How to Open a Bar: Starting a Bar Business Steps

Thinking of opening a bar? Bar owners get to enjoy the benefits of running a bar — working in a dynamic, fast-paced environment, getting to know regulars, mentoring bar staff, and generally taking part in a fun industry that contributes to building great nightlife in your city or town.

Michael Beltran, who opened The Gibson Room in Miami earlier this year, had dreamed of this bar for over 15 years. But in 2023, the time was finally right. “It brings me a lot of joy to create something for the city that they wanted and needed,” he shared with Michelin Guide. “I want The Gibson Room to be a really great place for a very long time.” 

Especially if you’ve already worked in the restaurant or bar industry, opening a new bar can be an exciting opportunity — even a profitable one. Compared to restaurants, which tend to only bring in 3-5% in profit, bars and nightclubs enjoy a stronger average profit margin, ranging from 10-15%. Plus, starting a business means running your own bar how you’ve always wanted to see it done at places you’ve worked — whether you’re building a bar from scratch or buying an existing bar.

We’ll get into everything business owners need to know and need to do in order to open a bar.

What Do You Need to Start a Bar Business? (Checklist)

Write Your Bar Business Plan

A bar or nightclub is the type of small business where poor initial planning can be expensive to fix — if not impossible. That's why it’s important for bar owners to have a business plan in place when opening a bar or nightclub.

Writing out a bar business plan can help you identify holes in your business model and bar concept that can be fixed before opening and reduce your risk of failure. It can also help you get your big goals in writing, like your mission statement and your business’s competitive advantage. It can also help you get a sense of the startup costs you’ll need, and help you get ready to seek out capital and investors. 

The minor details are likely to change over time — for example, you won’t be able to predict the month you finally hit your break-even point. But what you can do is outline the factors and metrics that will contribute to your business’s bottom line.

How to Open a Bar: Your Complete Checklist

1. Write Your Bar Business Plan
2. Set Up Your Business Structure
3. Secure Funding and Loans
4. Taxes, EIN, and DBA
5. Obtain a Liquor License and Other Necessary Licenses
6. Trademark Your Name and Logo
7. Choose the Perfect Location
8. Design Your Bar and Start Renovations
9. Create the Bar Menu
10. Plan Your Branding, Marketing, Promotions, and Advertising
11. Buy Bar Equipment
12. Hire Excellent Bartenders, Bar Managers, Barbacks, and Other Staff
13. Find Suppliers and Distributors, and Purchase Your Inventory
14. Buy a Bar POS System
15. Set Up Sales Forecasts, Track Operating Expenses, and Watch Your Bottom Line

    
    

Set Up Your Business Structure

One of the first big decisions you’ll have to make when starting a bar is how to structure your business. Do you plan to be a sole proprietorship, a partnership, an LLC, or a corporation?

It can be easier to start a sole proprietorship or a partnership, but one problem with this structure is that you’re personally liable for lawsuits and debt incurred by your bar. In other words, if something goes wrong, there are no limits to your liability so you may need to forfeit personal assets to cover a loss should one occur.

To avoid personal liability, the most popular option is to set up your restaurant or bar as an LLC or a corporation. These business structures act as an entity of their own and take on the business' liabilities, which limit your personal liability — so if someone slips and falls in your bar and wants to sue, they sue the business instead of you as an individual.

The benefits of each of these structures are beyond the scope of this article, but you can learn more about the five US business types here..

Secure Funding and Loans

The great thing about bars and nightclubs, especially when compared to restaurants, is that they’re more easily profitable. Alcoholic beverages have high markups and low ingredient costs, which make it much easier for bars to profit more quickly. They also require fewer staff, which lowers labor costs — all of which will make your business more appealing to potential investors. 

To learn about the various loan and funding options available to hospitality businesses, check out our guide to restaurant financing and loans.

Taxes, EIN, and DBA

Every business needs to pay taxes, and staying on top of that process from the beginning — and years to come — will help you avoid headaches.  First, apply for an Employer Identification Number (EIN) from the IRS, which is your business’s tax ID number. 

If your business will be taxed under a name that isn’t your name or the business’s, you’ll need to register for a DBA (Doing Business As). 

To run a restaurant smoothly, you’ll need a good accountant, so it’s a good idea to find one to help you from the very beginning.  

Obtain a Liquor License and Other Necessary Bar Licenses

It’s important that your bar is properly licensed before you open for business to avoid legal trouble and to ensure your bar opening and ongoing operations go smoothly.

Licenses are required in order to serve alcohol, food, and even to play music in your bar. Some of these are easy to obtain, while others are more complicated. Many bar business licenses cost money and take time, from days to weeks to months, so starting early is crucial. 

Learn how to get a liquor license (and two other essential bar licenses). 

Throughout the life of your business, there’s a good chance you’ll need a lawyer at some point or another, so starting to work with a trusted attorney early on in your opening process can help you avoid costly and time-consuming mistakes.

Trademark Your Name and Logo

Register your trademarks, including your name and logo, with the United States Patent and Trademark Office (USPTO). Follow the steps listed on the USPTO website. Note that some cases may require an attorney to represent you, and if you worked with a designer to create your logo, you’ll need to work with them to ensure you have the right to copyright their work.

Choose the Perfect Location for Your Bar

A location can make or break a business. Here are a few things to consider before choosing the right location for your bar:

Rent and Utility Costs – Do you expect to be able to attract enough customers on a regular basis to cover the cost of rent and utilities?

Your Bar’s Style – There are so many types of bars: cocktail bars, dive bars, breweries, craft beer bars, sports bars, pubs, brewpubs, specialty bars that focus on one spirit (like whiskey bars), bar lounges, wine bars — and within that list, there’s a lot of variety in terms of ambiance and vibe. Will you be building a bar that’s formal and elegant? Hip? Divey? Corporate? Casual? All of these factors can determine what kinds of potential customers you’ll be trying to reach, and where you should set up shop to do just that. 

Target Customer Demographics – Different areas of your city appeal to different types of people. So choose your target market and look for a location that suits them. If you’re looking to appeal to college students, opening near a university makes sense. If you’re looking to attract well-paid customers looking to splash out on a $22 cocktail, set up shop in an affluent part of town.

Transit and Parking — In cities, choosing a location close to a subway station or bus stop can be more expensive, but you’ll be much more likely to capture more foot traffic. Consider that balance when choosing your location.  In more rural areas, ensure there’s adequate parking nearby, or room for a parking lot — but also be sure to create a plan and set of policies to prevent drunk driving.

Zoning Restrictions – Is the location zoned for a bar business? Every city and town will have its own zoning policies, so dig deep for information before falling in love with a location and finding out you can’t put a bar there.

Find a commercial real estate agent that you trust, ideally one that works with restaurant businesses and bars, and start your search.

Design Your Bar and Start Renovations

People go out to bars for the atmosphere and to socialize — it’s not like a restaurant where people can sometimes be satisfied with takeout or delivery. If they’re at the bar, chances are it’s more for the vibe than for the beers. That’s why selecting the right music, décor, and furniture is so important.

When choosing your bar design, make sure everything is complementary. For example, don’t open a sports bar and play techno music: everything should be in sync.

Check out Pinterest for unique bar decor ideas and build a board of inspirations. If you have the budget, hire an interior designer.

Whatever you decide, make sure you get this right so that you can create a memorable experience for your customers to keep them coming back.

Create the Bar Menu

Get inspired by bar menu design templates, by scoping our bars in your area, and by checking out online menus of bars elsewhere with a similar concept. Then, put together and design your bar menu in accordance with what type of bar you’re opening.

 A craft beer bar should have dozens of unique, local beer options, and a wine bar should have a range of wine options, sometimes within a niche (like natural wine). A cocktail bar can have creative cocktails as well as rail classics, and a general bar should have a little bit of everything, some beers, some wine, classic cocktails, and non-alcoholic options.

Plan Your Branding, Marketing, Promotion, and Advertising

Many bars get customers through word of mouth, foot traffic, and proximity — especially bars aiming to become a cozy neighborhood bar standby. But in order to grow your bar business, it’s important to also show off your offerings with an online presence and a strong marketing strategy. That’s how you attract customers from other neighborhoods to come check out your business, and once they’re in the door, your great vibe and drink selection will keep them coming back — even if they have to travel across the city. 

Learn more about bar marketing and how it can help you get a strong start.

Buy Bar Equipment

Part of what makes bars more profitable than restaurants is the relatively lower cost of equipment. If your bar doesn’t do food service, you won’t need a stove, oven, industrial mixer, deep-fryer, or walk-in freezer, which can cut down start-up costs. Even if you serve snacks or appetizers, you can work with a more manageable list of major equipment.

However, you’ll still need to invest in great blenders, plenty of fridges of various sizes, maybe a wine cellar, a great dishwasher, a keg and tap system, and many TVs if you’re opening a sports bar. Learn more about the equipment you need to run a bar, and start planning what you’ll buy first.

You’ll also need to buy plenty of smallwares for your bar, like glassware, napkins, straws, cleaning supplies, and more.

Hire Excellent Bartenders, Bar Managers, Barbacks, and Other Staff

Your bar will not succeed without the right staff, but it’s not always easy to find great bartenders, barbacks, servers, and support staff. As the bar owner, you may choose to take on the role of bar manager, or you can hire an experienced bar manager to lead your operation alongside you.

It’s important to have bartenders who are experienced and great at making drinks, but what matters even more is that every staff member is great at connecting with customers and working collaboratively. Customers could always just make drinks at home, but they’ll come back to your bar time and time again to enjoy the vibe and camaraderie. 

In order to attract great staff, build competitive pay and meaningful benefits into your business plan. Bars and nightclubs are among the most profitable business types within the hospitality industry, so you’ll be able to swing it if you built it into your business plan from the beginning. With a comprehensive compensation package, you’ll attract the best of the best.

Once you have a killer staff, rely on them to help you find more candidates. The best employees often stem from an existing network; great bartenders know great bartenders. 

Keep everyone motivated and happy by featuring your bartenders' creations on social media or entering your staff for bartending competitions and awards. And encourage them to never stop learning: bartender training is essential to helping your aspiring bar team grow into genuine hospitality professionals. 

Looking to become a bartender before opening a bar of your own? Check out our guide on How to Become a Bartender.

Find Suppliers and Distributors, and Purchase Your Inventory

Bar inventory is an important aspect of keeping track of your cost of sales (including liquor cost, food cost, and other important metrics), so before you open, make sure you set up a process for this or make proper use of a bar point of sale system.

Proper bar inventory tracking can help you set prices and figure out which beverages are most profitable in your bar. You can use this information to help bartenders make more effective drink recommendations, increase your bar profit margin, and to price your bar menu for profitability.

In addition to properly tracking inventory, make sure you have a good bar accounting system in place. Whether you use Quickbooks or hire a bookkeeper, it’s important to keep track of how your business is doing, and where you need to make improvements.

Buy a Bar POS System

It's imperative that you invest in a bar POS system before opening your bar. A good point of sale system will speed up your workflows behind the bar and in the kitchen, helping you make more revenue and preventing costly accounting problems.

The best POS systems for bars are customizable to your setup — even if you run a high-volume bar or nightclub. Here are top five top bar POS features you should look for:

1. Handhelds - With handheld point of sale systems such as Toast Go™, bar servers can take customers' orders from anywhere in the bar — even the rooftop — and allow customers to pay, sign, and tip quickly on the device. Plus, a repeat button on the device makes it easy to re-order drinks.

2. Time-based Pricing - As a bar owner, you will most likely want to set happy hour pricing to entice the after-work crowd. The best POS systems make it so time-based pricing is automatic, so you don't have to sit down and set it every day.

3. Preauthorization - Credit and debit card preauthorization (or "preauth") allows bartenders to swipe a customer's credit card, securely save that information as their bar tab, and verify that the card is real and has a preconfigured amount of funds on it.

4. Moving & Splitting the Check - If a customer moves from one area of the bar to another, transferring the check should be easy and painless, as should splitting checks by person or item. Plus, if a shift changes, you should be able to bulk transfer checks, sending multiple paid and/or open checks to a new server or closing several paid checks at a time.

5. Intuitive, Cloud-Based Drink Menu Management - You might need to change the price of a drink on the fly, or change your pitcher specials and happy hour specials every morning. With cloud-based bar POS software, you can do that from your couch.

A smart POS system with bar and nightclub management software is critical to the success of your business from the beginning.

If you're interested in learning more about how Toast helps bars get up and running and be as profitable as possible, schedule a demo today!

Set Up Sales Forecasts, Track Operating Expenses, and Watch Your Bottom Line

It can be tricky to predict exactly how much your bar business will bring in in the early months, but using a great bar POS can help you start tracking important performance metrics from the moment you open. Keep track of your fixed and variable operating costs and plot our how much revenue needs to come in every day, week, and month to cover your costs, break even, and eventually start profiting.

Planning Thoroughly, Finding Funding, and Hiring the Best People Makes for a Successful Bar

Starting a new business can be exciting, invigorating, and totally exhausting. It’s a long road full of possible bumps on the way to your bar’s grand opening, but hospitality pros and entrepreneurs are no strangers to a challenge. And once your bar is open, filled with customers, and with a team that’s great at connecting with your community, hopefully you’ll look around and see that all the steps were more than worth it.

Related Bar Business Resources

• How to Write a Bar Business Plan

• Bar Business Plan Template

• Bar Names

• Bar POS System

• Bar POS Comparison Tool

• Best Bar Websites

• Cost to Open a Bar

• Bar Marketing Ideas

• Bar Design Ideas

• Bar Branding

• Bar Ideas and Concepts

• Bar Equipment List

• Bar Licenses and Permits

• Bar Floor Plans

• Best Bar POS Systems