Starting A Club Guide

Starting your own bar or nightclub is a dream many people have. You’ll hear many conversations from people throughout their life that say “I wish I had my own bar”, or “I wish I could open my own nightclub”.

This is not unusual. Another standard one is people wanting to open their own restaurant. These dreams are ok. Really! And for many, they can be more then a dream, but reality.

The hard part is knowing where to start. Yes, I’m sure you have had many people tell you what to do, or how to start. In addition, I’m sure you have many people tell you that “you can’t do it”, or “you’ll fail and lose all your money”.

You see, most people are negative. If you research entrepreneurs that have since succeeded, you will find that these people were told the same things. You have to have faith in yourself, and the product you want to sell. Yes sell.

In all comes down to sales, as this is really what you are doing. In addition, you have to have a good work ethic. You will find that people who are self employed work harder and longer then anyone working a forty-hour a week job. I know it may not seem so, as when you see them at work they are generally talking with customers, dressed up, and having a nice time.

But what you don’t see is the hours upon hours that these people have put in before you actually see them at work. But their passion for what they are doing, the whole life style of being self employed, and their desire to accomplish monetarily what they could not do in a regular job, makes them happy to put in the hours.

So you need to ask yourself, is this what I want? Is this worth it to me? These questions only you can answer. This book will talk about many things, along with why you bought it. Which is how to open your own bar or nightclub.

Wondering how to open your own bar or nightclub is a common question. You can’t believe how many people ask this question. As there are so many aspects to doing this, people just don’t know where to start. This book will guide you through how to do this and will give you an understanding how and why you are doing the things that you need to do.

You will find comfort in the explanation of things, and it will give you the confidence to move forward. Don’t read this book once. Read over and over until you understand completely what you need to do. Then, you will be ready to move forward with clarity and understanding of what needs accomplished to make your dream come true.

This book will not sugar coat things. You will get the facts and the direction you need so you can choose how you would like to proceed. The direction you receive here you must take seriously. This is your new life. What you do and how well you do it will determine your success.

As I hope you enjoy the new life you are ready to embark on, remember, this is a business and is to be taken seriously. Yes, I hope you find enjoyment in what you create, because without it, you will fail. But the new business you create is not supposed to entertain you, but rather to support you, and enable you to experience a great quality of life by doing something you enjoy.

The bar business can be your best friend or your worse enemy. Whether you are opening a bar or nightclub, the procedure is the same. The big difference is size and clientele.

In these alcohol related businesses, you must keep your wits about you as you are dealing with alcohol and tobacco. These drugs, of which they are, have ruined many lives. I know you say, “it won’t happen to me”. Please heed my warning that this business takes no prisoners. You’ll succeed or it will probably ruin you.

I realize it looks fun. That’s the perception that many have, but it’s still a business that has to be taken seriously. If you do, you will have a life that people will envy. And one that you will enjoy for the rest of your life. I can’t imagine doing anything other then being in the food and beverage industry. I hope you will find it as satisfying and rewarding as I. I wish you good health and prosperity.

THE MONEY:

This is where we need to start. Please read over this even if your financing isn’t completed yet. Then move on to the next steps.

Well of course you can’t build your own bar or nightclub without money. So you need to obtain that cash you will require before you proceed. The number one question I get on this subject is how much would it cost.

My answer is always “everything is relevant”. How much does what cost? A bare bones place with just enough money to get open? Or an average looking place, with adequate equipment, and a few bucks to get by for a couple of months. Or a beautiful large business with the best of everything and tons of money in the bank. See what I mean. Everything is relevant.

Also, every State is different about purchasing a Liquor License. Some States you can buy a Liquor License from the State itself. How much? I don’t know, but we will talk about that later. Some States only sell so many as a quota. If the quota has been met and all the Liquor Licenses have been sold, you have to buy someone else’s business in order to get a Liquor License.

In addition, we haven’t talked about location. There are some States that have a higher cost of living therefore the cost of property to purchase or the cost of leasing a property is going too much higher then in another State.

So unless you have a boatload of money, the next thing we need to look at is where you are going to be as far as how much this venture will cost you.

Are you with me so far? The next section we’ll talk about getting a Liquor License.

GETTING A LIQUOR LICENSE:

The first thing you need to know is how to go about getting a Liquor License. All States have a liquor enforcement agency. This is operated and governed by the State you live in. Use your telephone book, the Internet, or call the State Capital to get in touch with the agency.

Also, write down the name of agency once you get it along with their telephone number, web address, and their physical address.

Now is the time to go out and buy yourself a good address book and binder to keep all your information in. It will take time and energy to compile this information and you need to keep everything together.

Some States alcohol and licensing board are named the ABC. Some States they are called the Liquor Control Board. Yours may be different.

Once you find out what the agency in your State is called, and you have a contact number, call them and ask how to obtain a Liquor License with them. I have spoke with the people in these departments for years and I can tell you that these are some of the most helpful people you could ask for.

They are going to tell you one of two things. Either the State can sell you a Liquor License and they will tell you the price and they will send you out the appropriate paper work packet to fill out, or tell you where you can go on line to get this information.

Or, the State will tell you that they only issue a certain amount of licenses per county or township, or city, and that they either they have some available to sell, or, they have none, as the area you are looking to purchase in the quota is full. In that case you would need to purchase an existing one. Regardless if there is one readily available or not, make sure you find out how to get the necessary paper work to purchase one.

If in fact they tell you the State has none available, and you need to purchase an existing business, then you will need to contact a real estate company to find a business that is for sale that you would like to own, or buy the cheapest dump you can find to purchase just for the Liquor License. Then you can transfer it wherever the laws allow.

This step requires legwork. It requires you to take your time and understand what the State agency is telling you. Read the State web site, and or any paper work you get fully. Information and education is very important here. Each State has their own stipulations where a Liquor License can be located. So many feet from a school, so many feet from a church, etc. Read your information carefully.

In addition to the States stipulations, you will also have stipulations that your local government will impose. Check with your local Zoning Office and ask them about their rules for the location of a Liquor License.

This will be the most important thing you do. Obtaining and understanding the aforementioned will give you the knowledge of the cost of a Liquor License, how to purchase one, the price, and where it can be located.

Once you have this information, you need to look at your financing. Can you afford this? Or has it already exceeded any monies that you can obtain? In some parts of the country, I can imagine that just the cost of the Liquor License would stop people from going any further.

If you are satisfied with the price and availability and wish to move forward, we’ll go to the next step, which is obtaining the license. The paper work that will need to be done for the State to purchase a license, or to transfer one from a purchased business to you, needs to be done accurately. Not doing so may result in a delay. Sometimes a substantial one. As it is, some States can take up to six months and maybe more to purchase and transfer the Liquor License into your name.

So do it right the first time. Take your time. Check and re-check your paper work before you submit it.

Many people hire an attorney. If you do, insure your attorney has done a substantial number of this type of work before. If you hire an attorney that does not do this type of work often, they will make mistakes, as they are not familiar with it, and will cause you delays.

Usually, there are attorneys that specialize in this paperwork. I suggest you use them if there is one in your area. But give the paperwork a once over before you do anything. Generally, they are a fill in the blank type form and you may be able to complete yourself with some help from the State liquor agency.

And yes, the liquor agencies are very helpful. Fill out all the things you know. Then, you can call them and ask the questions you don’t understand to complete your forms.

Here’s some information that you will need to know about applying for the Liquor License. First, if you have a felony criminal record, your State will probably not allow you to purchase a license. Second, you will probably have to prove where the money came from to make this purchase.

The reasons these two questions are asked derive from many years ago when criminals operated many liquor establishments. They need to be sure you are not one of those. So, they want to make sure you don’t have a criminal background and you are not paying with cash you can’t explain where you got it. Make sense now?

Once you have all this information at your fingertips, stop. Don’t fill out anything yet. There are a few more things you need to learn yet before you proceed. One of which is what name is the Liquor License going into.

Are you buying it personally? At this time, you need to make an appointment to see a Certified Public Accountant (CPA). The first reason for this is to talk to a professional about the tax consequences, equipment depreciation, and liability issues.

They will probably advise you to start a S-Corporation. There are many benefits to this type of Corporation that your CPA will review with you. In addition, when and if you choose to proceed, they will be the ones that will apply for your Federal ID Number, your State ID Number, and set up your account to make payroll deductions. Your CPA can also do your payroll if you are not planning to do yourself. To start a State Corporation, you will need to contact a lawyer. Your lawyer will work with your CPA and get you running correctly.

Can you do this yourself? Yes you can. This will depend on you. It is a nice amount of paperwork, but if have some patience, it can be done. If you are familiar with these procedures, it probably won’t be too bad. If you are fairly new to this, hire it out. Let your lawyer and accountant give you a price in what this will cost you to have all this done.

Your lawyer will provide you with your Corporate Book and Seal when he completes your work. Tell your lawyer that you will also need him to submit paperwork for you to file a fictitious name with the State.

This fictitious name, which will be he name of your Corporation, which then will be the name of the purchaser of the Liquor License and or the business you want to buy, not you personally.

Your lawyer and CPA will explain how a Corporation works, how to sell stock in your Corporation, and your responsibilities as a Corporate Officer.

I know this may seem like a lot to digest. If this is all foreign to you, you may be getting a little overwhelmed. But don’t. Once it’s explained, you’ll completely understand.

Right now, the only monies you are for sure of is the quotes you have received from your lawyer, CPA, and possibly the price of a Liquor License. Write them down. This was quite a bit to do just to buy a Liquor License wasn’t it?

At this point, you know how much the legal and financial paperwork is going to cost you. The biggest thing you need to do is find out about that availability of a Liquor License if you can’t buy one from the State.

The next item to talk about is your new business location.

THE LOCATION:

We are going to jump around a little bit here because you’re not sure if you are buying a Liquor License from the State or buying a business.

So let’s start with buying just the Liquor License. If you are able to buy your Liquor License, you can’t actually buy it without having a place, or a physical address, to transfer it to. So where are you going to put it? Do you have a location in mind?

Also, some States do offer an option called “escrow”. Some States allow you to purchase a Liquor License and put it in escrow. Another word they may use is “safekeeping”. This option is great if it’s an option they offer. Once your Liquor License is purchased, then you can take you time and find a location, knowing that the license is already secured.

Most of us who always wanted to get into the bar or nightclub business usually has had on their mind a certain location. You know what I mean. You’re driving down a street and you see a building, and you say, that would be a great site for a bar. So do you have one in mind?

If so, the time to go see it is now. I mean right now! I can’t tell you how many times I have had a location in mind and by the time I went to see it, it was rented. And I moved fast. This makes you mad.

If you don’t have a particular site in mind, start driving around. Most places for lease or for sale have a sign on them. Call the number. It doesn’t matter if is being let by the owner or a real estate company. Just get in and take a look. It doesn’t cost you anything to look.

Now if you love it, keep your poker face on and don’t let on that it’s perfect for you. Admit you like it, but will need to crunch the numbers. Get it?

What to look for? Many things. First of all you have to know a little bit about size, or should I say square feet. Every commercial property is leased by the square foot. If you don’t have much experience with this, the more places you go to see, and see what size they are, they more you will know what size of a place you need.

I can tell you from experience that if the place doesn’t have parking, go to the next site. I don’t care how great the location is, without parking, you’re doomed.

Ok, so the next place has enough parking for you. Don’t let a big piece of land fool you. Cars take up a lot of room. Is the parking dirt, gravel, or blacktop?

If this is a self standing building on a piece of land, your lease or purchase will require you to keep that parking lot maintained. And it can be costly. If it’s in good condition it’s a plus. If not, you will need to negotiate the lease or purchase price to reflect the cost of repairs.

If this building to lease is in a shopping plaza, which I love for nightclubs because when all the stores are closed, you have a ton of parking, you won’t have to worry about the maintenance of the parking lot. When you lease a space in a mall or shopping plaza, on top of the lease payment they are requesting, you need to ask them about the amount of the CAM (common area maintenance) charges.

Cam charges are maintenance charges that are charged to you separately, monthly. They can be hefty at some places. Remember, the cost you are quoted in these environments do not include CAM charges. They are in addition to the lease payment.

The next item you need to look at is the electric service at this location. Depending on what the site was used for before, usually reflects how large the electrical service is. If the location was used as a clothes store, there is probably only a 100 amp electric service there. That in no way would be enough power for this type of operation.

But sometimes you get fooled. The last store that was there might have been a clothes store, but the store before that might have been a store where they required a larger electrical service. You might get lucky. Go to the breaker box and on the panel will be listed how big the electrical service is. You’ll need a minimum of 200 amp.

The next two things are always really costly. That is the HVAC, (heat and air conditioning) along with bathrooms.

Although the owners may say they have new air conditioning/heating units on the roof, and if it was for a retail shop like a clothes store, the units would be too small. There are formulas that HVAC companies use to figure how much tonnage of air conditioning a place needs depending on its use.

A clothes store will need very little. But a bar, restaurant, or nightclub requires much, much, more. You have the ability to be slow early on but once it gets later, you may one hundred to one thousand people come in your door in short period of time. Now there is drinking, eating and dancing, which generates heat. See what I mean.

If your place is too hot or too cold because your units are too small, your crowd will leave.

Bathrooms are another costly investment. I have never taken a place over where the bathrooms were usable. The ADA (American Disability Act) laws, along with local ordinances, will require you to use a certain number of stalls and urinals based on the amount of people that can be accommodated in you place. Usually the number of people safely allowed in a building is determined by the Fire Department. They call it Fire Code Occupancy. You will receive a visit and an inspection from them and they will provide you with an occupancy permit.

The need to relocate bathrooms, enlarge, or just a new install is very costly. It’s thousands of dollars, just like the air conditioning.

Please note, that these things if not exactly what you need, are not necessarily deal breakers. Depending on how much improvement the location needs, the landlord, if you are leasing, or the present owner, if you are buying, may reduce the price substantially because the improvements stay there if you ever go.

A building owner may substantially reduce the purchase price if these things are required for you to make your business work. But, even if the price may be good, it requires you to come up with more cash to improve these things, unless you can get thrown into your mortgage.

It’s all supply and demand. If a location has been empty for a while, the people may make you a very good deal if you take it off your hands.

I know that was a lot to swallow. Most importantly, don’t rush and make bad decisions. Take your time. If you rush through this process you will make costly mistakes.

The site you choose is very important. This will be home for you. Although we tackled some of the pricing, here a few more things you need to look for. Parking lot lighting, room to place a dumpster for garbage, dumpster for old cooking oil, room for trucks to park and deliver your supplies outside along with room for these large trucks to be able to get in and out. You will need the amount of emergency exit doors required by your local code, and a place to erect a sign.

SIDEBAR: When you are quoted a per square foot price for a leased space, here’s how you figure you monthly lease payment. For example purposes, let’s say you are quoted ten dollars a square foot for a leased space. Let’s also say the size of the space you are looking at is three thousand square feet. You take the ten dollars per square foot times the three thousand square feet of space, and it comes to thirty thousand dollars. Divide the thirty thousand dollars by twelve months in a year, and you come up with a monthly rent payment of two thousand five hundred dollars per month.

Now you know what to look for, view a couple of comparable sites, find the one you like and start to haggle. Whatever you do, if you lease a site, always get the first three or four months of your lease at no charge. Explain to the landlord that you require this time for construction time. They will usually give three months to you at no charge.

If you are not aware of building codes, stop in at your Local City Municipal Building. The Zoning Office is located there and you will have questions for them anyway, as we discussed earlier. In addition, you will need to discuss how to acquire a remodeling permit for any renovation of the interior you need. If you hire this work out, please make sure before your contractor starts anything, a remodeling permit has been acquired and posted. Most of the time the cost of this permit is based upon the cost of the remodeling you are doing. Furthermore, they will be able to inform you of the local codes that you will have to adhere to.

They will go over your proposed plans with you and answer any questions you will have. This guidance from them is invaluable. I always stopped and spoke with the people there as they can remind you and guide you of stipulations that must be adhered to.

They will also talk to you about an Electrical Permit, and Plumbing Permit. As every City is different, some will tell you that you are able to perform the work yourself as long as it’s inspected when completed. They may also tell you that only licensed and bonded people can perform these tasks.

And while you are there, you need to ask about a sign permit. They will tell you about the maximum size of a sign you can use and possibly where it can be placed. I have had the luck of all these departments all being located in the City Municipal Building. So it was a one-stop shop. Hopefully, these departments are not scattered around your City and saves you some footwork.

It’s getting to be a lot isn’t it? Make sure to write all the rules you need to abide to, along with the costs and procedures you must follow. Don’t try and rely on your memory. Now you have some other financial figures you can add to those you already have.

And we haven’t even talked about the square feet you need and the design. We’ll get to this next.

DESIGNING YOUR SPACE:

Design is the single most difficult thing people have a hard time with. There are a couple of reasons for this. First, it’s just the artistic ability that many of us lack. We all want a real nice looking place but don’t know how to go about it.

Second, is when you design a place you need to have some knowledge of building trades. The reason why is the cost and ability to locate some things in certain areas. What I mean by this is let’s say you have a rough sketch of what you would like your place to look like.

You may not realize that it would be either impossible or cost prohibitive to locate your bar area in a certain section of the space as it would be next to impossible to run water and drain lines to this spot. Understand?

You see drains work on gravity. Water has to run down hill. You may not have a drain in the right spot to connect your drains and them to work properly. You may be able to have the drains moved to accommodate your wishes, but the cost of digging up a floor to move a drain can be really expensive if it can be done at all.

Ideally, if your location had a basement, utilities can much easier be moved around. Problem being is that most commercial buildings have a concrete slab as a floor and the utilities are buried in the floor.

So, call a reputable contractor and set up a meeting to go over a couple things about your site. It will be worth it to pay him for an hour of his time to tell you that the bathrooms have to be placed here, the bar can go here or there, etc.

Once you have this knowledge, then you can sit down and play on a piece of paper how you would like your place to be laid out. I like to use graph paper. Graph paper is just a piece of paper with that is divided into little squares.

You give the size of that square a value. Let’s say each square equals one foot. Then as you draw you lines of the size of the room, and then start adding a bar, bathrooms, a waitress station, etc. Then as you look at the paper, you are able to see how close something is to something else. You can see if the walk way between the tables and the bar is too narrow. You just count the squares.

If you have never been in this business before, you may need to see a designer, an architect, or if you know a person or two like a bartender, and a waitress, that can inform you of the needs of these people and their positions. That’s another guide to write.

When you get this far, contact an architect if you need to and get a price to do design and floor plans for you.

Remember, most of what you will design is cosmetic. You may not need any more additional guidance other then the contractor you hire. This meeting will let you know about crucial placement of rest rooms, and drains. The rest you may very well be able to work around.

You need to know how much room the waitress needs, how much shelving is needed behind the bar and how long, what cabinets need to be where and do they need two electric outlets above the cabinet, not to mention how much room is needed behind the bar, etc. See what I mean.

The last part of your design, and potentially the most expensive, is the kitchen to work into your plans. If you plan to have a small menu, and don’t plan to expand that idea, then the cost won’t be too bad.

But kitchen equipment is expensive. And the installation can be just as bad. You may get lucky and buy some nice used pieces. You will have to install a stainless steel exhaust hood, duct work, exhaust fan and diffuser, not to mention the ansul fire suppressant system. It is easier to locate this on an outside wall. Which is the reason the most kitchens are located at the back of the place. The larger the menu is, the more costly it will become, as you will require more equipment.

If you have a computer, go to www.superprod.com. This is the address for Superior Products. I have bought from them for years. You can get a catalog sent to your house and view the large selection of productsyou’re your business. They have everything you can imagine and it will give you an idea of what things cost.

Once your plans are completed, contact a couple of contractors and get a bid on the construction of your new place. Be very specific in your contract with them, so there is no misunderstandings and over runs. As always, any talents you may possess that you can give to the project will lessen the total price tag.

The next topic is about you not being able to acquire a Liquor License. It’s about buying a place to operate yourself, or just for the Liquor License.

BUYING AN EXISTING BUSINESS:

Sometimes you are not able to acquire a Liquor License and if you want one, you’ll have to buy an existing business, just for the paper. (Liquor License)

I have done this before. The business was down and out. They tried to sell for months and months but no takers. I offered the owners a price I was comfortable with it, and it was accepted. Now I had the paper and already had a site in mind. You can do the same thing.

If it doesn’t work out, and there isn’t a business you can buy cheap enough just for the paper, then your only option is to buy a business that’s for sale that you may want to own.

When looking at the business for sale, the current owner is looking to sell you the current business they have, at a full retail price. Not only will you buy the business, it’s contents, the Liquor License, but also what they call “good will”.

Good will is the amount of money an owner will figure that the business itself is worth. This amount out of the entire deal will be the part that is negotiable. Here’s why.

The Liquor License will have a market value depending on the current supply and demand for that item. It may change up or down a little, but you will find the value will hold pretty close to the local market value.

The equipment has a market value too. Used restaurant and bar equipment, depending on its age, will also carry an average market value. Generally used equipment is worth half the price it is going for new. Unless, the equipment is very old and beat up, and then it’s not worth much at all. Probably no more then twenty five percent of that same piece new.

You can price similar new equipment costs from the Superior Catalog we spoke of earlier. Next, if you are not leasing and you are purchasing this property, the real estate value will be a constant also. Someone can’t just make up a price on the value of their land. Your real estate agent will be able to give you a ballpark price on the value of the property.

So you see, the only value that can be negotiated is the good will. Normally, you would ask to see their books. This is the profit and loss provided by a CPA only. Basically you need to be provided the tax returns that have been signed by a CPA only.

But understand this, you should buy a business based on what you will do with the business, not what the current owner has done. In my view, the amount of money the current owner is making has nothing to do with you. You need to pay the price you feel the business is worth based on what you know you can make there.

So the good will that is being sold has to be a price that you feel you can make, not what the other person made.

The purchase of a business is, especially one with a Liquor License, can take some time. The actual purchasing of a business a lawyer can draw up in a day, sign, and it’s yours. Add a Liquor License in the deal, and you need to have to complete all the paper work we spoke of earlier, and usually a completed transfer can take a few months.

Before you begin negotiating the price with the current owner, you need to write in to the purchase agreement any stipulations you have.

Things like, the owner will warranty any and all equipment in this business for three months from the actual date they legally take over. It doesn’t have to say three months, it can say anything you want. I can tell you that repairs such as air conditioning, slicers, refrigeration, etc, can be costly. You don’t need to have the burden of expensive repairs as you are just taking over.

In addition, if you are purchasing, you also must include the warranty of the roof for a certain amount of years. If you lease, your lease agreement will stipulate what the landlord is going to be responsible for. Read carefully. Have this and any agreements reviewed by a lawyer.

You need to insure that you are not being sold a money pit. Your lawyer will be looking out for your best interest.

And we are done. This is how you start your own bar or nightclub. These are the procedures to follow. Actually the starting of a business is where no one knows where to begin. They don’t know what to do first. Now you do. Does owning your own business entail more. Sure it does. I have written approximately fifty pages on my web site about the bar and nightclub business.

Although they are not extremely detailed, they give a good overview about this industry. Many people just click on a page that interests them. That’s the wrong way to learn. Read all the pages. I know that maintenance of your business is not the most exciting subject in the world, but it’s the whole package that makes it work.

I have stressed the value of education and experience in this industry. You don’t have to have a formal education to be successful in this industry, but experience is required. Without hands on experience, you will never know the correct way to operate. How would you know if you are doing something wrong if you don’t have the experience to tell you so?

Learning inventory control, insurance, hiring staff, bartending, cooking, ordering supplies and equipment, developing menus, understanding liquor laws, entertainment, designing a place that’s functional, and many more subjects are all a part of operating a successful business.

These subjects and more will be the topics of more guides and free newsletters to come.

What you have read inn this guide shows you how to start your own bar and nightclub. If you have the experience, you are on your way. If you don’t have the experience, get some before you invest your hard earned money. Don’t be a failure statistic.

I hope you have enjoyed learning the process of starting your own bar or nightclub. In your process, never feel like you are asking to many questions to the people and organizations that you need to work with.

Be polite to these people too. If you are kind, they will help you on your way. If you are not, they can make your life miserable.

It is imperative that you understand every step of the way, as it will all affect you. If you don’t, ask questions.

Don’t forget to keep good notes, names, addresses, and pricing information.

If you have nothing planned right now, but plan to do something in the near future, start your calls to get as much information as you can now. These things do take time. Start your learning process now. Even go and look at some locations to get a feel of what commercial sites look like. Call a real estate agent and find out what the going rate per square foot is.

Familiarize yourself as much as possible with all the facets of starting your own bar or nightclub. I know you will be successful. I wish you good health and prosperity.

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