Your Bar or Club's Location
As we’ve discussed before, location is everything for this type of business. It’s worth holding out for a great location, since local traffic and pedestrian patterns will have a major impact on your success.
If you’re interested in starting a bar, club or other business that serves alcohol, there’s plenty to do.
You’ll need to balance the competing demands of long hours, regulation, employees and competition. That's why we’ve put together this guide — it explores everything you need to do to set up your bar or club business and maximize your chances for success. We’ll cover:
Understanding the world of the bar or club
Finding information on taxes and finances for your bar or club business
Deciding if you’re ready to start a bar business
Following the various rules and regulations your business requires
Determining the best legal structure for your new organization
Managing marketing and administration processes
Locating resources for your bar or club business
Planning your bar business
Hiring employees
... and much more
By the time you’ve read through our complete bar business guide, you will have all the information you need to set up and manage a thriving bar, club, pub or similar business. Let’s get into it.
Understanding the Bar and Club Industry
Key Background Stats for Bar and Club Businesses:
$25B
Revenue of bar and nightclub industry in the U.S. every year
1.1 - 1.4
Percent of sales increase each year
400K
People employed in the industry
200M
Barrels of beer are sold every year
32%
Taverns
20%
Bars and Lounges
19%
Drinking Places
12%
Cocktail Lounges
9%
Nightclubs
There are over 65,000 bars and clubs throughout the U.S.
Each establishment employs an average of six to seven people.
The split of alcohol sold tends to be 42% beer, 31% spirits, 10% wine and the remainder as food and non-alcoholic drinks.
Nearly 80 percent of establishments are small businesses employing fewer than 10 people.
This all points to the bar or club industry being ripe with new opportunities for focused entrepreneurs, so now might be the perfect time to dive into starting your bar or club business. Incfile is here to help you form your business and understand the ins and outs of owning an establishment like this.
Understand Your Local Market Opportunity & Customers
The bar and club market is very much driven by your customers’ personal incomes and entertainment needs. It’s vital to look at the competition in your local area and find a niche you can fill. It’s easy for an area to become saturated with bars or clubs, so choosing the right location will be vital to your success.
What Kind of Bar or Club Should You Open?
When you’re looking to start a bar or club, you have plenty of options to help you stand out. It’s important to cater to your customers’ needs. There are many different types of bars or clubs you could run; here are some suggestions:
Brewhouse and pub
where you make and serve your own beer
Cocktail bar
mainly serving spirits and mixers
Nightclub or dance club
where customers can move to the music
Themed bar
like an Irish, Mexican or British pub
Wine bar
with plenty of choices for medium- and high-end wine
Sports bar
where people can enjoy the big game
Bar
specializing in live music or comedy
Explore what’s already on offer in your area and think about what your ideal customer would want. Talk to people in the local area about the type of pub or club that might be missing.
The Challenges of Running a Bar or Club
Is Being a Bar or Club Owner Right for You?
The popularity and profitability of your bar or club will depend on balancing several different areas. You’ll need to have loyal, repeat customers, be good at marketing and provide a unique experience for your patrons. Fortunately, there are no large companies that dominate in the bar and nightclub industry — the combined revenue of the 50 largest bar and nightclub companies only accounts for 5 percent of all sales.
You’ll also have to work long hours and need to get involved in every aspect of the business, from accepting deliveries to training staff, resolving problems and serving beer. You can compete most effectively by understanding your local customers, providing the right atmosphere and experience and focusing on great customer service.
There are low barriers to entry, meaning new bars and clubs open fairly frequently, so there will always be competition. Margins are slim though, so unless a bar or club is well-managed, that competition may not last for long.
There are strict rules, regulations and compliance on serving alcohol that are different from state to state.
One of the main issues new bar owners will face is getting the right licenses to serve alcohol and food. The type, cost and availability of alcohol licenses vary widely; you may also need a specialized entertainment license.
Bar and club locations must have proper zoning from local government, and you may face issues with community resistance due to patrons and noise. Additionally, local laws will dictate when you are and are not allowed to be open.
Skills Needed to Be a Successful Bar or Club Owner
If you want to run a bar or club, you’re going to need multiple skills:
Market research
So you know what your customers want and need
Employee management
So you can choose, hire and work with the best people
Marketing
So you can get your name out there and attract customers
Financial management
So you can get the most out of the thin margins
Negotiation
To get the best deals from suppliers and distributors
Customer service
To keep all your patrons happy
Time management
So you have enough hours to do everything
...and many more
You will be working long hours, often up early in the morning and staying past closing time. No two days will be quite the same, although many of those days are likely to be tiring! You will need to deal with a high staff turnover and be able to spot good servers and bartenders who will work well with your patrons.
Plan Your Bar or Club Business
Before you start your business, there are a few key areas you need to focus on. You will need to establish whether there’s a demand for your bar or club business services, look at potential benefits and pitfalls, understand how your business finances might look and ensure everything is in order.
In short, you need a business plan — here’s how to think about your business idea.
Do Market Research and Validate Your Bar or Club Products and Services
Before you launch your bar or club business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:
Find market research reports for bar or club businesses
These types of businesses rely almost completely on locality and location, so understanding the residential and tourism markets in your region is critical.
Check out your competitors in the space
Having competitors is a good thing as it shows there’s a market. Additionally, in the bar and club scene there’s generally plenty of room for a niche establishment that provides a unique reason for customers to drink there.
Talk to patrons
Speak with potential customers to understand what they want from your bar or club and find out what’s currently missing in the local area
Identify your business’s unique selling points (USPs)
These are the areas that will set you apart from competitors and encourage customers to come to you. This will mainly be driven by the type of bar or club you choose to run.
Get involved with business communities and discussion groups
Ask questions about bar or club businesses and meet up with other owners. You can find links to some excellent discussion groups later in the article.
Understand Your Bar or Club Business Model and Financial Projections
All businesses need a business model, which details the way you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.
You will also need to look at financial projections for your bar or club business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others? If you can, try to plan your revenue out for the next month, three months, year and two years.
Write a Business Plan for Your Bar or Club Business
Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:
1
An executive summary with the most important points from your business plan
2
Your goals and what you hope to achieve with your bar or club business
3
A description of your business, background information and context
4
A market analysis and likely demand
5
An overview of how your handyman business is structured
6
Your business model
7
How you will market and sell your offerings
8
Financial projections, revenue and profitability
9
Appendices
We’ve got the perfect guide to writing your business plan.
Choose the Right Business Structure and Register Your Bar or Club Business
Now that you have all the background information for your bar or club business, it’s time to make it into a reality. That starts by choosing the right structure or “legal entity” for your business. In the US, there are four main business structures. They are:
Sole Proprietorship
This is the "default" business structure and is what your business will be if you decide not to create a more formal structure. We don't recommend this type of business as it doesn't give you the legal protections you need.
Limited Liability Company or LLC
The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your bar or club business.
This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.
This is a more complex type of business and isn't generally recommended for smaller organization.
These are the largest and most complex types of businesses and are far more than the average entrepreneur or business owner will need.
For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your bar nightclub business.
In most cases our recommendation would be to create an LLC. We’ve got a complete guide to everything you need to do and we can set one up for your bar or club business. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.
Setting up Your Drinking Establishment
Once you've legally created your bar or club business you’ll need to get some other things in place.
Marketing a Bar or Nightclub
You will probably need to build a website and should also get professional branding, marketing and business cards.
Equipment Needed
Running a bar or club is all about the furniture, fixtures and fittings. You’ll need to outfit your space first and then develop a good inventory of the stock you’re going to be selling. Depending on what your bar does, you may need other specialized equipment like commercial cooking and kitchen facilities or brewing gear.
Employees
You will almost certainly need to hire employees to help you out. Staff turnover in the bar and club business tends to be high and positions are not very well-paid, so expect to always be on the lookout for new servers and bar staff.
The Complete "Start Your Business" Checklist
A Clear and Comprehensive Guide to Starting Your Business the Right Way
Rules, Regulations and Laws for Bars and Clubs
Of course, along with running a business there are many rules, regulations and legalities you need to be aware of.
Liquor Licenses, Business Licenses and Permits
Required licenses and permits for your bar or club business will vary depending on where you're operating and what regulations apply. In general, there are different permits required at the local, state and federal levels.
1
Local
Your region, county or city may require you to have licenses or permits to operate a business. Talk to your city’s Chamber of Commerce to learn about your local licensing and permit requirements. In particular, you will need to understand the laws around serving alcohol and opening hours.
2
State
You can find all the information you need on statewide licenses and permits on the website for your Secretary of State. You can find all those details in our state-by-state guides to company formation. Alternatively, the Small Business Administration website has a list of licenses and permits by state.
3
Federal
The Small Business Administration provides details of any national or federal licenses and permits you might need.
When researching your licensing requirements, pay very careful attention to the following areas:
Licenses to serve beer, wine or spirits for consumption on the premises
Detailed records of all liquor, wine and beer received from suppliers
Licenses to prepare and serve food
Zoning requirements for opening a bar or club
Dealing with are the Alcohol and Tobacco Tax and Trade Bureau (TTB) and your local Department of Alcoholic Beverage Control (ABC agency)
Licenses that regulate renovations, entertainment, advertising and personnel
Business Insurance
Most bar or club businesses should have comprehensive business insurance. There are different types.
1
Workers compensation insurance
This insurance provides coverage for job-related illnesses, disabilities or injuries that affect employees. Regulations for this insurance vary from state to state. It typically covers areas like medical costs, loss of earnings, compensation and retraining.
2
General liability insurance
This insurance protects your business from claims due to being sued and other legalities. This may include injury to members of the public, property damage, personal liabilities, legal defense and more. It can help protect your business from financial penalties and bankruptcy; this will be vital as you will be serving patrons on your premises.
Registered Agents
All businesses need to have a Registered Agent. These are individuals or other businesses who can accept legal documents on behalf of your bar or club company.
Although you can act as your own Registered Agent, we recommend using a professional service. It ensures there will always be someone available to receive important legal documentation on your behalf and also removes your name and address from the public record.
When you incorporate through us, we provide a complete Registered Agent service free for the first year.
Business Taxes for Bars and Clubs
Taxes are a fact of life, and if you’re in business there are various ways you will need to file and pay them.
File with the IRS
Let the IRS know you are setting up a business.
Payroll tax
If you pay employees, you will be liable for payroll tax.
Self-employment tax
Unlike employees, the earnings from your business will be taxed under a self-employment tax (FICA and Medicaid). This is just over 15 percent of your earnings.
State tax
Most states do have a state income tax. If yours does, you will be taxed on your earnings as normal. To register for state tax, see your Secretary of State website.
Federal income tax
You will need to pay income tax on any profits or earnings you take from your business. In most cases, profits from the business will “flow through” to your individual tax return and you will be taxed there.
Sales tax
If you’re selling locally, you may also be liable for collecting and paying sales tax. To register for sales tax, see your Secretary of State website.
Corporation tax
If you incorporate as a C Corporation, you will also need to pay corporation tax — you will be taxed both on your profits as a business and when you extract earnings from your company. This “double taxation” is one of the reasons we normally recommend LLCs as a good business structure, since they avoid this.
Other taxes
In certain circumstances you may need to pay some other types of taxes. Talk to your accountant to find out what else you may be liable for.
As a rule of thumb, we recommend keeping back around a third of your earnings to pay your taxes. We can prepare and file your tax returns for you.
Requirements for Maintaining Your Bar Business
There are certain forms and legalities you need to follow to keep your business in good standing.
1
File an Annual Report
Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.
2
Pay estimated taxes
You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).
3
Renew Business Permits and Licenses
Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.
4
File your taxes
You will need to file your taxes once a year.
5
Pay payroll and sales taxes
If applicable, you will need to make payroll and sales tax payments on a regular basis.
6
Prepare Your Taxes
You will need to work with your accountant to prepare all the taxes you need to pay.
Hiring Employees for your Bar, Nightclub, Pub or Other Drinking Establishment
Since you won’t be able to run your bar or club solo, you will need to hire employees. Additionally, because bar and server wages are typically very low and supplemented with tips, expect to have a fairly high staff turnover. This could mean you spend a lot of time interviewing and hiring. See our 10 tips on hiring employees.
Your bartenders will be mixing and pouring drinks, which means their speed, efficiency and pour accuracy will all have a direct impact on your profitability. For that reason, it's vital to train your bartenders well. Be aware that both over-pouring and theft can be fairly common in the bar and club industry, so try to hire people you know you can trust.
Report employees as "new hires"
In most cases, you will need to report the hiring of employees to your state.
Pay employees
On a raff and workers typically receive a low hourly wage which is supplemented by tips from patrons.
Get worker's compensation insurance in place
As listed above, you will need to make sure you have proper worker compensation insurance to cover injuries, illness, medical costs and the like.
Make sure your employees can work in the U.S
Your employees must be legally able to work here. Carry out background checks and ensure they have any necessary legal documentation.
Get an Employer Identification Number (EIN)
Contact the IRS and let them know you will need an EIN for your bar business. This is a number you will use to file and pay your taxes. We put together this guide to getting your EIN.
Withhold income and payroll taxes
You will need to calculate and keep back income tax so you can pay the appropriate bodies. You will also need to pay the employer portion of the payroll tax.
Learn about legal requirements and responsibilities to employees
You do have certain responsibilities and requirements for hiring employees. In addition to getting a proper employment contract in place with them, you have a duty to provide them with a safe working environment, proper training, regular pay and certain other criteria. OSHA covers your health and safety requirements, while the U.S. Department of Labor provides information on other responsibilities.
Useful Online Tools for Bar and Club Owners
Here are some really great online tools for managing your bar or club business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.
Collaboration
Social Media Management
Communication
Email Marketing
Advertising
Customer Relationship Management (CRM)
Customer Support
Human Resources
Legal
Website Development
Analytics
Hiring
Conclusion
Although there are many challenges in running a bar or club business, they can still be an excellent way to generate revenue and create a great place for your patrons and employees. Find the perfect location, create the right type of bar, hire excellent people and share your establishment's uniqueness to really stand out.