Having been on the forefront of small business battle-lines, working tirelessly to ensure somebody else’s success, popularity and profits, I’ve obtained some highly valuable inside information on keeping bars afloat. In my career ups and downs, and varied bartending stints throughout the years, I’ve had the privilege of opening a couple of establishments. I’ve also had the misfortune of being a passenger on some doomed, sinking ships. Scenarios both good and bad have well-prepared me with a ton of practical knowledge I’ll need once I open up my own watering hole.
I’ve yet to own my own bar. I assure you however, that is what I’ve been working towards all these years. When I do, you can bet your ass I’m not going to subject myself to the same stupidity of my predecessors. Their loss = my gain. I’m pretty damned confident in my abilities. I’ve known for years what I want my bar to look like, where I want it, what the decor will be and the type of musicians I’ll have on stage. I’ve already envisioned the clientele I’ll be targeting, area demographics, the margins I’m looking at, foot traffic studies, neighboring competition, etc. In short, my mental business plan is nearly complete.
Today, we’re talking business operations. Let’s take a look at a handful of high-priority pitfalls I’ll be avoiding. Just maybe, this can also help keep your bar from getting shuttered:
1. Insuffficient Operating Capital. I’m not sure what the statistics indicate in other towns, but here in New York City, it’s long been known that 9 out of 10 bars and restaurants fail within the first 12 months of operation. Holy shit! Well, guess what dear readership; the core reason for most of those failures is insufficient cash money. To be more specific, a whole heck of lot of entrepreneurs dive into the bar business with just enough money to open the doors. That’s a big problem. It’s a problem because (1) a lot of that “key money” is often borrowed and there may be limitations in getting additional leverage (2) more importantly, many businesses don’t initially operate in the black. So, what happens? Mr. Smith has to cover rent, a construction note, salaries, insurance, permits, utilities and a never-ending stream of supplier payables. But the monthly net income comes in short. This ugly cycle continues and within a few months until the well’s run completely dry. Employees stop showing up due to repeated bounced checks and suppliers cut off deliveries due to outstanding invoices – the bar is quickly shut down. Lesson: don’t open a bar without enough reserve capital to operate at a complete loss for at least 6 – 12 months. If you’re unable to project what that monthly nut might be, you haven’t planned properly. Re-evaluate.
2. Bad Publicity. No, it’s not Yelp’s fault that you’re doing little volume. It’s your fault. In the age of the Internet, there will always be haters and trolls badmouthing your establishment. Expect it. Unfortunately, guests with great experiences are far less likely to post about it. That said, you should be focusing on your own backyard, implementing a well-known corporate philosophy – namely: Continuous Improvement. Applied to a bar/restaurant, it means that you need to be constantly evaluating FOH and BOH operations, finances, ordering, human resources, reviewing the customer experience, and tirelessly looking for ways to improve upon an already stellar customer experience. Remember – customer is king. He/she is the one who pays your rent, buys you dinner, and provides you with everything else you need. There’s no quicker way to doom your bar than to shit on that customer by giving him/her a bad experience. That doesn’t mean the customer is always right and you let clearly in-the-wrong morons on a tirade get away with murder. Try as you might, it’s impossible to completely avoid the occasional problem child. Bad publicity is like a disease – spreads like an Arizona wildfire in July. Just ask the owners of P.J. Clarke’s on 3rd Ave for an example. Good publicity, for whatever reason, also spreads but not nearly as quickly or as well-distributed. If a customer hates your place or has had a terrible experience, they’ll tell 10 friends. Those 10 friends may relay the story to 10 other friends and so on, and so on. Avoid that at all costs. It’s far less costly to eat a little crow, comping a $100 meal and picking up a $15 dollar cleaning bill for a stained dress than to have a guest bitch to all her friends about how your restaurant doesn’t care about its customers.
3. Poor Location. You can have the top industry consultant write you up the most kick-ass business plan ever documented. You can hire away the top management and Front of House staff from the top city bars and restaurants. You can be sitting on a Steve Jobs reserve capital fund. A 4-star French chef can be running your kitchen. If you’ve opened up your bar in an otherwise industrial commercial district with no foot traffic, public transportation options, or parking, because you think the “cool” factor will draw crowds, you’re likely in for a rude awakening at some point (unless something rare and miraculous happens). On the flip side, your bar can be nestled between a dozen other bars on the same street and have Time Square-like throngs of people streaming up and down the block and you can still fail miserably. You’ve got to study and know your target clientele and area demographics.
4. Too Many Cooks in the Kitchen. One person has got to be in charge – not two or seven. A reporting hierarchy is critical to success. I had the misfortune, in my early bartending days, of opening a bar for a pair of owners who – like a terrible marriage – had zero business being in “bed” together. I suspect they never heard of (a) Class C corporations (b) Sole Proprietorships (c) Limited Liability Corporations and (d) General/Limited Partners. Crap, they probably never even picked up Running a Bar For Dummies. They were constantly squabbling (in front of customers and staff) over everything from mundane things like where to buy bevnaps, all the way up to decisions with more grand implications such as menu items and financing terms. One of them owned a hardware store and that was the extent of his service industry experience. He was a pretty sharp guy except for the fact that he felt the need to “carry” day and night. You see, he was one of the handful of NYC residents with a Concealed Carry Handgun Permit. I don’t have a problem with it – I’m a gun afficiando myself. It was just really awkward on many occasions when he’d either “print” or Open Carry (unknowingly of course). This caused constant drama among customers and staff. The other owner was simply a dumbass – a pushover. Needless to say, that bar closed swiftly. Lesson: get your shit together and have someone knowledgeable, respectable, experienced, and dependable at the top of the food chain – preferably, a “people person.” This is particularly important for the positions of (1) General Manager and (2) Executive Chef. Furthermore, those two folks have to be able to be on the same page – in a harmonious relationship.
6. Theft. Far too large a topic to cover in a paragraph. Read my articles on FOH theft (here and here) and BOH theft here. Prepare for the worst, hope for the best, and continually observe and adapt accordingly to improve your processes.
7. Poor Costing and Pricing. I’ve been witness to some crazy ass moves on part of bar owners over the years. One of the most commonly overlooked needs, is the process of costing your food and beverage ingredients, and pricing them to ensure adequate margins. There’s a great article on the topic, along with a formula-laden spreadsheet right here. Many people assume (incorrectly) than they can simply base their prices on prevailing competitor pricing and all will be hunky-dorry… not the greatest move! A smart businessman will obtain a complete picture on labor, time, ingredients, tools, and utilities, and subsequently break that data down into per component and per drink costs. In that way, you can nearly guarantee what you’re charging covers associated expenses and generates an adequate margin. If you have no clue what something actually costs, how can you be sure you’re making money?
8. Cheaping Out. Hiring strictly for looks, to get laid, and on a bare bones budget will torpedo your money making aspirations quicker than Lindsay Lohan bounces in and out of rehab. If you don’t have the budget to open your business properly, don’t bother doing it at all. You’re far more likely to lose your entire investment than succeed. Look for other financing options. Wait until you do have the proper financial opportunities. Hell, borrow money if you have to. Lesser examples:
- Buying used restaurant equipment is a great way to save money. However, if you think you can get away with a Kitchen-Aid mixer in place of a proper, commercial Hobart, you’re probably going to run into some big problems on a busy Saturday night. The MTBF, heat dispersion capacity, ability to run in continuous operation, and volume handling abilities are not on par.
- Bait-and-Switch tactics with booze. I’ve seen clubs do it. It’s nasty, dirty, and downright criminal. Filling premium booze bottles with the cheap shit. Your customers will eventually find out – one way or another – and leave your establishment to the sounds of crickets.
- Not hiring adequate security/bouncers. This should be self-explanatory.
- Hiring family members for the wrong reasons and keeping them around though they well deserve to be let go.
- Tap beer lines need regular pressure cleaning
- Kitchen filters require routine maintenance
- Your whole kitchen and bar needs to be steam-cleaned on occasion
- “Bug Nights” on the regular and all bottles protected
- Hosed down mats
- No standing water anywhere behind the bar overnight including ice bins
- Routinely cleaned soda guns and caps (you’d be shocked to see what’s lurking under there in most bars)
- Properly maintained, high-temperature dishwashers and cleaning of all your bar gear nightly
- Bottles, wells, bartops, backbrs, terminals, counters, condiment bottles, etc. thoroughly cleaned every night
- All bar and kitchen refrigerated items sealed and date-labeled nightly
10. Failure to Document a Well Thought Out Business Plan. Yes, many, many businesses (not only bars) have achieved spectacular success on a shoestring budget, having completely failed to document a solid business plan. However, a far greater number have been crushed under the weight of the inability to generate profits. The owners succumbed to stupidity – they got excited and jumped the gun before thinking everything through (repeatedly), and more importantly, documenting it. If you’re planning on opening up your own place, I hope you this sinks into your head, if nothing else makes an impression. If you lack the facilities to document proper business plan on your own, there is no lack of consultants willing to give you a hand. Google is your friend. By the way, every item discussed above (among a myriad of other things) needs to be incorporated into your plan, and reviewed – again and again.