With the typical profit margin for a bar between 75–80%, you might be wondering how you can get in on the action. But as the old saying goes, you have to spend money to make money. The real question is: how much will you have to spend to open a bar?
The answer depends on several factors. Your location, the venue size, and the type of bar you want to open all play into the total cost.
With that said, the average startup cost for a bar is between $110,000 and $550,000 when renting a space, and between $175,000 and $850,000 when buying a building. But you could easily spend more or less—it all depends on your vision. For example, you may end up paying a different amount for a sports bar vs. a cocktail-style bar.
To help you budget for the grand opening of your new brewpub, Nextdoor has broken down the cost to open a bar into several categories.
Real estate expenses
Before you can start pouring mixed drinks, you’ll need a location. As a bar owner, your venue will be the biggest expense of the whole endeavor.
Real estate prices can vary dramatically from place to place, but once you’ve drafted a business plan for your bar or pub, you’ll have a better idea of whether you’re able to buy a venue or if you’ll have to rent.
- Buying a building – If you’ve secured a loan or an angel investor, you may have the capital to buy your bar outright. One way to reduce the cost of opening a bar business is to buy an existing bar.
- Renting a building – The more affordable option is typically to rent a venue for your bar in the short term. Making monthly payments to a landlord is often easier for fledgling businesses in the bar industry, as you don’t need an influx of capital from the get-go. However, if you see yourself staying somewhere long-term, it’s worth trying to buy.
Renovations
You’ll probably want to make some changes to the building you bought or leased.
Some of the most common targets of a makeover include:
- Flooring – Perhaps you’ll want to rip up the old carpet or replace the worn wood in the entryway. The average cost of hardwood flooring is $6–10 per square foot. If you redo your entire 3,000-square-foot bar, you’re looking at a bill of around $20,000.
- Paint – A fresh coat of paint is one of the most cost-effective ways to improve your space. If you paint yourself, you can purchase a few gallons of paint for less than $1,000. Or, try getting in touch with one of your local painters from Nextdoor to support your community.
- Construction – If you decide to tear down an existing wall or build a new one, you will be looking at a pricier job. Construction costs can include general construction, electrical work, plumbing, and more.
- New furniture – From new chairs to kitschy decorations, your bar will probably need an overhaul to fit your vision.
- Kitchen renovations – You may also need to make changes to your bar that go beyond decor. If your kitchen needs a refresh, you can expect to spend $300–500 per square foot on new features and appliances.
Renovations are one of the costliest parts of opening a bar business. However, you can save money by doing much of it yourself.
Creating an ADA-compliant space
If you buy an older building, it might not be up to modern standards. For example, your location may not have been renovated to adhere to Americans with Disabilities Act (ADA) requirements. In that case, you may need to set aside an extra 20% on top of your initial budget.
Potential expenses can include:
- Permanent or portable ramps
- Upgraded entryway lighting
- Wheelchair-accessible tables
- Accessible parking spaces
Luckily, a small business is eligible for financial assistance in removing barriers. There are two federal tax incentives for businesses aiming to make their locations more accessible: the Disabled Access Credit and Section 190 of the Internal Revenue Code.
Licenses and permits
Whether you’re opening a brand new bar or taking over an existing one, you’ll need at least some of the legally required licenses for opening a bar:
- Business license – Whether you need a license from your state, county, city, or all three, you’ll usually have to pay a small fee. It could be as low as $25 or as much as a few thousand dollars. Most licenses last between one and three years.
- Liquor license – While registering your bar with the Alcohol and Tobacco Tax and Trade Bureau is free, you’ll usually have to pay for a liquor license at the state level. Most licenses cost between $100 and $5,000 per year, but a coveted full license in a city like San Francisco can cost upwards of $200,000.
- Food service license – If you plan to serve food at your bar, you’ll also need a license for that. Fees vary by location, but most are inexpensive. For example, the annual fee for a permit in New York is $280.
- Certificate of occupancy – Also called a C of O, this certification confirms that your bar adheres to applicable building codes. Once again, costs vary, but fees are usually minimal.
- Music licenses – While music licenses are technically optional, they’re required if you plan to play music at your bar. A music license from a performing rights organization like ASCAP can cost as little as $2–3 per day. Alternatively, you can subscribe to a business-oriented streaming service like Pandora and save money.
Supplies
As a neighborhood bar, your most important purchase is probably alcohol. According to the American Nightlife Association, sales numbers for establishments that sell alcohol are as follows:
- 35% of sales are beer and ale
- 35% of sales are distilled spirits
- 10% of sales are wine
Keep these numbers in mind when ordering alcohol for your bar. If your establishment offers all three categories of alcohol, you can arrange your budget using similar percentages. And don’t forget to include soft drinks and juice for mixed drinks.
You’ll also have to factor in ingredients, plates, napkins, and other expenses if you'll be serving food.
Employee-related expenses
In the early stages of preparing to open your bar, you may be the only employee. But as you approach your grand opening, you’ll have to start hiring, training, and paying staff members.
Payroll
Payroll is one of the most variable costs associated with opening a bar. Depending on the cost of living in your area and the number of employees you’ll need, your weekly staff expenses could total anywhere from a few hundred to several thousand dollars.
According to the US Bureau of Labor Statistics (BLS), bartenders make an average of $12/hour. Other bar and restaurant employees earn around $11.60/hour. So, if you have two full-time bartenders and four full-time servers and bussers, you’re looking at a weekly cost of $2,816 to run your front of house.
Hiring for other roles will drive your numbers upwards, but it will also allow you to turn a profit more efficiently. As your business grows, you may need to add:
- Cooks
- Dishwashers
- Bouncers
- Managers
- Bookkeepers
Workers’ compensation insurance
Workers’ comp insurance protects you from the brunt of employee injury claims. Instead of paying for a bartender’s medical bills out of pocket, your insurance will cover their lost wages and hospital stay. Many states require workers’ compensation insurance. Even if yours doesn’t, it’s generally a wise investment.
Your insurance costs will depend on the number of employees and your location. However, you can usually allot around 1% of your total payroll amount to workers’ compensation insurance.
Miscellaneous expenses
Along with the big-ticket items, you may want to allocate part of your budget to various other expenditures. As part of your “how to open a bar” checklist, you should consider paying for:
- Advertising – Whether you advertise online or in your local paper, you can reach new customers through marketing efforts. While the upfront costs may seem high, advertising is a terrific investment in your new business. You can also consider free advertising through an online hub like Nextdoor. By creating a free Business Page, you can easily connect with people in your neighborhood to let them know about your bar’s opening, happy hour specials, and any community events.
- Commercial liability insurance – Though not required in every state, commercial liability insurance is a worthy purchase for a bar owner. This type of policy protects you from lawsuits involving your bar. Commercial liability insurance can cost less than $50/month.
Make the most of your investment with Nextdoor
So, how much does it cost to open a bar? It depends on your plans. But one thing is for sure: you’ll want that money to come back to you. And the quicker you can pack the seats, the sooner you’ll make back your opening costs.
When you use a platform like Nextdoor, you can easily reach members of your community that need a nice, cold drink. Plus, once they get a taste for what you have to offer, they can leave reviews and recommendations for others in your area to see.
Ready to start meeting your soon-to-be regulars and driving a profit? Claim your free Nextdoor Business Page today.
