Cost to Open a Bar

How much does it cost to open a bar?

The average startup costs for a bar (or start any business, really) can widely vary. You might wonder, “How much is a bar?” Well, that depends on the type of bar you’re opening. A small neighborhood bar might cost you around $110,000 to start, while a large downtown nightclub could be as much as $1 million or more.

Below are just a few of the costs to budget for. Keep in mind that these are estimates, and the actual cost will vary significantly from one bar to another. 

• Lease/Rental Space: $2,500-$15,000 OR $100,000+ for purchasing property
• Renovations: varies, but often between $50,000-$200,000
• Equipment: $20,000-$115,000 depending on the size of the bar
• Licenses: varies from state to state
• Initial inventory: $6,000-$50,000
• Staff wages: $10,000-$30,000 per month
• Insurance: $6,000-$10,000 annually
• Marketing: varies
• Entertainment: $5,000-$20,000
• Professional services: $1,000-$5,000
• Security: $2,000-$10,000

Essential Costs for Opening a Bar

To start a bar, there are some average costs you can’t avoid. Let’s walk through them.

Lease or Property Purchase

As a new business owner, securing a location is the first step to bringing your vision to life. Costs will heavily depend on the size and location of the property. In urban centers, a monthly lease can range from $2,500 to $15,000 (even for a couple thousand square feet, in some cases). Alternatively, you may decide to purchase a property, which could range from $100,000 to several million.

Building Renovations and Decor

The aesthetics and functionality of your bar can make or break the customer experience. Renovations could include improving the layout, installing adequate lighting, building a great bar area, and ensuring restrooms are clean and accessible. Decor should align with your bar’s theme and could add up to $50,000 to $200,000 to your initial costs. You should also check if you need any building permits for your renovations, as that can add to your start-up costs.

Equipment

A well-equipped bar is critical for smooth operations. From coolers, tap systems, glassware, refrigeration, and a POS (point of sale) system to other kitchen equipment, equipment costs can really add up. Consider allocating between $20,000 to $115,000 for these initial purchases.

Business Registration and Licenses and Permits

Navigating the legal landscape can be challenging. To start, you’ll need to register your bar as a limited liability company (LLC) or corporation if you want personal liability protection; state fees vary widely, from about $50 to several hundred.

Then there are licenses and permits to consider. Commonly required licenses include a liquor license, food service license, and a general business license (if required in your area). The cost of wine licenses varies widely by state and can range from a modest $500 to a staggering $400,000 in areas where licenses are limited.

Initial Inventory

Starting off with a well-stocked bar is a key part of your business. Alcohol, mixers, and garnishes for your beer and wine bar and food inventory (if you’re offering a menu) can all cost between $6,000 and $50,000.

Staff Salaries

Your employees are the face of your business. Hiring experienced bartenders, servers, and kitchen staff is crucial, with wages ranging from $10,000 to $30,000 per month. Don’t forget to factor in additional costs such as training, benefits, and uniforms.

Insurance

Insurance is a necessity in the bar business. You’ll likely need various types, including general liability, workers’ compensation, and property insurance. Premiums can vary, but budgeting between $6,000 to $10,000 annually is a good start.

Optional Costs for a Successful Bar Business

If you have a little extra money in your budget, there are some discretionary operating costs that could benefit your business in the long term. Let’s walk through some of them.

Promoting Your Bar

A solid marketing strategy can help draw customers to your bar. Social media advertising, print advertising, events, or even hiring a PR firm could add $1,000 to $10,000 to your budget. Remember, a great bar is nothing without patrons, so marketing is an investment in your success. Also, make sure to invest in a great bar name, check out some bar name ideas here and have a great logo.

Entertainment

Depending on your bar concept, entertainment may be crucial. Live music or DJ equipment, sports broadcast licenses, or even games and pool tables might add $5,000 to $20,000 to your bar startup costs.

Professional Services

Working with professionals such as an accountant or lawyer can help manage your finances and navigate legal issues. They can also help you structure your business to minimize tax obligations. This could cost around $1,000 to $5,000 annually.

Bar Security

Security is vital for the safety of your patrons and staff. This might include hiring security staff, installing security cameras, or implementing an ID check system. This could cost around $2,000 to $10,000 per year.

High-End Decor and Furnishings

If your bar concept is a high-end or theme-based establishment, you might need to invest in luxury furnishings or specific decor pieces. This could add anywhere from $10,000 to $150,000 to your costs.

Timeframe to Break Even from Opening a Bar

Breaking even in the bar business doesn’t happen overnight. You’ll need to take into account your startup costs, ongoing expenses, and projected income. Typically, bars can break even within the first 1-3 years. Efficient management, strategic pricing, exceptional customer service, and a great atmosphere can help speed up this timeline. You can also check out our break-even calculator, too.

How to Fund Your Bar

Finding the funds to cover the cost to open a bar can seem like a daunting task. However, there are many avenues available to generate the necessary capital. Personal savings often serve as a starting point. It’s a great option that offers full control of your business but comes with personal financial risk. Alternatively, traditional business loans or Small Business Administration (SBA) loans are viable options. These require a good credit history and sometimes collateral but can provide substantial funds.

Another approach is to seek external investors, which could range from supportive friends and family to angel investors or venture capitalists. These investors could bring additional resources and experience, but they usually require a share in your profits and may want a say in business decisions. Crowdfunding is a modern way to raise funds and customer interest simultaneously.

Regardless of the chosen method, having a well-structured bar business plan showing potential ROI (return on investment) is crucial, as it can influence the decision of lenders and investors.