A lot of us love going to bars. During one of those trips to the pub (usually between beers No. 5 and 6) you may have thought to yourself, “Forget this place. I’m going to open up my own drinking establishment. Then I can drink all I want whenever I want.” Unfortunately, it’s not that easy.
But that’s not to say it’s impossible. In order to help you realize your dream, we sat down with Jon Taffer to give us the keys to success. Taffer has thrived in the bar-and-restaurant industry for nearly three decades, and stars in Spike TV’s “Bar Rescue.” (Its second season premieres Sunday, July 29. Check your local listings for times). During his time in the industry, Taffer has seen every horror story possible, and fixed all of them. Here are Taffer’s tips for opening up a successful bar.
Play the Percentages
The key to survival in the bar business: manage your budget. More than half of every dollar you make is already accounted for. For those of you who didn’t just run off at the thought of doing math, here’s how it breaks down.
Occupancy costs cannot exceed 10 percent of revenue. That means rent, taxes and any other elements in your lease can’t add up to more than 10 percent of what you’re making off your bar. “If I spend 15 percent occupancy costs and don’t budget correctly, I’m screwing myself before I even start,” says Taffer. More good percentages to follow: beverages can’t exceed 21 percent of revenue and labor can’t top 28 percent.
The average bar will cost about $100 to 120 a foot. If you’re looking to become a club mogul and open up a 10,000-square-foot party palace, that means before you even think about anything else, you’re in the hole for $1 million. A more reasonable, low-key neighborhood pub will usually be around 2,200 square feet, which will run you about $220,000.
Taffer’s tip: you can save big time by hiring a residential contractor. On average, a commercial contractor is 30-percent more than a residential builder. “Contact the home remodeling companies,” says Taffer, “and take their bids.” Of course, this only works for neighborhood bars. Huge spaces still require a commercial contractor, so plan accordingly, Jigga Jr.
Once you get your space picked out, it’s time to fill it up with bar amenities. Guess what? That’s going to cost a small fortune too. A bar will run you $500 per linear foot. That includes the wooden bar, the back bar, the sinks, the fridges and everything under the bar.
Naturally, a space has to be efficient in design. Typically, 25 percent of a bar space is back of the house. Bathrooms, storage, kitchen, break room and other stuff like that. “Every foot that you move from the front of the house to back of the house costs you money,” warns Taffer.
Don’t worry; Taffer has your back here too. Rather than buying all brand-new equipment, buy used, reconditioned equipment and save 50 percent. Your average neighborhood joint can thrive with a 20-foot bar, so do the calculations and start searching for discarded bar goods.
What kind of place are you trying to open? Is it hip? Homey? Smelly? Taffer says there are plenty of affordable online demographics programs that will help you narrow down what kind of customer inhabits your bar’s neighborhood.
The challenge is combining all of the targeting elements into a cohesive customer experience. The logo and look creates an expectation. The exterior, the music, the finishes, the colors, the uniforms, the employees: they all have to create something that subliminally comes together for the customer. “If it doesn’t all add up, it misses,” says Taffer. “And the whole experience falls apart.”
Elaborate drinks can take too much time to make. While acting like Tom Cruise in “Cocktail” certainly looks cool, all it does is lose you money because you’re not serving people fast enough. But that doesn’t mean you should only serve Jack and Cokes either. “I am a proponent of mixology,” says Taffer. “But I’m not a proponent of the mixologist.”
Get rid of the word mixology and the snobby attitude, and have quality ingredients in ready-to-serve containers. People still react really well to fresh fruits, so start there and stock your bar with quality products that result in drinks you can be proud of. It’s simple, really: have your high-quality ingredients ready to go, make drinks faster, serve more customers and make more money.
There are three kinds of bar menus: convenience (“While you’re here, you’ll have something,” describes Taffer); novelty (“Something like, ‘We’ve got the best hot dog in New York'”); and experiential (“A quiet place to eat and talk”). Don’t overcomplicate your menu. “A killer burger can go a long way,” says Taffer. “Develop a reputation for doing two or three things really well.”
That means you don’t need to hire a chef to crank out good pub food. Food usually only adds up to 30 or 40 percent of sales, so top talent in the kitchen is a waste of money. Never forget: beverages will always be your main money maker. It’s simple mathematics. Taffer says, “The cost of producing a drink is lower than the cost of producing food.”
You can build the greatest bar in the world, but if no one knows about it, it doesn’t matter. Taffer likes to build up anticipation as his openings near. “I wrap a bar in white paper and write ‘Top Secret’ on it for six to eight weeks,” says Taffer. “It’s a great way to get people talking and create enticement.” He then changes the sign to “Opening in 10 Days!” with a countdown leading up to opening day.
Traffic goes back and forth every day, creating a sense of anticipation without having to spend a dime on marketing. In addition to getting free publicity, it also caters to the local marketplace, which is most likely to develop into regularly returning customers.
Now that you’ve got everything built, settle on an opening budget. Then take 25 percent of that opening budget and put it aside for contingency. Anything from a delay in getting permits to major current events can add up to more time paying rent without any business to offset those costs. “I had a grand opening on the night of Desert Storm,” says Taffer. “Everyone sat at home and watched CNN that night. There are things you can’t control.”
Even if you pull off your grand opening just as planned, be prepared to lose money the first month. You will also probably make mistakes early. Taffer admits he still has occasions where he opens a bar and loses money, and he’s been in this business longer than most of you out there have been alive. “A lot of home runs take 60 to 90 days to hit,” he says. “It can hit overnight, but I wouldn’t bet your future on it.”
The Costs Keep Coming
Once you’re up and running, the most important element to keep tabs on is product costs, including beverages, food, etc. Most bars Taffer comes in to rescue run their food costs up to 50 percent, which is way too high. “It’s a business of controlling your expenses,” says Taffer. “And you have to control them every minute. Meat goes bad, employees steal liquor; we call it shrinkage.”
For new owners, an easy way to track how much you’re spending is a website like Bevintel. These guys will weigh every liquor bottle in your place and then compare it against the register. If your register says you sold 100 bucks worth of gin that night and Bevintel tells a different story, you need to figure out where that extra product is going.
Track the Right Stats
Most people judge their success based on the bottom line. Most people are wrong. You should always manage by guests count. “I have to know how many people come in the building for breakfast, lunch and dinner,” says Taffer.
Track your guest counts every day of the week, then manage by revenue as it relates to sales per guests. That way you can recognize whether or not you have a sales problem or a marketing problem or an experience problem. Do people come in but never return because they didn’t enjoy it? Are not enough people showing up in the first place? These are problems you have to correct differently.
In a general bar business, people average about $14 to $18 every time they walk through the door. If you can pinpoint which aspect of the experience patrons aren’t enjoying, you can quickly salvage sagging revenue numbers. If you’re just looking at the bottom line, you don’t know where you need to improve. You might not even know you need to improve at all.
Make Sure You’re Right for the Job
Still, none of this will work if you don’t have the right mindset for the job. “Don’t open a bar because you love bars. Open a bar because you love business,” says Taffer. “If you’re not passionate about the business, you’re just going to hang out at the bar and lose all of your money.”
There are generally two types of bar owners: the social owner and the businesslike owner. Not a lot are great at both. “Understand that you need to have the social skills for not only your customer but your employees,” says Taffer. “But you also have to manage your costs, which can be contradictory to the first element.”
It’s not easy being everyone’s friend while also maintaining a voice of authority. That comes back to Taffer’s main point. Just because you like hanging out at bars, it does not mean you should own one. “This isn’t a person; this is a business,” says Jon. “You’re not opening it for yourself; you’re opening it for your customer.”