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 925-785-3118 - 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 925-785-3118 to get info about bars, taverns, and nightclubs for sale in your area.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Joe Sandbank, Esq. - Legal Services
I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.
|Steve Zimmerman: Restaurant Broker Specialist
Steve founded Restaurant Realty in 1996. He has personally sold/leased over 900 restaurants, bars & clubs, & completed over 3000 valuations. The author of "Restaurant Dealmaker - An Insider's Trade Secrets For Buying a Restaurant, Bar or Club" available on Amazon. Reach Steve direct at 415-945-9701.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Mani Singh, Business Broker, Riverside, San Bernardino Counties
I have successfully represented clients sell & acquire multitude of businesses ranging from Gas Stations, Liquor Stores, Markets, Super Markets, Smoke Shops, Postal Stores, Restaurants, General Retail, Auto and Construction related. Phone me for assistance with selling or buying at 951-296-7646 Cell
|Bob Baumgarten, Business Broker: Orange, LA Counties
National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727.
|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.
|Lee Petsas, Business Broker - Orange, San Diego Counties, Inland Empire
UBI Business Brokers has been successfully selling businesses in Southern California since 1965. Our Agents have over 100 years of experience in selling small to medium size businesses throughout Southern California. We service Orange County, Inland Empire, San Diego. Phone Lee at 714-363-0440.
|Joe Ranieri, Business Broker, Orange & LA County Areas
Having owned retail/restaurant businesses for over 20 years, my interest turned to listing and selling businesses rather than owning them. I specialize tend to specialize in Orange County high volume restaurants, fast food independents and chains, bars and liquor stores. Call 714-292-5448.
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