liquor license. Other licenses and permits would include a business license, building health permit, certificate of occupancy, and entertainment or music licensing.

The cost and other requirements for these licenses and permits can vary between states and municipalities so it is always important to check your local regulations.  Liability and general insurance will be necessary to protect yourself and your business as well.

Bar insurance often costs between $3,000 to $5,000 per year but can be less if your bar is on the smaller side.

Equipment and Inventory 

To set your business up for success from the start, you’ll need to get all the right equipment ahead of time. At a minimum, you will need bartending and cocktail equipment, beverage dispensing equipment, bar furniture, refrigeration equipment, and smaller items like blenders and glass racks. If you plan to serve food, you will also need supplies and equipment for producing and serving the meals. This initial stock-up can cost tens of thousands of dollars.

Different types of bars might need additional equipment as well. For instance, a sports bar will need several television screens to be hung around the bar area to keep sports fans happy, and a cozy neighborhood bar may benefit from investing in a pool table or a few dartboards for patrons to use.

There’s no shame in purchasing second-hand equipment as long as you know it’s functioning and sanitary. You can always shop around and upgrade later, once your business is more financially stable. Preventative maintenance can also go a long way toward minimizing costs as you’re getting started. It’s much less expensive to take good care of your equipment and make repairs as needed than to wait until the bottom falls out and buy everything brand new. 

Once you’ve got all that sorted, you’ll need to stock your bar with the alcohol you’ll be serving. If you’re offering a lot of cocktails, make sure not to skimp on the sodas, mixers, and garnishes.

Technology

Most bars aren’t managed with pen and paper these days. Software that manages Point of Sale, accounting matters, and even labor management, can certainly be costly, but it also facilitates basically every aspect of running a successful bar.

Be sure to spend time researching and choosing a bar POS system to help your manage all of your tavern’s transactions and payments.

Advertising and Marketing

Word of mouth can be any business owner’s best friend, but putting together a solid plan and investing in some local advertising can really help you spread the word about your new bar.

It may seem daunting, but a bit of research and some wisely spent dollars can generate a great deal of profit in the long run. There are even many free methods of advertising and marketing your bar, like building a presence on social media or simply getting more involved in your local community.

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What Are the Operating Costs of a New Bar?

Most of the revenue that comes in during your first several months will need to go back toward your initial start-up costs or repaying investors. This means you won’t be making a profit right away, so creating a thorough and realistic budget from the start is key. Operational costs on average, including items like staffing, rent, and inventory, amount to about $20,000 per month.

Rent

Rent, of course, will vary depending on the size of the city it’s located in, in addition to a number of other factors. Utilities, like gas, electricity, and water, will also need to be paid on a monthly basis. You can call these vendors as you’re getting your plan together to find out if they offer any type of special contracts for new business.

Restocking Inventory

Restocking the bar itself can run your business more than $5,00 per year. In addition to alcohol, you’ll likely also need to restock and repair some of your equipment as time passes. 

Staff

Staffing isn’t cheap, there’s no way around it. To be certain that you are getting the highest return on your staffing costs, make sure you’re really investing in training in support for your permanent staff – front and back of house.

You may also have some start-up needs that would be best delegated to freelance or temporary contractors. These might include things like building an initial marketing plan or getting legal or financial advising.

Final Thoughts: Running a Profitable Bar or Tavern

As with most investments, expecting an immediate payout upon opening your bar is unwise. The average monthly earnings are between $25,000 to $30,000, so that leaves additional profits between five to ten thousand dollars each month. 

You should be confident from the start that your investment is large enough and your budget is comprehensive enough to get you through this initial period without substantial profits coming in.

Join the conversation with thousands of customers and partners talking about the future of food service.

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