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How to open a successful cocktail bar

10 February 2015 By admin

It just so happens that the hottest cities in the world in terms of cocktail culture happen to be some of the most expensive to set up a bar. But, as Tom Aske writes, there are savvy ways in which some entrepreneurs are getting around this

Opening a world-class bar like Quinary in Hong Kong is not an easy feat

The hospitality industry is as strong as ever, with attention to detail, innovation and high quality produce being the focal point for new bar operators. The cocktail bar scene is no different, with an evolution over the past five years that is now leading to some industry experts predicting that bartenders will gain the same fame that chefs have enjoyed over the last 20 years.

It is no surprise then that some of the industry’s brightest stars are now progressing from bartender to bar owner – a trend that can only strengthen an already thriving industry.

There is however something innately terrifying about taking a leap of faith into self-employment; the unpredictability and unsettled nature of realising that success or failure is entirely dependent on one person.

Not only is your financial and personal security in the balance but you also have a team of people who depend on you. Ryan Chetiyawardana, owner of award-winning bar White Lyan, agrees: “At the beginning, and on-going, the hardest thing is the idea that you are responsible for people’s livelihoods.” This business is tough. The real question is what lies ahead and just how tough can it really be?

Quadrupled rents

The first hurdle that must be jumped is finding premises – something that has become increasingly difficult in recent years.

The licensed trade has evolved immeasurably over the past decade. In London particularly, the premiums placed on leases has quadrupled. In 2010, at the height of the recession, it was far easier to find an ailing business with the owner willing to throw you the keys at the first opportunity.

Fast-forward four years and as the economy strengthens, property prices are soaring and businesses that are still hemorrhaging money are now commanding lease premiums in excess of £80,000.

Assuming that a potential buyer can afford this extortionate rate, they will then often need to find three months’ rent deposit that is unlikely to fall short of £25,000. So, we are over £100,000 before we have even considered screwing in a light bulb or painting the walls. Then comes the rewiring, music system, plumbing, bar stations and cash-flow. Even then there are likely to be many unforeseen costs that can potentially slow or even stop the build process.

Chetiyawardana states: “Every site has its ghosts (sometimes literally) and lots of things will come out of the woodwork which inevitably have extra costs involved”.

Boilermaker in Nottingham ran into unforeseen costs even before opening

Residency over ownership

Christian Tirel, of Boilermaker in Nottingham, has a fine example: “The floor in our courtyard ended up costing a deceptively large amount totalling nearly 15% of our overall cost. It’s these outlays that make the difference between the premium furniture and the sexy shakers or the items at the bottom of the bargain bin.”

These high costs are not isolated to London, as Antonio Lai of Hong Kong’s Quinary finds. “The rent is really too high in Hong Kong and the setup even more expensive,” he notes.

The rising cost of opening a bar along with the instability and risk has seen a few bartenders opting for a residency over ownership, much in the same way as renowned chefs. This will naturally alleviate most of the initial outgoings but it will also omit any potential goodwill value that may be attached to a resale. There are of course ways to generate funds and set the ball rolling.

Investors often crop up in conversation but they will require a solid trading history from an established company before taking a risk themselves. Similarly, the banks may well match the amount the owner is willing to put in but this can still leave a huge deficit. Even in this scenario the purchaser may still need to find around £70,000 and a watertight business plan to satisfy their criteria.

A route that is often taken for the fortunate few is that of using family finance, something that is risky both to the individual and their families. Almost all leases and loans will require a personal guarantee, meaning that in the instance that the premise fails, the purchaser or guarantor has to find the rent out of their own pocket until the premise is sold.

Consultancy as a means to an end

An alternative way to generate funds would be to use the skills acquired as a top bartender, by offering out their creativity as a consultant. Consultancy requires very few overheads, the main requirements being knowledge, time and a good reputation.

Fluid Movement, operator of Worship Street Whistling Shop, decided to reinvest consultancy profits into a bar enabling the company to grow, firstly as a showcase for what they could offer the consultancy clients, and secondly, and more importantly, as a way of generating a steady revenue stream. This in turn created a showcase that drives more consultancy and so the cycle continues.

In embarking on this uncertain path, one must first make sure it is what one wants. “Lots of people say they want their own bar, but it’s certainly not for everyone,” adds Chetiyawardana. “The stability of a job is a great thing and shouldn’t be overlooked”.

Once a bar is established and begins to make a profit, the hard work really sets in. New bars open every day and each one aims to take away business from its competitors. It is at this time that constant day-to-day management of all variable costs is essential. There are a variety of key areas to any successful bar, something that Antonio Lai confirms: “Make sure you find the right staff, location and idea. It is easy to open a bar but never easy to keep a bar up and running”.

Business development is key and there’s no such thing as a day off. However, the sense of pride seeing a dream come to fruition is worth every second of that hard work.

Top 5 tips to opening a successful bar

It really is all about location, location, location. Ensure that the area has the clientele and footfall to sustain a business through the entire week, not just the weekends. The weekends can pay the bills, but its during the week that a bar will generate profit.
Consider building a concept around the existing building. This will maximise the features you would normally have to pay a lot for. Those dusty bricks and concrete floors could be the perfect setting for a speakeasy or blues bar.
Ensure that budgets are stuck to rigidly. Cashflow is the most important thought; don’t get swept away with luxury purchases before you can pay staff wages.
Lower the wage percentage and increase profits by working all the hours you possibly can. In the first six months, spend as many hours behind the bar to minimise expenditure.