Throwing back an ice-cold one at a neighborhood pub is a tradition as old as time — and a profitable one at that. The U.S. bar, tavern and nightclub industry tops $26 billion in sales revenue annually. But if you plan to open a club or a place that serves spirits, you’ll have to make a considerable investment before realizing those revenues. Read on to learn how much “real” cost to open a bar can be.
What are the economics of owning a bar?
Factor in the following one-time and ongoing expenditures when evaluating how much it will cost you to open a bar:
- Start-up costs: According to Restaurant Owner, start-up costs can range from $125,000 to $550,000 for the average rented or leased bar or $175,000 to $920,000 for a purchased bar. This factors in:
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- Renting/leasing or buying the real estate for a new or established bar
- Physical bar assets (e.g., furnishings and any equipment and systems used to operate the bar and accept payments)
- Initial product inventory (e.g., alcohol and food) and any shipment charges
- Licenses/permits you must obtain to sell alcohol and food in a given location.
- Business insurance
- Operating costs: Starting at $20,000 per month, this factors in the day-to-day costs of running a bar:
- Restocking the inventory
- Mortgage/Rent (including any interest payments)
- Equipment maintenance
What’s the average cost to open a bar?
Factoring in the above criteria, it can cost you a minimum of $125,000 to open the average rented/leased bar or $175,000 to open a bar you purchased. Ongoing operating costs can run you at least $20,000 per month after that.
However, it’s important to keep in mind that these are averages. The location, size, and bar concept (e.g., full-service bar, sports bar, brewpub, etc.) can profoundly influence these costs. For example, you can buy an established bar in a small town for as little as $20,000. Similarly, the price of opening a brewpub in a big city, for example, can rise to $1 million because specialized equipment is needed to make the beer on-site.
If the costs above are beyond your budget, know that making a solo investment in a bar isn’t the only option for starting your business. Investing in a bar with a group of individuals allows you to share the start-up and operating costs and day-to-day stresses of running the establishment.
The other benefit of joint ownership is that it spreads your risk. Should the bar not succeed, you will have only lost a fraction of your investment.
What licenses do I have to get to open a bar?
There is a multitude of licenses and permits you must obtain from your state and municipal government to operate a bar. These licenses/permits and their associated costs vary widely by location, but the most common ones are listed below:
- Business permit: This permits you to operate in a distinct jurisdiction
- Certificate of occupancy: This certifies that your bar location meets specific building and maintenance requirements
- Liquor and food licenses: At a minimum, you need a liquor license to sell liquor. In New York, you can expect to pay at least $4,500 for a liquor license alone. But if you also plan to sell food, you’ll generally also need a food service license.
- Building and Employee Health permit: This certifies that proper sanitary practices are employed in the building and by food and drink handlers.
- Entertainment licenses: These permit you to license and play recorded music or feature live musical acts at your bar.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.