Bars can make a lot of money because they can mark up the cost of alcohol significantly, often by as much as 500%. Here are some insights into the financial aspects of running a bar.
Revenue and Profit Margins
- Alcohol has high profit margins, between 200-400%.
- The average bar brings in $330,000 yearly.
- After expenses, profits are around $40,000.
- Gross profit margins at bars can be as high as 80%, with the average bar owner earning $27,500 per month in revenue.
- Expenses average about $24,200 per month, leading to roughly $39,600 in net profit per year.
Types of Profitable Bars and Initial Costs
- The top three most profitable types of bars are: bar and restaurant combination, sports bars, and clubs.
- Initial costs to open a bar include inventory, equipment, and building setup, totaling $150,000 to $200,000.
Strategies for Increasing Profitability
- Match the bar type and style to the local area.
- Budget properly to avoid being underfunded.
- Introduce an exciting food menu to attract more patrons.
- Experiment with different types of menus and limit food costs.
- Use bar promotions like happy hour to increase profits.
Industry Overview
- The bar industry encompasses various types of establishments, each catering to a different audience.
- In 2019, bars and taverns’ sales in the US totaled $19.9 billion.
- Most bars aim for a profit margin of around 80%.
The Reality of Owning a Bar
- Owning a bar can be highly profitable, with gross profit margins between 70% and 80%.
- The primary reason for high profitability is the high pour cost of alcoholic beverages.
- Before deciding to own a bar, it is essential to weigh the pros and cons of such a business venture.