New bar, rough numbers

[Greg B]

Hi all – First, thanks so much for this forum. My wife and I are considering opening a bar next year, and as part of the (very) preliminary stages of the project I’m trying to rough-out some “ideal” numbers that we’d want to manage to. I’ve read through similar threads here, but they were all specific or situational enough that I’d still like to offer this up for feedback.

So, this would be a tried-and-true “fun bar” concept (sexy staff, good drinks, music, sports, games, events), decently located in an entertainment district of a Texas major metro area.

Given that these are ideal numbers, are they generally in the ballpark? Any significant cost centers I’m missing? Is the gross sales projection attainable for this kind of bar in this kind of location? Anyone actually doing ~25% pretax on this kind of place? :)

Thanks very much in advance.

Usable area: 4,000 sf
Sales/SF: $250
Gross sales: $1,000,000
Liquor sales: $750,000 (75%)
Food sales: $220,000 (22%)
NAB sales: $10,000 (1%)
Vending: $20,000 (2%)

COGS
Liquor: $135,000 (18%)
Food: $61,600.00 (28%)
NAB: $1,250.00 (12.5%)
Vending: $10,000 (50%)

Hourly payroll: $180,000 (18% of gross)
Employee benefits: $36,000 (20% of payroll)
Misc. expenses (royalties, paper, merchant fees): $30,000 (3% of gross)

Salaried payroll: $100,000
Rent: $120,000
Utilities: $10,000
Insurance: $15,000
Licenses: $4,000
Marketing: $30,000

Gross profit: $546,150
Gross margin: 54.62%
Pretax profit: $267,150
Pretax margin: 26.72%

[ministry]

those are some nice numbers. what you did not account for was weather. throw in a nice minn snow storm or two and the % goes way up. or if there is a concert in town and your crowd goes somewhere else for the night. alot of your numbers are fixed ( as they are ) so the only way to get the numbers down is by putting people in the front door. we all know the economy sucks right now and $ is tight. that being said, go for it ! good luck.

[Greg B]

Thanks for the input, Ministry. I hope I was clear about what "ideal" numbers are supposed to represent. At this stage, I'm just trying to get a broad outline of what achievable sales and mistake-free direct costs would be on an establishment like this. The downside is obvious -- I need to have some idea of the upside in order to determine if this is something we should pursue further.

Another way to look at it would be, in looking at those numbers, where do the red flags pop up? For example:

* You're not going to get sales of $250/sf
* The rent is way too high
* That hourly payroll fits a full-service restaurant, but a bar driven by beverage sales should be lower
* Your utility bill is going to be much higher
* Your insurance is going to be much higher
* You forgot to deduct 10% for employee theft

Or whatever. Incidentally, we'll be escaping the minn snowstorms one way or another, whether a bar is involved or not. ;)

Thanks for your time.

[Franchise]

Hi all – First, thanks so much for this forum. My wife and I are considering opening a bar next year, and as part of the (very) preliminary stages of the project I’m trying to rough-out some “ideal” numbers that we’d want to manage to. I’ve read through similar threads here, but they were all specific or situational enough that I’d still like to offer this up for feedback.

So, this would be a tried-and-true “fun bar” concept (sexy staff, good drinks, music, sports, games, events), decently located in an entertainment district of a Texas major metro area.

Given that these are ideal numbers, are they generally in the ballpark? Any significant cost centers I’m missing? Is the gross sales projection attainable for this kind of bar in this kind of location? Anyone actually doing ~25% pretax on this kind of place? :)

Thanks very much in advance.

Usable area: 4,000 sf
Sales/SF: $250
Gross sales: $1,000,000
Liquor sales: $750,000 (75%)
Food sales: $220,000 (22%)
NAB sales: $10,000 (1%)
Vending: $20,000 (2%)

COGS
Liquor: $135,000 (18%)
Food: $61,600.00 (28%)
NAB: $1,250.00 (12.5%)
Vending: $10,000 (50%)

Hourly payroll: $180,000 (18% of gross)
Employee benefits: $36,000 (20% of payroll)
Misc. expenses (royalties, paper, merchant fees): $30,000 (3% of gross)

Salaried payroll: $100,000
Rent: $120,000
Utilities: $10,000
Insurance: $15,000
Licenses: $4,000
Marketing: $30,000

Gross profit: $546,150
Gross margin: 54.62%
Pretax profit: $267,150
Pretax margin: 26.72%

In my opinion, the pretax margin is high. You have forgotten some costs...

1) Insurance number might be slightly low, if you are including worker's comp

2) There is no budget for legal, payroll, and/or accounting fees

3) First Aid supplies

4) Holiday Decorations

5) Building and Equipment repairs

6) Trash Removal

7) Dues/Subscriptions. You'll need to pay for various music rights, and joining the Restaurant & Bar Association will probably save you money on insurance.

8) Taxes - Real Estate, assuming the lease is NNN

9) Utilities are very low. I would do much more research on what they will actually be in your area.

I am sure I'm missing a few items, these were just off the top of my head.

I would be very worried about opening a location where rent and taxes will cost more than 10% of your anticipated Gross Revenues. That is not a good formula for success.

[Greg B]

Thanks very much, Franchise. Very helpful!

[alchemybar]

I'm interested to know where the $1M in sales will come from.
Who are the competitors that you will be taking sales from?
Will they take the losses lying down?
Will it create a price war?
How will that impact your margins?

From nothing to $1M is a huge jump - can you survive if you only make 250k for the first year?

Without research to back up the feasibility of your sales forecast I'm concerned that you haven't really thought this through.

Start with a SWOT and competitor analysis and let us know how you get on.

[Greg B]

Without research to back up the feasibility of your sales forecast I'm concerned that you haven't really thought this through.

Start with a SWOT and competitor analysis and let us know how you get on.

We most certainly haven't thought it through -- we're just beginning to think about it. I suspect I was way too specific with my first post, but that's how I think.

Here's the conclusion I've arrived at: bars and nightclubs are potentially very profitable, but it comes down to whether or not you can get paying customers in the door. This may seem obvious, but it's not true of many industries in which volume \= profitability (think of many GM divisions that lose money on every car they sell).

We can't do a real SWOT analysis until we're much further along -- when we've decided to focus on a specific market, a specific venue, etc. But the approach to a competitive analysis on a really high level is very interesting, and I'd love to get some feedback.

It strikes me that competitive analysis in this industry is pretty noisy in that it's not strictly zero-sum. On the one hand, there's a defined market, you're trying to take a piece of it, and at least some of that business is going to come at someone else's expense. On the other hand, a venue clearly benefits from proximity to similar venues competing for the same market.

How do the veterans approach this? Are there well-defined metrics that you look for? Can you research a market and conclude, "Okay, there's just too much density here"? Or is there always an opportunity for the right venue in the right location on or near Las Vegas Blvd.?

Thanks so much for your feedback.

[Steadydoses]

I took a year developing my business plan...feel free to use the concept or numbers if you like www.suburbannight.com (http://www.suburbannight.com) Good Luck with your new place.

[sirslim1124]

Greg,

I’m in the St. Paul area and contemplating purchasing an existing bar in a St. Paul suburb. I am wondering how your venture ended up? Did you open your bar? If so how has it done in this economy?

James