A lot of people think buying a bar would be a fun, easy business to get into. Your job would basically be to provide a place for people to have fun, right?
Maybe, but bars are one of the riskiest businesses to buy into. The bar business is highly competitive and it tends to rely on contemporary trends within the area. Many owners find the most difficult part in buying a bar is to sustain consistent growth beyond the "buzz" factor.
Also, the laws that ban smoking in public places have changed the game for many bars, hurting profits, but at the end of the day there is no greater markup than that of liquor so there is potential to make money in this business.
Here are a few more things to take in consideration when exploring the possibility of buying a bar from a business broker or direct from a bar business owner:
Food Or No Food?
As I said, competition in this industry is high. You are not only competing with other small businesses but also the large chains that offer both food and liquor. True bars, establishments that don't offer food, just liquor, are becoming less profitable. Bars in good, dense, urban locations are still strong but suburban bars are struggling. The absence of a kitchen increases the risk of losing hungry customers to other venues. So, while liquor is always more profitable than food and not having the expenses of a kitchen can be good for the bottom line, not having food can also hurt, so consider this option closely.
Regardless of whether or not you offer food, without a liquor license you lose your greatest source of revenue, if not all of it. Not having a liquor license can completely stop your access to this industry so you need to make sure that the existing owner's license can be transferred to you. Liquor licenses in certain areas where there are high concentrations of establishments within major cities have become extremely difficult to obtain, thus driving the value of those licenses very high. In some states, such as New Jersey, they only offer a specific amount of licenses. Once those are gone, they do not issue more.
Owner Involvement, Staff, Inventory Control And Your Customers
If you plan to be involved in the day to day business, be prepared for some potential headaches. Most bars are open until the early morning hours and at least 6 days a week. With so many operating hours, you have to be adequately staffed. Not only do you have to be staffed for all those hours but you also have to make sure your staff is friendly, hardworking and most importantly honest.
This can be a difficult business to control inventory as pouring an extra drink here and there can easily go unnoticed. Given that most bars do a lot of cash business, it is also easy for dishonest employees to pocket your cash. The bar and restaurant industry is also known for having high turnover, so be prepared for staffing challenges.
Let's not forget to talk about customers. While your customers are the life of your business, they can also be your biggest headache. When buying a bar, you will encounter customers that come in, have a few too many drinks and become unruly. You also have to worry about how these unruly customers will leave your establishment. With new drunk driving laws being introduced every day, customers like these could up being a big problem. Not everyone will be a problem, but it's important to ask the current owner what procedures are in place should one of these customers come in.
In my opinion a high degree of owner involvement on a day-to-day basis will make a bar business most successful as it will give you the ability to contain costs and prevent "˜shrinkage. As the Owner, you must have excellent people skills. This is not a business for introverts.
Successful bars and nightclubs can usually generate up to $5,000 per well on a good night. As you are reviewing financials, keep in mind that the cost of goods should be below 28% of sales in a tavern/bar with little or no food. Payroll should be less than 20%. Look closely at the rent, it should be about 6% to 8% of gross sales. Serving alcohol should be an extremely profitable endeavor, with average pour costs running as low as 16 percent for liquor, 21 percent for draft beer, 25 percent for bottled beer, and 28 percent for wine but despite these great numbers you have to make sure you have the right management and staff in place to run the operation efficiently.
About The Author: Peter Siegel, MBA is the Founder (of BizBen.com) & the Director Of the BizBen California Network (founded in 1994!) consisting of business buyers, owner/sellers, business brokers, agents, intermediaries, and advisors (there are over 90,000 users, and 8,000+ listings posted on BizBen.com). To join (FREE) the BizBen California Network, phone Peter Siegel direct at 866-270-6278 - get signed up for business for sale listings (Email Alerts) before they hit the market, view requests from serious business buyers - wanted notices, notices about upcoming FREE online webinars on the topic of buying and selling California small and mid-sized businesses and much more! Call 866-270-6278 to get info about bars, taverns, and nightclubs for sale in your area.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance
For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.
|Mike Brewer: Liquor License Brokers, ABC Consulting Services
Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100.
|Manjit Singh: SF Bay Area - Business Intermediary
Assistance in the San Francisco Bay Area. Contact me about buying or selling a restaurant, liquor store, gas stations, markets, and c-store businesses. If you are looking to buy or sell a SF Bay Area liquor store, market, c-store, restaurant, etc phone me direct at 510-417-9429.
|Jim Saxton, Liquor License Broker & Consultant - SF Bay Area
With over 20 years experience of local governmental requirements, such as Police Departments, Zoning / Planning Departments, and ABC District Offices, my company Liquor Licenses of San Francisco Bay Area is very qualified to resolve all of your concerns during the liquor license transfer process.
|George Lanza, Business Broker, At Plethora Business Sales
Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses.
|AJ Rana - Business Broker, San Francisco Bay Area
Professionals who understand the importance of world class business brokerage service and the value it can create. Specializing in assisting sellers and buyers with retail stores, restaurants, hospitality & lodging, manufacturing operations, distribution companies, e-commerce and service businesses.
|Jeff Sacher, Business Broker - North Bay Restaurant, Retail Specialist
Jeff is a leader in business brokering in the North Bay. Since joining Santa Rosa Business And Commercial in 1999 he has assisted Buyers and Sellers in over 200 business sales and acquisitions. Jeff provides other services for his clients as well. Reach Jeff and his team at 707-888-4972.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|Buying A Restaurant Can Be Challenging: 3 Key Tips For Restaurant Buyers
People always need to eat; there should be plenty of business. Some buyers think there is prestige to owning a popular eating establishment. But it isn't an easy purchase. Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program at 866-270-6278) reviews this topic.
|Buying A Bar - 4 Tips Worth Reading About Before You Buy Your Bar Or Lounge
Four factors to consider when buying a bar. Peter Siegel, MBA (BizBen ProBuy, ProSell Programs) with BizBen discusses: The advantages and disadvantages of a bar that serves food as well as liquor. Staffing, inventory control and owner involvement as they relate to a good business are summarized.
|Don't Buy A Restaurant Without Checking The Competition - Key Buying Tips
Looking to buy a restaurant business? Check out these tips first to avoid getting blindsided when you buy any type of small or mid-sized California restaurant. Peter Siegel, MBA (BizBen's ProBuy & ProSell Programs & Restaurant Purchase Financing Expert) at 866-270-6278 covers this topic for buyers.
|Selling A Business Without Getting Sued: 5 Tips For Business Sellers/Brokers
How do I sell my business without getting sued, isn't a subject just for discussions with lawyers. A seller can take some precautions to reduce potential legal problems. Peter Siegel, MBA Founder Of BizBen and BizBen's ProSell Program discusses this topic for business owners/sellers and brokers.
|If You Plan To Offer Seller Financing: 3 Things Owner Sellers Need to Know
When selling your business, offering seller financing is a great way to help your business standout from others on the market and it is also a good strategy to consider that can help you close a sale. Peter Siegel, MBA (BizBen ProSel Program & Financing Expert) explains. Reach him at 866-270-6278.
|Buy A Business Or Start From Scratch? 5 Key Differences For Business Buyers
Some buyers believe it's better to start a business from scratch rather than buy an existing enterprise. While this may be good advice in some cases, usually it's not the best strategy. Here are five tips to help a buyer make the right decision from from Peter Siegel, MBA (BizBen Director).
|4 Reasons Why Business Brokers Do Not Cooperate With Other Brokers & Agents
Despite challenges in the business for sale marketplace, some of the business brokers who make a living by facilitating a deal between buyer and seller are known to stand in the way of a completed transaction because of some outdated ideas. Too bad they put greed ahead of the needs of their clients.
|Selling Your Business To One Of Your Employees - A Good Idea? Pros And Con
After investing years of time and talent into a company, many small business owners want to feel like they are leaving their business in good hands and for that reason, some sellers opt to sell their business to an employee. Peter Siegel, MBA talks about the pros and cons to taking this route.
|See All News, Tips And Events|