You can buy a bar and open your business immediately or start from scratch and face these pitfalls.
There is a perfect storm of demand brewing for buying a bar or club as record numbers of a buyers are searching for a small business that offers all things “foodie.” Building a pub or bar from scratch requires planning, spending a lot of money, and then waiting which makes it a very uncertain option. For this reason, buyers are opting to seek out clubs that are already established so they can be up and running and making money right away.
Statistics point to the fact that a lot of clubs are never launched due to the capital being depleted during the build out phase with six out ten new bars and pubs that close their doors by the end of the first few years. These statistics point to a dismal outlook for a startup bar or pub and contribute to shattered dreams of aspiring bar owners. What makes it worse is that most new bars and pubs that might have potential, startup cash poor without any advertising budget to market the bar or pub and no funds to help keep it going for the first few years it takes to operate at a profit.
When it comes to the phrase “if you build it, they will come,” unfortunately this is as highly unlikely in the bar business as it is in baseball. Buying an established pub makes a lot of sense since there is no magic formula for a startup in the bar or pub industry.
If you buy an established bar or pub this will ensure your path to success as a potential bar or pub owner. If you build a bar or pub from scratch it is highly likely you will deplete the capital if you are a skilled bartender but amateur contractor and decide to tackle the project yourself. If you are not a skilled contractor who uses his tools as efficiently as you can shake up a meant martini, then your bar or pub will take much longer to build.
In our years of experience with selling bars or pubs we always come across someone who tries to reduce costs by building their bar from scratch. As the project progresses they begin upgrading their construction choices to moving walls and other costly additions and end up driving the constructions costs so high that it quickly depletes the budget. The reality is that if you buy a second generation pub or bar and add a new space this will always turn out to be much more cost effective.
When it comes to business, time is money. If you buy an existing tavern you can be operating tomorrow. When you compare this to building a pub or bar from scratch you are looking at up to nine months to permit, build, and open a bar. Instead you could be serving your first cold brew tomorrow with an established bar instead of waiting close to a year to open the doors on a bar that is built from scratch. What’s more is that despite the fact that an Atlanta liquor license does not transfer to the new owner, you still have an advantage over trying to obtain a liquor license on a bar that you built from scratch.
When you purchase an established bar or pub it will have an immediate customer base even if the bar is struggling at the time of purchase. If your bar is brand new you have to start from the bottom with building the initial sales dollar and then go from there with every dollar incrementally. It is important to note that the first sales volume of $100,000 is the most difficult to achieve and if you buy an existing bar or pub, you can implement the necessary marketing plans to take the current sales to a higher level. This is much easier than if you start a bar or pub from scratch with zero sales. It will not matter how famous you are as a mix master or how many customer you predict will come to your bar, starting from scratch is a daunting task any way you look at it.
These reasons alone should help you to decide to buy an existing bar for sale instead of starting from scratch and find a restaurant broker to help you find the bar of your dreams.
Eric Gagnon, Certified Restaurant Broker®, CBI is the founder and president of We Sell Restaurants and co-author of Appetite for Acquisition, the definitive guide for anyone looking to enter the restaurant industry. He is a fellow of the International Business Brokers Association and serves as a board member for VetFran of the International Franchise Association and as a board member for the Southeast Franchise Forum. Eric is an industry expert in restaurant sale and valuation with 20 years of experience brokering restaurants for sale.
Updated 6/3/2022