How to Open a Bar

There’s a lot to consider if you aspire to become a bar owner. Alcohol permits, significant funds, location, staff, and even a food menu. 

But don’t let these “to-dos” deter you from your dream of creating happy drink experiences for others. A successful bar owner stands to earn approximately $330,000 in annual revenue, with $39,600 in profits—which is much better than the average 10% returns from stock market investments. 

Use this guide and our tips to open and effectively manage your bar. 

Is now the right time to open a bar?

You’ll be surprised to know that despite stiff competition and being the ninth-largest market in the U.S., the industry is expected to grow at 2.2% by 2028. Also, the heavy initial investment definitely pays off as seen by the gross profit margins of 48%, which is significantly higher than the restaurant business's margins of 3%-5%.

Here are reasons to own your own bar: 

• You are providing a safe entertainment area for the local community.
• Lucrative earnings potential as liquor and food have high markups.
• A bar provides a source of employment for others in the community.
• No two days are the same, offering a break from the 9 to 5 of a desk job.

But be prepared. Owning a bar isn’t something you can just swing. It’s a full-time commitment in a notoriously competitive business that faces tough regulatory controls and requires major equipment investment. However, if you play your cards right, you can overcome these hurdles and build a rewarding career as a bar owner.

How to start a bar in 12 steps

Use our 12-step roadmap to raise your glass to a successful bar business. 

Step 1: Conduct market research 

Your vision of a lively bar with great drinks and a steady flow of customers will only be possible if you have done your market research. Otherwise, you risk becoming just another bar. To get an understanding of opportunities and identify which niche you can cater to, complete one or more of the following due diligences: 

• Study population demographics. Conduct surveys and interviews to understand needs and client preferences. Your local Chamber of Commerce is a good resource for this information. 
• Know your competition. Monitor other bars and successful establishments to understand their offerings and clientele to know what’s working and how to stand out from the crowd.
• Network with professionals. Reach out to other established bar owners to learn best practices and get invaluable tips on how to open a bar.  

Step 2: Decide on your bar concept

What type of establishment do you want to open? Use your market research and identify where’s the gap—that’s your best shot at building a bar that offers a unique experience.

You can also explore the following concepts and find one that appeals to your target market while matching your goals and skill set. 

• Neighborhood bar. Targets a local crowd, providing a laid-back vibe for people to let off steam. 
• Wine bar. A specialty bar serving hard-to-find and quality wines from across the globe. The menu at wine bars complements the drink, like cheese and charcuterie boards.
• Sports bar. Designed to appeal to sports fans with large screen TVs to showcase games and primarily serve beer and typical bar food. Many sports bars have video games and pool tables to keep people entertained.
• Cocktail bar. A specialty bar that attracts people based on their well-crafted drinks. These bars have a more up-scale ambiance and require skilled bartenders. 
• Microbrewery or beer pub. Offer their own brews alongside a variety of other craft beers. Some breweries provide a select food menu that pairs well with the beer. 

Step 3: Choose a business model

Every business owner needs to decide on a business structure. The chosen entity structure influences your legal liability, ownership rights, tax obligations, and funding options.

A sole proprietorship is the easiest to set up and operate, but this model offers no liability protection. You may need to dip into your personal savings to pay off a loss. The most popular structure that separates your bar business from you as a person is an LLC. Suppose someone gets injured at your bar. They can file a personal injury lawsuit against the business—not you. Formalizing your business also makes it easier to secure funds and provides several tax advantages.

Step 4: Write a business plan

A business plan gives you the foundation for growth and securing funds. It should cover the following essentials. 

• Executive summary. Describe the mission, vision, and values driving your business. 
• Market analysis. Mention market trends, local bar and restaurant statistics, and growth opportunities. 
• Bar description. Name your business and detail the type of bar you’d like to open, potential customers, and exact location. Outline the food and type of drinks you will serve and emphasize unique offerings, like ladies' night or signature cocktails. 
• Financial projections. Understanding the economics is crucial to building a profitable business. Your business plan should include startup costs, operating costs, income statements, and projected profit and loss statements. Also, a bar requires serious funds. If you don’t have the money, where will you secure funding? Good funding options include small business loans, angel investors, crowdfunding, and grants. 
• Operations plan. Outline the organizational structure, including ownership details, the number of people you’ll hire, and their roles and responsibilities. Describe daily operational processes, like billing and payments, or manage a disgruntled customer. 
• Marketing and sales. The right marketing strategy is key to your bar’s longevity and success. Marketing efforts should be driven by why people should come and hang out at your bar over another. 

Step 5: Find the perfect location

Location, location, location! It can make or break your bar. While selecting the perfect spot, weigh the following factors: 

• Access to public transport and parking
• Foot traffic
• Rent and utilities
• Alignment with bar’s theme and clientele
• Zoning and other regulatory restrictions
• Competition in area

Work with an experienced real estate agent and scout multiple properties. A real estate attorney can help you negotiate an attractive lease agreement, such as a modified gross lease that gives you more control over the property. 

Step 6: Obtain necessary licenses and permits

Owning a bar is a high-stakes business subject to stringent legal oversight. Securing some of these can take a while, so it’s best to get the paperwork started early. For instance, registering with the Alcohol and Tobacco Trade and Tax Bureau (TTB) can take a minimum of 45-60 days. LegalZoom can help you secure licenses and permits. 

Licenses and permits required to open a bar are as follows: 

• Liquor license 
• Food service license 
• Food handler’s permit 
• Certificate of Occupancy 
• Music and entertainment license
• Health and safety permit
• Signage permit
• Resale permit

Step 7: Design your bar

Your bar design impacts the vibe and ambiance you're creating. The design should effectively utilize the space, reflect your concept, and appeal to your target customer base. Pick furniture, artwork, lighting, and music to complement your theme. 

The space also needs to be functional and safe, with designated areas for standing, sitting, and socializing. For instance, stuffing many chairs and tables into a small bar can make it difficult for your server to reach all customers. You can create a design blueprint using your good old paper-and-pen, use software like RoomSketcher, Floorplanner, and Planner 5D, or hire an interior designer.

Step 8: Purchase equipment and inventory

Bars require significant equipment—from glasses, glass washers, furniture, and serving utensils to ice machines and taps. 

Create a list of items you will need and ensure it aligns with your bar concept. For example, don’t spend on fancy cocktail glasses if you aren’t going to serve specialized drinks. 

You can find equipment, alcohol, and food suppliers via an online search. Don’t shy away from reaching out to other bar owners, restaurants, or event planners and asking who is best in the business. Factor in things such as delivery times, payment terms, selection of beverages and food, and minimum purchase price before finalizing a supplier.

Step 9: Get a bar POS system

A POS (point-of-sale) or payment system saves time and makes managing operations more efficient. Imagine running everyone’s tabs using a pen and calculator. Your POS should be able to do the following: 

• Create open tickets and invoices.
• Track inventory.
• Integrate with multiple payment systems.
• Split checks.
• Change menu and pricing.
• Provides sales reports.

Toast, TouchBistro, Clover, and Square are the most popular POS systems in the market. Take advantage of their free trials to learn how they work. 

Step 10: Hire and train your staff

Running a bar as a one-man show is tough. You will have many people to hire:

• bartenders
• barbacks 
• hosts
• servers
• security personnel
• cooks

These are just some of the positions you need to fill. And, if your place has music, you might need a DJ. 

Yes, the industry is plagued with high turnover. But, it’s possible to build a strong culture by conducting thorough interviews, hiring those with experience, and providing a relevant training program, like how to deal with a drunk person or an intro course to bartending. Signing employee contracts that spell out roles and responsibilities also keeps conflicts at bay. 

Also, don’t skimp on pay and benefits. The industry is known for its massive margins, and sharing a little with your staff shows them you care and will help you build a tight-knit team. 

Step 11: Market your business

To build a cohesive brand image, select a creative and available business name. Follow it up by designing a logo, color scheme, and signage. 

An engaging social media page, like TikTok or Instagram, along with a well-designed website, serve as powerful tools for brand identity.

More marketing strategies that don’t break the bank are: 

• Tap into the digital crowd. Get listed on online directories like GoogleMyBusiness, GoogleMaps, and Yelp.
• Partner with tastemakers. Connect with influencers to post pictures and reviews on social media sites. 
• Create a buzz. Host game nights, happy hours, or live bands (if it aligns with your concept) to generate hype and excitement. 
• Encourage word of mouth. Ask customers to review online reviews and share their positive experiences. 
• Stand out from the crowd. Invest in attractive signage to draw people in. Make sure the sign is easily visible and recognizable.

Step 12: Launch and manage your business 

You’re almost at the finish line and ready to cut the tape. To announce that you're the new bar in town, consider hosting a party or a giveaway to generate hype. You could also partner with small businesses or charities to host an event that coincides with your grand opening. 

To boost brand recall, offer branded t-shirts or beer mugs on opening day. Many business owners recommend running a soft opening to work out kinks before the big day. 

Post the launch, there are some management "to-dos" that will help you run a smooth show:

• Register and trademark your business name.
• Get an EIN (Employer Identification Number).
• Invest in inventory and sales tracking software.
• Monitor profitability on an ongoing basis.
• Focus on providing excellent customer service.
• Stay updated on regulations and industry trends.
• Provide regular staff training.
• Hire a business lawyer to help with business decisions and legal advice.

How much does it cost to open a bar?

The average cost of opening a bar is around $480,000, but the numbers can range anywhere from $110,000 to a hefty $800,000. Location, size, type of bar, staff, marketing, and regulatory permits and licenses all influence the startup costs.

Let’s get a closer look at the typical costs associated with opening and running a successful bar. 

Location, leasing, and utilities

Location and size is a heavy startup cost and is often correlated to the type of bar you wish to open. Renting a space is more economical than buying a space and there are various types of commercial leases that will give you more control over costs. Another way to save costs is to take over an existing bar so you don’t spend as much on renovations. 

The area you decide to rent a space impacts startup and operating costs. A commercial area with heavy foot traffic and proximity to other businesses is prime and will cost you more than an area tucked away from main streets. Likewise, opening a bar in a city like Los Angeles will cost more than opening one in a midwestern town like Cleveland. Utility rates are also higher in urban areas. A real estate agent with experience in the restaurant industry is the best person to help you find the right space. 

Renovations and decor

Creating an inviting atmosphere for your customers includes possible renovations and decor updates to your bar. Of course, buying an existing bar with your preferred decor will help cut any potential renovation costs. Furniture, lighting fixtures, the star of your space, and the actual bar should be considered.

Equipment and inventory

Equipment costs can quickly add up and can cost you around $30,000-$47,000. Don’t forget the alcohol and food inventory costs. Get quotes from alcohol and food distributors and compare rates. To ensure you have enough stock for starting operations, set aside around $6,000-$10,000 for inventory. 

Licenses, permits, and insurance

Licenses and permits have a wide spectrum of costs. Liquor licenses can be between $100-$400,000. A state business license, on the other hand, costs around $50. Prices of permits like Certificate of Occupancy range between $100 to $200.  

Software

If your bar has minimal needs, you could get a basic, cloud-based POS system for $60-$100 per month. Some platforms even provide a free plan that can suffice one or two person operations. The hardware could run you around $500-$1,500. 

A good accounting system is equally important for keeping the books straight for tax time, identifying sales trends, and understanding profitability. Wave Accounting and Zoho Books offer free accounting packages to get you started. 

Staffing

The number of people you need to run the place will raise startup costs. The cost of hiring a bartender is $15.15 per hour, which amounts to $31,510 annually. A bar server also costs $15.80 per hour. On top of salaries, you’ll need to consider ongoing costs like employment taxes, benefits, and insurance costs per employee. If you’re a new business owner, here are some first steps to hiring employees.

Marketing

It’s easy to build a professional website for free, but there are hidden costs like domain name registration and hosting charges. Experts suggest budgeting around 3%-6% of your expected revenue for marketing. 

Designing logos, menus, and other paraphernalia can be free if you go the DIY route or upwards of $2,500 if you work with a professional agency. 

How to decide which business structure is right for you

Bars have greater legal risks than other businesses, so at the very least, you want basic liability protection by forming an LLC or corporation.

An experienced attorney can carefully explain the pros and cons of each structure when it comes to:

• Liability. There is no liability protection in a sole proprietorship. LLCs and corporations offer liability protection that separates you from the business. 
• Tax implications. As a sole proprietor, you will report your business earnings on your personal income tax. LLCs have the option to file as pass-through entities or as a corporation. Corporations are subject to double taxation as owners get taxed on their earnings, and the company needs to pay corporate income tax. 
• Complexity. You are automatically considered a sole proprietorship when you start a business. To form an LLC or general partnership, you need to file articles of organization or partnership agreement with your Secretary of State. Forming a corporation is more complicated as you need to appoint a board of directors and create company bylaws. 
• Costs. The fees for filing as an LLC for your bar depend on your state but are usually between $30-$300. To maintain good standing, you simply need to file an annual report. Corporations are the most expensive to form and maintain because of associated legal fees and complex compliance requirements. 
• Control. A sole proprietor has complete control over the business. Depending on who and how you form the LLC with, the control is either spread equally or by a defined percentage between the owners. Stakeholders own the corporation and can vote to decide the company’s direction.

If you’re looking for more information about business structures, LegalZoom has expert guidance for new business owners. 

FAQs

What are the risks of opening a bar?

Bars face risks of property damage, vandalism, theft, data breaches, food contamination, and personal liability. The bar business is seasonal and notorious for high employee turnover. 

What insurance coverage do you need for a bar? 

Important insurance covers include general liability insurance, workers’ compensation, commercial property insurance, and liquor liability insurance. An insurance broker will tell you what coverage is best for your space. 

How do I get funding to open a bar? 

There are multiple funding sources at your disposal. Explore startup business loans from the SBA or traditional sources like banks. A business credit card is a quick way to cover small to mid-sized ongoing costs like marketing and software subscriptions. Another popular way is crowdfunding, which allows you to raise funds you don’t have to pay back. 

How do I create a bar menu? 

Look at local bar menus and brainstorm about your best bar experiences. Use data from your market research to understand what customers want. Also, if the budget permits, consider working with a professional chef and mixologist to design a sample food and drink menu that will keep bringing customers back.  

How long does it take to open a bar?

It can take anywhere from a few months to a year to open a bar. The final timeline depends on your bar size, concept, and time to secure the necessary licenses and permits. Taking over an existing bar and having a well-planned business plan can speed things up.