Drinks are on me! [new biz help?]

desperaterobots

Hello H/A!

I have been daydreaming for the last few years about opening a combined bar/gallery/art space/retail joint. Basically, a cool small bar that has an adjoining gallery space for exhibitions by local/interstate artists. Recently I've been inspired by people younger than me opening up small retail and/or gallery spaces, and I figure if they can do it, maybe I can too.

But I am starting utterly from scratch. Right now I'm just thinking about what I don't know. So I wrote a list of questions I feel I will definitely need answers to:

LOCATION including

• reasonable cost p.a. or per square metre for renting a place.
• ideal sizes for bar/seating and gallery space
• outdoor space
• requirements of the liquor license (number of toilets v number of patrons, security provisions, etc)

COST OF SET-UP/FIT-OUT including

• Estimated cost of architect or interior designer
• Option of DIY fit-out depending on complexity of design/style
• Safety requirements
• Cost of liquor license and any ongoing renewals
• Reasonable timeframe for expectation of returns
• Initial cashflow requirements or 'money in the bank' to get the business operating.
• Possibility of small business grants....

COST OF RUNNING including

• Staff (local hourly rates for bartenders etc)
• Stocking the bar/fridge (and good systems/practice to use keeping tabs on everything)
• Electricity
• Advertising
• APRA License to play music in place of business
• Insurance?

COMPETITION including

• What bars/galleries inspire me?
• Why do they work and what do they charge?
• What do these spaces cost their operators?
• What do these spaces lack that could set mine apart?
• What improvements would make these places totally awesome?

INCOME and IN-KIND SUPPORT OPPORTUNITIES including

• Drinks (obviously)
• Gallery rental (must be affordable for the artist, so what do comparable spaces charge?)
• Gallery sales commissions
• Deals with breweries/wineries

That's just a starting point and is no where near comprehensive. If you spot a problem or ommission I'd love to know.

Some context:

My city has recently passed laws that have made liquor licensing less expensive, and there's a resurgence of new venues opening up. I think there's a segment of the market underserved right now and it seems like something I'd really enjoy pouring myself in to. A lot of this stems from frustration with a lack of options in my city for young, creative people.

Not that I want to compete with these guys, but there is one bar/cafe here that stays open until about 3am most nights. Their prices have steadily increased for the last 5 years while their service levels have gotten (a great deal) worse. Despite that they're more popular than ever, and I suspect a lot of it has to do with their monopoly.

Until recently the majority of our drinking venues in my city have been very large 'beer barn' type places -- hundreds of people, loud music, flashy lights, asshole bouncers, long lines to get in. I'm interested in a flexible bar/gallery space that would service perhaps no more than 50 to 60 people at a time, be relaxing and fun, and as casual as possible: vintage couches, a place for bicycles to be stored, cool lamps, cheap drinks, good music and your friends showing up unexpectedly.

My rough plan:

I do not expect to do anything but learn about operational/financial realities for some time. I am open to suggestions for education (small business management courses etc). I'm also open to realising that this is a bad idea, so please feel free to smack me back to earth with horror stories.

Currently I'm working 4 nights on, 4 nights off in a night-shift role. I have been thinking about trying to find a second job in a table-waiting, bar-tending capacity for my off-nights, to get some hands on experience before I go too nuts. Good idea? I'm hoping to be upfront with whoever employs me and ask for some mentoring. Does this sound realistic? I'm hoping I'll learn stuff like the customer volume to expect and the amount of money that goes in to, and out of, these kinds of places. Is this a reasonable expectation, or will I just be mopping shit up the whole time?

Assuming I think I'd want to proceed, I'd do something along the lines of a small business management course, and some hospitality training, and start to look for locations, partners and/or investors. I'd also get some kind of business model (SOLID AS A ROCK!) together, but I expect to figure that stuff out down the track.

If anyone here has bar management/gallery management/small business/entrepreneurial experience, I would really love to hear any/all thoughts. Any Australian experience would be highly valuable, but I imagine working in a bar here is going to be roughly similar to working in bar anywhere, so any advice is awesome. Has anyone here attempted anything similar, or know anyone who has? Do you know of any new-business resources online that you think might help me?

Like I said, I'm at a killing rats in the sewer point in my possible bar-running career, so if you have any advice I'd be keen to hear it.

badpoet

When you're opening a bar, the one thing most people don't usually think of is insurance. I see you have it up there with a question mark by it. You will need it, and it will be expensive.

You'll need general liability, property (building, contents, tenant improvements and loss of income), liquor liability, assault and battery, and also workers compensation/accident injury.

The costs will vary wildly but they can be in the range of and exceed $20,000 to $30,000 annually, depending on the location, what exact laws apply in your state (dram laws for example), and your personal finances.

Bars don't make huge money. Most people see a $7 beer they could get wholesale for $1 or less and think there's a huge profit there. There really isn't, the overhead is staggering. As long as you go in with this knowledge you'll be fine, though.

My parents owned three bars (at different times) in my youth. It was always a struggle. One thing I will suggest as far as location is don't go somewhere that they are looking at redeveloping. Construction is a killer for small businesses. Find someplace already redeveloped. You'll have more initial overlay (rent if you're renting or assessments, taxes, and increase property value if you're buying), but that's easier to handle than losing all of your business for a summer while the sidewalks/streets/nearby major thoroughfare is under construction.

Do your homework. Work as a waiter/bartender to get a feel for it. Take a small business management course. Then do it. If it's your dream, find some investors and a solid framework and do it.

desperaterobots

Thanks for that insight regarding future redevelopment. As an aisde, my aunty (who lives in england) ran a pub for a long time. My family lived above it when I was a kid. I'm going to ask her all that I can, even though the information is 20 years out of date, I think it would be valuable. What kind of bars did your parents run? Inner city or suburban type joints?

Ponge

You absolutely must open it near a university or art college (preferebly both). Theres a place in Edinburgh called the Forest Cafe that is exactly what you're planning and it's packed 7 nights a week because it's 5 minutes walk from 2 universities.

Don't spend lots of money going too fancy either, this place is quite grungy and better for it.

You should probably try to find a partner or bar chain who would be interested in doing the business aspects.

NotYou

Well for one of your questions, you asked what to charge artists to rent the space, and the answer is that galleries generally take anywhere from 25-50% of the sale of the piece. I'd start around 30% until you get well known.

Esh

You want to open a bar and you have no service industry experience? That's not going to end well. Get a partner who knows something about it.

Deebaser

Esh wrote: »

You want to open a bar and you have no service industry experience? That's not going to end well. Get a partner who knows something about it.

I hate to be a debbie downer, but if you're serious you should get a job at a bar immediately while you work on putting this together.

Ryna

I see you're in WA, and I heard somewhere that Perth is the new Melbourne for cool in Australia. I think you might be onto something..

Esh

Deebaser wrote: »

Esh wrote: »

You want to open a bar and you have no service industry experience? That's not going to end well. Get a partner who knows something about it.

I hate to be a debbie downer, but if you're serious you should get a job at a bar immediately while you work on putting this together.

And bar jobs are only going to people with a ton of experience right now (I should know, I'm a bartender). Get some real experience in restaurants (4 - 5 years) and THEN think about opening a bar. Unless you like the idea of having a business that shuts down within the year.

Cyd Cyclone

You'll want to have at least six months of operating expenses, preferably one year's worth. You can get this from loans. The primary reason being, is that if you make no profit for the first six months, you need a way to pay for everything. Unless you want to close after one month.

badpoet

desperaterobots wrote: »

Thanks for that insight regarding future redevelopment. As an aisde, my aunty (who lives in england) ran a pub for a long time. My family lived above it when I was a kid. I'm going to ask her all that I can, even though the information is 20 years out of date, I think it would be valuable. What kind of bars did your parents run? Inner city or suburban type joints?

Two of them were bars in small communities, the other a suburban. Getting insight from your family is a good start.

desperaterobots

Esh wrote: »

You want to open a bar and you have no service industry experience? That's not going to end well. Get a partner who knows something about it.

You are right that opening a bar without service experience would not end well, however I wouldn't summarise my OP like that. I thought I was pretty clear in that I'm very much at square one. I haven't made any decisions at this point, and what I want, right now, is to gather as much information as possible so that I can decide if doing this is really something I could handle, before I dismiss it as a pipe-dream.

Regarding partners, I'm clearly not ready to approach anyone yet! But I do have a friend who has expressed similar desires about starting a bar/gallery business. He's been working in the kind of bar I'm interested in setting up for the last 3 years and in vineyards for about 8, and he has money to invest. He works in Melbourne, I'll be travelling to catch up with him in a few months. I'm hoping to talk to him about it then - and I'm hoping I have a more solid picture of what would be involved before I talk to him about it. He's pretty good friends with the people who run that bar, and since we'd be operating in different cities I can imagine they might be really helpful sources for info on the logistics of running a small bar.

Esh wrote:

And bar jobs are only going to people with a ton of experience right now (I should know, I'm a bartender). Get some real experience in restaurants (4 - 5 years) and THEN think about opening a bar. Unless you like the idea of having a business that shuts down within the year.

Can you elaborate on why you're suggesting working at a restaurant? Will 4 or 5 years waiting tables really help? Would you recommend some hospitality training first? Bar-tending courses?

I am looking at part-time job at a bar to help educate me some - worthwhile? Fortunately the local economy is much healthier than the US, so I don't see getting a job to be too difficult. (Prepared to be wrong on that front.)

Ponge wrote:

Don't spend lots of money going too fancy either, this place is quite grungy and better for it.

Many of the new venues opening here go for really showy fit-outs which seems to be reflected in the cost of the drinks, so I know what you mean.

Cyd Cyclone wrote:

You'll want to have at least six months of operating expenses, preferably one year's worth. You can get this from loans. The primary reason being, is that if you make no profit for the first six months, you need a way to pay for everything. Unless you want to close after one month.

Would rather not close after one month Also wouldn't expect to make much money in the first few years of operation. It would be the goal, obviously, but more of a 'break-even' situation.

Ryna wrote:

I see you're in WA, and I heard somewhere that Perth is the new Melbourne for cool in Australia. I think you might be onto something..

Not quite. But we have an awesome new Lord Mayor who is pro-development and our inner city population is rapidly increasing, as is our population generally - and there's still a lot of money flowing in from our resource workers.

Thanks for all the responses, I appreciate them all.

Spherick

If you were in the US, I would heavily suggest filing your articles to qualify as an LLC for favorable (partnership) tax treatment and for the limited liability. I have no clue if they have something similar in Aussie land, but only an idiot would operate as a sole proprietorship.

Look into small business loans from any gov't run organization (again, something similar called SBA loans here in the US)

Finally, go get a bar job right now. Get a few years of experience under your belt and write a professional looking business plan. You can find great resources for these online and they impress investors.

Also, when you are ready to get the ball rolling, hire a lawyer to handle all the legalities of it.

Rubix42

Much like other people said, you should know something about the service industry before starting in on it. However, much like everything in life, having a good idea and solid execution is so very important too. I know people who bartended for 12 years, opened a bar and failed within 3 months. I have a buddy who was a lawyer, decided he'd had enough lawyering, quit and opened a bar. He's been in business 6 years and is thriving. Never once owned a bar or worked in one before that day.

It's all about the right people, solid location and execution. Some places are really awesome because the people running it don't give a crap, let you act crazy and go nuts. Some places rule for small intimate live shows. We have one here in Detroit that is almost pitch black, and the place is packed everynight of the week. It has 1 light over the pool table and even that bulb, I'd be surprised if it was more than 5% lit. Place is an absolute shithole and looks fucking terrible during the daytime. At night it's the world's most classic hotspot.

To answer some of your questions, you would be better served and off financially if you buy a bar that currently exists, shut it down, remodel the decorating and reopen under a new name after 6 months or so. Saves you the cost of a new liqour license, you just maintain the current one. Not having to plumb out a new bar, or build a new bar saves you tons of cash.

For staffing, you are doing yourself a huge disservice if you don't bartend in your own bar. Especially during the payback period when you are trying to get your money back off the intitial investment and becoming profitable. Most bartenders in our area get the server's minimum wage, $2.65 an hour, or at least it was last time I checked, and of course, keep their tips. Most bars I ever worked at, I wiped my ass with my $22 paycheck and bankrolled $150+ a night in cash.

My point is, why pay someone peanuts to take what is essentially about 20% of the drink price. Say you charge $4 a bottle of domestic. Most people would give you a $5 and tell you to keep the change. Some would not, but this is an average, so let's go with it. Why put that extra $1 in someone else's pocket. Especially because you'll be paying a security guy and other people.

Having a partner is also good. You don't really want to be at your bar 7 nights a week, so having a partner allows both of you to get nights off.

supabeast

You should really discuss this with locals who have already done it and find out how they make it work. In some parts of the world a business like this can be run at a loss, which can be a benefit to wealthy investors around tax time. If you’re really lucky there’s tax loopholes like this in Perth and what you need to do next is make friends with some wealthy art and culture fans who need to invest in a business that’s guaranteed to lose money for at least a few years.

Spherick

One caveat to that is (at least under US tax law) you can only offset passive activity losses with passive activity gains. This law was made specifically to counter the above situation. I would be surprised if the Aussie tax law didn't have something similar.

Esh

Rubix42 wrote: »

Much like other people said, you should know something about the service industry before starting in on it. However, much like everything in life, having a good idea and solid execution is so very important too. I know people who bartended for 12 years, opened a bar and failed within 3 months. I have a buddy who was a lawyer, decided he'd had enough lawyering, quit and opened a bar. He's been in business 6 years and is thriving. Never once owned a bar or worked in one before that day.

It's all about the right people, solid location and execution. Some places are really awesome because the people running it don't give a crap, let you act crazy and go nuts. Some places rule for small intimate live shows. We have one here in Detroit that is almost pitch black, and the place is packed everynight of the week. It has 1 light over the pool table and even that bulb, I'd be surprised if it was more than 5% lit. Place is an absolute shithole and looks fucking terrible during the daytime. At night it's the world's most classic hotspot.

To answer some of your questions, you would be better served and off financially if you buy a bar that currently exists, shut it down, remodel the decorating and reopen under a new name after 6 months or so. Saves you the cost of a new liqour license, you just maintain the current one. Not having to plumb out a new bar, or build a new bar saves you tons of cash.

For staffing, you are doing yourself a huge disservice if you don't bartend in your own bar. Especially during the payback period when you are trying to get your money back off the intitial investment and becoming profitable. Most bartenders in our area get the server's minimum wage, $2.65 an hour, or at least it was last time I checked, and of course, keep their tips. Most bars I ever worked at, I wiped my ass with my $22 paycheck and bankrolled $150+ a night in cash.

My point is, why pay someone peanuts to take what is essentially about 20% of the drink price. Say you charge $4 a bottle of domestic. Most people would give you a $5 and tell you to keep the change. Some would not, but this is an average, so let's go with it. Why put that extra $1 in someone else's pocket. Especially because you'll be paying a security guy and other people.

Having a partner is also good. You don't really want to be at your bar 7 nights a week, so having a partner allows both of you to get nights off.

Because the right bartender will know what to stock, what to charge, how to do things, etc...

desperaterobots

Just wanted to say thanks for all the responses.

I agree that gutting/rebranding an existing bar would be ideal for keeping costs down, however our bar landscape is so unbalanced (heaps of huge beer barns or large night clubs, not much else) I think the best I could manage here would be re-purposing a store that had an existing kitchen or food-prep area, something like that. But then, if the space was in the right location the cost of a small bar fit out would probably be worth it in the long run.

A bunch to consider. If anyone has anything else please do, this thread has already helped me a lot.