Updated: Mar 7
It seems like the right thing to do? You have cut your teeth in the industry and given of your time to something you have been very passionate about. You have performed many different roles within the industry and built up a set of skills which will bid you well in your own business. You have built up a repore with your peers, and spent time building businesses for other people and now you feel it is now time for you to spend your time building your own.
Great, now that you have come to this conclusion, I doubt anybody will change your mind. Especially now in a post Covid world where many businesses have yielded a plethora of prime outlets available to be snapped up, enticingly presenting themselves with massively reduced rental rates after businesses fold and continue to fold at an alarming rate.
This is not a checklist of things to cross off before you open a bar. This is rather an advisory piece based off of practical application. So before you jump in with both feet, hold your nose because here comes the cold water, these are few things to consider before you take the plunge.
Don’t under capitalise
When setting out to design and build your business you will put together a business plan. This plan will include your start-up costs which will bring your concept to life. The figure you set aside for this will almost always be over whelmed by the actual cost it will take and you can prepare yourself for your initial figure to be higher than what you planned it to be. Having a business plan is essential, however things can, and probably will creep in as you negate the process of setting up and I suggest building in some ‘fat’ into your budget to deal with any surprises.
Have enough running capital
Having start-up capital is only going to be able to get your business to the starting line, ready to run a race. But now you need to run the race and extra funds must be made available in order to make sure you can run a good race and maybe even win. Any professional racer will tell you the only way you can win a race, is to finish a race.
Running capital is often overlooked and sometimes to the detriment of the whole business. Every business institutor needs to do their due diligence in order to find out what the operational costs will be to actually run the business from month to month. Once you have that figure, it is a general rule of thumb to make sure that you have enough running capital to keep the monthly expenses paid up for an extended period of three months.
Meaning that if you had to find yourselves in the unenviable position of having a business which doesn’t turn a single cent turnover in three months, it will still be able to cover it’s running costs for those three months even though there is no revenue coming in. In a Covid world however, that rule means nothing and I suggest you prepare yourself for it to be a lot more.
Surround yourself with power people who can add skill to the project, not just money.
Unless you were born into wealth, or if you have been diligent enough to save up some money over a period of time, the chances are that you will have to raise the capital required to open a bar. Bringing on investors in order to raise the capital will mean that you will have to give up pieces of your business in lieu of their investment.
Unless the investment is strictly financial and the investor wishes to remain silent, you should try and align yourselves with investors who add benefit to the business in other ways. But always remember who keeps the direction of the business on its course. Everything in the business is subject to the ethos and identity of the brand, and this should be kept true by its institutors or the creators of the concept.
Just like in sailing, a ship cannot have two Captains, everyone else must be specialists in their specific skills and you should not be shy to delegate roles. You just hope that you have a good judge of character but you’ll find out really quickly if you can work with someone or not, but a good rule of thumb is to stick with people who understand the business you are in.
Don’t skimp on staff
The staff compliments of any business are the primary institutors of the vision and values of that business. When it comes to a business like a bar, the staff members you select to work in it are one of the most important factors which can contribute to its success.
After all, it’s vital to not lose sight of the fact that we don’t deal in the business of drinks, we deal in the business of people, and because of that bars and restaurants will always depend heavily on the image of their front line staff and how they carry the ethos of the establishment. You have to get it right from the get go, and then you have to keep it going with ongoing training and development.
I was shocked once to hear of a business man who was reluctant to invest in his staff’s development because of fear of them leaving the business and showing the value for their new skills to another business rather than the business for which it was intended. Then there are the business owners who are happy to train staff even if they are going to leave. The prospect of receiving a trained staff member from someone else yourself is how you see everyone benefitting, and the idea of uplifting the industry as a whole will always benefit the sum of all of its parts with this notion of thinking.
Like what Michael Stephenson, owner of SA’s premier cocktail bar, Lucky Shaker in DBN says:
“It is said that the two most important people in a great bar are the people that frequent it & the people that work in it.” “It's always important to remember that the true value in this business is the ability to nurture & grow talented staff as the revolving door of your business turns constantly with the comings & goings of both regulars & staff who equally have the ability to make this industry so worthwhile”.
Don’t chase ghosts
Everyone wants to change the world one drink at a time. It’s easy to look at the leading bars and want to immediately emulate their service delivery, their drink preparation, their beverage program or their ice game. For encouragement I can say that everything is achievable, but not all things are advisable. I recently read an article by a San Francisco Bar Owner Operator. He spoke about having an idea of showcasing single origin spirits through his concept bar called Agricole. Below is an excerpt from his article which was published in Punchdrink.com, called ‘So Long to All That Bar Business’:
“For my part, I mistook myself as an evangelist, spreading the good news of single-origin spirits. I thought I could change how the bar business worked and the way people drank—more thoughtfully, more intentionally.”
Always remember what the most important thing for any business is, and that is for the business to turn a profit. If the business isn’t doing this, the chances are you are chasing elements within your bar that you could possibly do without, but aren’t because your ego is getting in the way. So in short you should invest in the things that are going to make you money, and the rest will come after you have achieved that.
For a practical example, I look at the Vicious Virgin Bar. We wanted to make all of our drinks from freshly pressed juices. Let’s take our number one selling drink which was the Missionary’s Downfall made with pineapple juice. Where there are pineapple juices available commercially, we decided on pressing our pineapple juice from fresh pineapple. A couple of things to consider: Firstly, the number of pineapples we had to juice to get 5L made the juice outrageously expensive. But we wanted our drinks to have the freshest feel to them, and we were comfortable that our Missionary’s would have pure pineapple juice in with no other juices like pear or apple mixed in - so we thought it was worth it. Secondly, the juice left over spoiled really quickly, so the wastage pushed the cost of having the drink available even further out.
We could’ve more easily murdered everyone dead with Cosmopolitans at a fraction of the price with a drink that everyone knew and loved, rather than to introduce a cocktail which only our bartending friends would’ve appreciated, purely because my ego wanted to bring the exciting world of tiki to Cape Town, in the purest form.
Before opening a bar, to sell food and drink with ambient music you will need the corresponding licenses to make each element happen. Some are straightforward applications, but I suggest you become really clued up on the local laws pertaining to the sale of liquor in particular.
In Cape Town, it can take over 6 months (Pre Covid) to apply for a permanent liquor license through the Western Cape Liquor Authority. To get that license you will need a bunch of things in order to do so. One of which is to have permission to occupy the space you are trying to license.
That means that if you are renting a space which you more than likely will be. You will need the landlord to write a letter of occupation for you. Something you will only get if you have a signed lease, a signed lease means paying rent. So ideally you would not want to pay rent in a space from which you cannot trade. So to combat this you can apply for a temporary license, for which you will have to pay a daily rate of around R200 per day in order to trade while your permanent license is being processed. If you add up the cost of that assuming you want to trade for 6 days a week, you will see that the costs can be enormous.
The other thing to consider with regard to this, are sponsorships. Some liquor companies have a policy of not being able to sponsor on-trade venues without a liquor license number. Something you won’t have should you be trading on a temporary license/Special Event License for the first 6 months of trade. Otherwise looking for a venue that is already licensed is a great way of getting started and makes sure you hit the ground running, like Josh Sarembock, owner of the exciting new concept bar in Cape Town, Fable says:
“The laborious barriers to entry seemingly dissipate once there is a liquor license already attached to your venue. That’s the crux of it – a liquor license is attached to a venue AND a person. So once the venue has its license, the transferal between people is relatively simple.”
Prepare for a rainy day or a year of pandemic.
When taking out insurance on the business, it is more important now than ever to consider the fate of any possibility. So when looking at insuring the income of the business, you should consider interruption of any kind, nothing like a global pandemic to teach us that. Follow the story below of a South African Restaurant that successfully sued an insurance company for damages incurred during the pandemic.
In the article it seems as though they are arguing about the wording of the contract with the insurer insisting that the income interruption was more due to the lockdown rather than the actual pandemic. So like with any contract the devil is always in the detail, and all contracts should be gone through with a fine tip ice pick, and unless you’ve watched the movie ‘A Few Good Men’ a ton of times I suggest getting a lawyer involved.
If something can go wrong, it will.
You should never plan for the best of times. You should plan for the worst of times and then take the rest as a bonus. It’s like having an Irish Coffee, Irish Whiskey and Hot Coffee is still and Irish Coffee but it’s so much better with the fluffy cream on top. If the business cannot survive the worst of times when they come around then it won’t survive at all, because if something can go wrong it probably will.
Not to be a ‘Debbie Downer’ or anything, but if you do get through a month of trade ‘stress free’, then the planets have aligned for you well this time, but don’t get too comfortable. I recall recording a great run of amazing nights together at the bar. Not just from a turn over point of view, but just from having amazing service with great customers in.
Then a comically fateful night rounded off the week when we had to deal with a council plumbing problem of the worst kind. As if that wasn’t bad enough this was also overlapped with a splash of good old load shedding just as were wrapping up fixing the plumbing problem. I can say that nothing will clear out a venue quite like the smell of open plumbing, with nothing to look forward to the rest of the night except no lights and no music.
I look back on it a laugh now, but at the time I was so over roared with the fact that we were having so many issues which were out of our control. The best advice I can give, is to have a complete handle over the things which you can control, so that you can allocate your time to fixing things which you can’t control when they pop up.
Times have changed, consumer trends, profit margins are not the same.
In a world of convenience, a R25 burger has put the idea of quality under the spotlight. Yes there are people who are willing to pay R120 for a burger still, but the difference is the cost of putting that kind of quality together has gone up. Same can be said for drinks, it is becoming increasingly more difficult to charge for quality.
In a top cocktail bar, one can expect to pay up to R150 for a great cocktail made with quality spirits. Meanwhile off trade consumers are paying nearly the same amount on a whole bottle of enjoyment at home. Consumers are becoming more savvy with what they can expect to pay for food and drinks in the on-trade.
In a time gone by it was easy to reach a 200% mark up on a drink offering in a bar and clock triple digit profits along the way. It’s almost impossible to achieve a 200% mark up on a drink offering nowadays, all the while still using the spirits needed to achieve the quality expected. Bars are under increasing pressure to achieve the profit margins needed to pay their expenses and keep operating. The restauranteur of the future is going to have be more savvy than ever before in order to be profitable.
If you are reading this and have been toying with the idea of opening a bar what I am about to tell you will not come as any surprise. I think the kind of lifestyle one is exposed to in hospitality is a grueling one, it’s certainly not for everybody and one has to display a rare kind of strength in order to forge a lasting career.
Owning a bar demands more because you carry ‘the can’ before anyone else. Undeniable sacrifices will have to be made in order to own a successful bar. Time being the biggest sacrifice, you must prepare yourself for the idea of not having a lot of time on your hands, meaning that you will share that sacrifice with your family.
Sleep will also be hugely affected as the late night demands pile up. Your general health and well-being will slide out of importance as well as you will struggle to balance a healthy diet and regular exercise in between your scheduled shifts.
I think that the pitfalls that can befall any business are especially present for those in the hospitality trade and then some. The global pandemic has only highlighted this.
We may have done well to ignore some real problems people in hospitality face every day in hopes that they’ll go away if we don’t acknowledge them. For what were growing problems before, have now become festered, in your face problems which we know now won’t just go away. Things like exhaustion, stress, substance abuse, physical & mental health degradation are all symptoms that complicate an already susceptible industry.
We weren’t to know how susceptible it was until the pandemic hit and rendered everyone in it financially, mentally, and physically broken. In saying this though, no one is ever going to be able to make you do anything you don’t want to do, and we are all masters of our own destiny.
The focus on the well-being of people working in hospitality is increasing every year, with certain people taking the lead to promote the need for balanced lifestyles of hospitality workers worldwide due to the demanding toll a profession in hospitality can take on a person’s mental and physical health. I’ve really enjoyed the idea of a platform that can help people in hospitality get mentally and physically fit, and here is one to check out:
Follow them on the above URL and see how they are changing the way we see hospitality through a wellness APP and training platform designed to add much-needed balance to an otherwise one-sided life of diminishing health.
The reality is this! Yes, you can make a bar/restaurant business profitable in today’s times. I have heard of some bars making back their initial financial investment back in a matter of 3 months after opening, so the idea of making a hugely profitable business in the hospitality industry is still a possibility of course. Like with every business though, make a decision to climb with a sure footing, put the safety clips in place for extra protection, and make sure you can see yourself finishing what you started. Because failing to plan, is planning to fail.