What Percentage of bars fail in first year

[smiley blonde]

Hi there -- I am new to this board and had a question about the failures of bars.

What percentage of bars/lounges, etc fail in the first year?

Also, if a bar is losing money every month during the first year is that a bad sign of things to come?

Also, my friend owns a music venue so live bands play 5 days a week sometimes more.

I was told by another person that music venues do not usually turn a profit- is this true? thanks for the info

[MainSqueeze]

The percentage I've heard is 85%.

[smiley blonde]

Is this the percentage that fail within 1 year? Or is that within 3 years?

Does anyone else know the exact statistic?

[David]

I don't think that there is an "Exact" percentage. To the best of my knowledge, no one keeps these types of records. The bar business has always been fairly secretive and has it's own voodoo when it come to numbers and such.

The first thing that you need to be aware of is what bars and clubs have succeeded or failed in your area. Why they failed or continue to operate. Every market is unique and different. What works in your town might not work in mine.

As for your other questions:

Normally, bars do better when they are new. The excitement level is higher and the patrons will frequent "New" bars in the beginning. Keeping them there after the "Honeymoon" stage is the trick.

Live music seems to be heading the way of the Edsel. I, personally, like live music. I'm from that era. It's more cost effective (to a point) to use a DJ generated music format. An example, a band might cost you $1200 for a weekend whereas a DJ might cost $250.

[Bigdee]

I don't know anything about clubs and running one. But here is something I seen for myself:

Last friday, a friend invited me out. I went to a club about 6 blocks away from my house. I did not even know it was there at all.A friend told me it has been there for months. I happen to know the bartender who works inside, he told me the club was doing bad. It's dead on the weekend! But it's the hottest looking club I have been to in years and the music is not bad.

The club caterers to the latin crowd. But were I live DC based go-go music is what's hot, but club owners don't want to cater to hip hop/ go-go. They don't even want to play it because it attracts a very rowdy crowd. Basically all the clubs around here are trying to do the same thing, upscale, professional, mature crowd. 21 and over.

So I go down into the city were you have these holes in the wall clubs (stinky, smelly, and runned down), and they are packed above capacity. Everyone dying to get inside, and they are playing this hardcore go-go music. The night ends without any fights or trouble, because they have about 7 bouncers. But they are charging whatever they want for cover and people are paying it. Last week at a go-go we paid $30 me and two of my friends. That's 90 bucks. Sometimes you just gotta deal with a crowd you don't want to to make it work.

[DanDTGB]

The last statistic that I can remember seeing is that 2 out of 3 bars will either shut down or change hands (new owners) in the first 3 years. I believe this was through Restaurant.org under the Industry standards. Now, this may very well be Bar/Restaurants. May not hurt to take a look there to at least get leads on where you may find additional stats. If my memory serves me correct they even break it down by regions.

[HenryB11]

A longitudinal study of restaurants in Columbus, Ohio ( Completed by OSU ) found the failure rate for restaurants was 57 to 61 percent for a three year period (1996-1999) - the same criteria can be applied to taverns, pubs, lounges, and even night clubs - thus the result would more than likely be the same as well. The highest failure rate was noted during the first year when about 26 percent of the restaurants failed. About 19 percent failed in the second year and 14 percent in the third year. Cumulative failure rate for the three-year period (1996-99) was 59 percent. A 1991 study by hospitality professors at Michigan State and Cornell universities found a failure rate in the food and beverage sector to be 57 percent over three years and 70 percent after 10 years. Anyway you cut it , it is no walk in the park.

[SomewhereInAug]

Simply look up the liquor permits in your area for the past 5 years and see which ones have been renewed each year. From there, you will have an actual percentage for your area or state.

[daht77]

I believe and have ran into this that.... Think about how many people expecially drinkers dream is to own a bar and a lot of them do it at one point or another. They are in it for the ride not the business. I believe that a good portion of the bars gone in the first 3 years are because of this. I am not saying our job is easy at all but if you believe in what you are doing you will make it work.

[Kane99]

I have to agree that an overall percentage is not relevant without the context of one specific geographical area. Each market is unique. A lot of markets will have high failure rates, but some others actually have decent rates of success. (of course "decent" is a subjective term)

[Jimel]

Well our banker just told us from SBA, resturants and bars only 20 % will suceed first year, too bad for the other 80 percent. This percentage is nation wide, A well layed out plan and demi-graphs of your area a proper promotions will be the key. So I understand.
We are at the beginning stages, doing our home work.
Blood sweat and tears. .. and a lot of it all.

[smiley blonde]

Really??????????

Only 20% of bars and clubs will survive the first year?

So 80% fail in the first year?? Is this really true?

This seems really high--

Just curious, can you provide me with the link that has this information or provide me the name of the banker who told you this from SBA?

Any help would be greatly appreciated-- thanks

[The Event Guy]

20% is correct. Plug "small business association" into a google search or ask.com and it'll give you options.

[smiley blonde]

wow so all of you who have made it should be really proud of yourselves!!!

That is awesome--

So, is this statistic true for all bars or just nightclubs?

I know I read on another site that is a bar is still not breaking even after 16 months then usually it will soon go under--

Have you heard this as well?

[young owner]

My town has a limit on the liquor licenses. I think we're all pretty much protected almost no matter how bad we are (unfortunately)

[scott1988]

Young Owner,
Why are you responding to a thread that hasn't been responded to in 2 years?

---------However-------------

"You asked for it"

Here are some links to some of the material I've saved over the years (recently). Some of the studies may be a few years old but at least a few of them are good reads and have some detailed and definitive or "exact" figures and information based on specific things. Hopefully this will answer a lot of questions for you "newbies" and "old timers" alike. Here are the links (sorry forum supervisor):

http://statbel.fgov.be/indicators//bri2005_en.asp

(This one's good): http://www.ohiorestaurant.org/pdf/parsaproofs.pdf

http://researchnews.osu.edu/archive/restfail.htm

http://www.restaurantowner.com/public/302.cfm

http://www.businessweek.com/smallbiz/content/apr2007/sb20070416_296932_page_2.htm

http://www.gyford.com/phil/writing/2006/11/13/what_percentage_.php

http://www.restaurantowner.com/downloads/failure_rate_study.pdf

I realize that most of these may be more restaurants than bars but they are a very similar industry and can give you at least "some" more educated knowledge of the actual numbers. Hope this helps (even if it is 2 years late). lol....lol...lol

[Michael Black]

Scott, when you have time, please create a new thread file in the Docs section for the fail rate articles, thanks. I think others will find the info useful long term.

[smody121]

I know this is an old thread, but I am very interested in any kind of information about bars failing at any point and why. Does anyone have more links or other threads they know of?

[Iontheprize]

I agree with a lot of the opinions expressed as to why bars fail.

Keep in mind, MOST small businesses of ALL type (not just bars) fail--that's just the way it is. Many people get into a business doing something they love to do, but may not know a thing about business. I could see this being especially true in the bar scene. People may love the party, but may not know how to run a business effectively. It seems there are people that just throw cash at the "dream" in this industry, and end up getting burned on the business end of things.

Additionally, the bar business is not for the faint of heart, from the hours, to the customers, to the overall scene. Those who make it likely are well-grounded, and as suggested above, are in it not only because they love it, but for the business--they have strong business sense and understand owning a bar isn't all about having fun--it's VERY tough work.

I see countless times where people say they want to own a bar so they/their friends can drink for free, they want to own a bar to make friends, or own it because they like hanging out in bars. It's clear that these attitudes may lead to a high rate of failure in our industry...

Keep a level head, know what you're doing, and pour your heart into it

dp