Post: #1

I am looking at diversifying into other business. I really wasn't interested in owning a bar until someone posted a link to some bars for sale.

According to what was posted, we are talking about a 20% return which was shocking to me. I wouldn't know for sure until I saw the books but I could see it being even more since it is a huge cash business. Who knows what happened off the books.

This was a neighborhood bar, which seemed more appealing since I can see not running into the same problems of what is in fashion now won't be in fashion a year down the road. I would welcome any ideas on this as well.

Anyone know if those types of returns is accurate?

Post: #2

I was asked to invest in a bar a couple years ago (turned it down) and have friends who have run nightclubs and bars. They had a group of investors, so I'm not sure the returns. One thing to look at that can really sway the numbers, especially at a neighborhood bar (lower overall revenue numbers) is if the owner(s) are working there also. If you want it strictly as an investment, you need to factor in paying a trusted manager to do what the ex-owners did, and that can really throw the numbers off.

Post: #3

Not trying to be funny, I have seen a few of these episodes. The guy is a little wacky but he seems to be an expert.

http://www.spike.com/shows/bar-rescue

Watch some episodes and see all the headaches and how they turn it around. The one problem is theft of cash, over pouring and not charging customers for drinks.

Post: #4

If you are willing to be there every single day it can work, but as a passive investment, bars and restaurants are the absolute worst choice.
Open a pot-smoking comedy club in Colorado instead.

Post: #5

Hey guys, I appreciate the advice but that isn't what I was asking. A while back I got talking with a guy who owned around 3 or 4 restaurants and he gave me the scoop on problems. He isn't there each day but I am aware of what to worry about.

I got another person who I plan on talking with who owned his own bar for a long time. He ended up selling it but still wanted to get more info from different sources.

I am mainly interested in valuation and return on investment at this point. The valuation seems pretty low for revenues.

Post: #6

(10-18-2013 09:36 PM)paninaro Wrote:  I was asked to invest in a bar a couple years ago (turned it down) and have friends who have run nightclubs and bars. They had a group of investors, so I'm not sure the returns. One thing to look at that can really sway the numbers, especially at a neighborhood bar (lower overall revenue numbers) is if the owner(s) are working there also. If you want it strictly as an investment, you need to factor in paying a trusted manager to do what the ex-owners did, and that can really throw the numbers off.

Yeah, already ahead of you. I am more interested in the bar paying off the building. I can sell the bar business later and keep the building for a rental.

Post: #7

The wealthiest "restaurant" owners I've met all own silly franchises like subway, mcd, or a sports bar chain (buffalo wild wings, etc). They're barely even at the restaurants. Compare this to someone who owns a "cool" bar/restaurant - the owner is ALWAYS there.

Depends on what you want - working your ass off but being the owner of a cool bar/restaurant, or making money but being more hands off.

This was even joked about on the last Eastbound and Down episode where all the rich guys were bragging about their investments in franchises of shitty restaurants that keep raking in money.

Post: #8

The low valuation in restaurants in a Revenue metric is because of the low margin, growth potential and CapEx. Just one restaurant has a limited capacity and in order to grow is necessary to open more restaurants = CapEx and uncertainty. Also Rent and Payroll are going to eat your margins, thats why some people value restaurants using EBITDAR (Earnings Before Interests, Taxes, Depreciation, Amortization and Rent) I agree with this persperctive to see the value of the concept but not in a cash flow perspective given that rent is always going to be there and is an ongoing expense.

Post: #9

One thing I never understood in my town is why the shittiest bars are always the most popular. There are two bars where I live now who have the most mediocre DJs, the worst layout and no class, yet they're always packed Wed-Sat nights. Can't figure that one out.

It's probably just me.

Post: #10

I've never managed a bar but I've got pretty good exposure to bar and restaurant management.

20% on a freestanding bar isn't impossible but it's also not very common.

The most common mistake that people make going into restaurant/bar ownership is having zero experience in the industry. This deserves some serious emphasis; If you have zero experience as an employee in a bar or restaurant, I would say do not get involved as an owner or investor. You simply will not be able to sniff out the thousands of quality control checkpoints that need attention that will give you an informed conclusion as to whether or not you want to be an investor in that operation.

As an investor, you will have any number of people selling you a dream about their establishment. How talented their team is, how well thought out their business plan is, how detailed their critical path is. None of that shit matters. It's the exact same thing as a car salesman trying to sucker you into a deal. Imagine if you didn't know how to locate the fuel cap or know how to check tire pressure. The same thing goes for bars and restaurants. If you have zero experience, don't do it.

The ONLY situation in which I would suggest getting involved, is if someone that you know that comes from an incredible pedigree of bars and restaurants wants to strike out on their own and need some up-front capital. I would not suggest that you be friends with this person as I've seen the friends/business partner relationship sour way more often than not. I'm simply talking about an acquaintance who has an absolute sparkling clean 100% proven track record of success at each of their management positions. You want to see charts and figures detailing how they improved profit margins for their operators, and now this person wants some ownership of their own.

But even that's a bigger risk than you might want, and those places flop all the time.

What you would want to invest in is a group that already has a few outlets with proven profitability, but they probably wouldn't have any opportunities for you unless you've got a few mil to drop into a really big project.

The best case scenario is to work for at least a year in a very reputable bar. Getting your foot in the door might be a problem, but just talk to the right people and tell them you're new in town and really need the work and you'll do anything; scrub floors, unclog the toilet, polish glassware for 3 hours straight. Your starting position in a bar is barback. This guy basically ensures that the bartenders have everything they need to keep the night flowing; clean glassware, restock bottles of liquor, restock juices, keeping the bar clean. You'll learn almost all of the nitty gritty details of bar operations as a barback; it'll really give you the opportunity to snoop around and see how a bar works. You'll need this, because that's what a lot of managing a bar is; the small details, and it's only through that toil that you learn THAT'S what it's all about. Knowing the best commercial plumbing company in town, getting the best deal on contracting a dish machine with the best price-per-wash on dish chemicals. Getting the best pest control company, the most efficient security system that doesn't cost a fortune, because you are handing a LOT of cash. Being on top of trends and having a bar manager that understands those trends, offers the correct spirits to your demographic and knows how to make a Perfect Manhattan. If you don't know how to manage or ensure these things, find something else to invest in. You want 20% profits on your bottom line? You and the rest of the operators better be well versed in all these things. Bars are constantly falling apart and you can easily blow your profits just keeping the place open.

I do agree with the above commenter that quick, cheap and easy is very often the most profitable. If you can open a dive bar near a college with dollar shots, by all means do it, but make sure you have a very strong security team, surveillance cameras, and cleanup crew.

Post: #11

(10-19-2013 06:34 PM)thedude3737 Wrote:  You simply will not be able to sniff out the thousands of quality control checkpoints that need attention that will give you an informed conclusion as to whether or not you want to be an investor in that operation.

I got a friend who I would hire to look it over before purchasing if I go that route. He has managed several bars as well as owning his own for a long time.

I would only be interested in a neighborhood bar that has the normal pub menu and serves mainly mixed drinks and beer. I don't think there would be a lot of Manhattans.

My main thing is the owning the real estate. I can sell off the bar once it pays off the property and just bank rental income.

Post: #12

I appreciate the advice guys. Turned out to be a good thread for anyone wanting to open their own bar.

Post: #13

(10-19-2013 09:09 PM)worldwidetraveler Wrote:  

(10-19-2013 06:34 PM)thedude3737 Wrote:  You simply will not be able to sniff out the thousands of quality control checkpoints that need attention that will give you an informed conclusion as to whether or not you want to be an investor in that operation.

I got a friend who I would hire to look it over before purchasing if I go that route. He has managed several bars as well as owning his own for a long time.

I would only be interested in a neighborhood bar that has the normal pub menu and serves mainly mixed drinks and beer. I don't think there would be a lot of Manhattans.

My main thing is the owning the real estate. I can sell off the bar once it pays off the property and just bank rental income.

Okay but you need someone there fulltime as well, someone to manage the place. I'd say there are two rules when hiring managers:

1) you get what you pay for. The only exception to this is the scenario I mentioned above where you've got some hotshot bartender that wants to spread his wings. So you sell him a dream and tell him to run your place and you can pay him less since he doesn't have a killer resume or management references. However, this is high risk.

2) Do not trust anyone ever and make sure everyone knows that they're on surveillance. Make sure the place is airtight security-wise. If your managers find out that you don't have any experience, that's going to change their impression of you, and it won't be a good one. Chances are they'll pin you for a patsy and try to scam your place.

Post: #14

(10-19-2013 09:27 AM)worldwidetraveler Wrote:  Yeah, already ahead of you. I am more interested in the bar paying off the building. I can sell the bar business later and keep the building for a rental.

Does the bar own the real estate also? So if you bought, you'd be getting the real estate and the bar business with it?

I ask because I was going to suggest you just separate the cashflows and look at it that way. Buy a business that generates X cashflow, use that cashflow to pay the mortage of Y on a property --- but not necessarily the same property.

Post: #15

(10-19-2013 10:46 PM)paninaro Wrote:  

(10-19-2013 09:27 AM)worldwidetraveler Wrote:  Yeah, already ahead of you. I am more interested in the bar paying off the building. I can sell the bar business later and keep the building for a rental.

Does the bar own the real estate also? So if you bought, you'd be getting the real estate and the bar business with it?

I ask because I was going to suggest you just separate the cashflows and look at it that way. Buy a business that generates X cashflow, use that cashflow to pay the mortage of Y on a property --- but not necessarily the same property.

No, they are separate and would stay that way if I purchased both.

Post: #16

I have worked in bars for 1½ years, some of the best, in fact - and have often thought about opening one with some of my friends. The only thing stopping me is that I know how much fucking work it is. But then again, in life hard work is the only way to get ahead with some certainty.

In addition, having a good bar frequented by girls is a great way to capitalize on pussy down the line - I say down the line because you don't want people to think you're just a predator - you open the bar because you care about people and want them to have the most fun possible. After the bar is a success, then it becomes possible to start fucking a guest now and then.

Another thing I learned is to hire attractive men. They will bring in the girls, who will bring the guys. Hot female bartenders do not bring many female customers, which is what you really want. And as for marketiing... word of mouth ALWAYS trumps other advertising channels. If people are talking about your bar as "that place" to go, you'll be golden. If you spread flyers around, you'll just be categorized into a class F bar.

Post: #17

Here's the basic framework that applies to nearly any hospitality operation, whether it's a bar, restaurant, hotel, stripclub, you name it. The 6 P's.

People
Product
Physical Plant
Profits
Private Events
PR

Any operation can be detailed by drawing an outline of the 6 P's. If you're talking about how to bring in business, okay you can stick with the usual plan of hiring attractive staff, but that won't get you nearly as far as having a PR company. These days, you need someone that's in contact with Eater.com, Grubstreet, Blackboard Eats, and every major publication in your city. You can hire a PR person on a consultation basis for a very reasonable fee, i.e. they get you in 4 publications per year, 6, 9, 12, whatever. Lots of room for negotiation there. Your PR person is going to get you into those airline magazines that you flip through on your boring ass flight, so when people visit your city, they'll know the name of your bar. PR is also where I see far too many operators not spending enough; it is by far some of the most well-spent money and one of the best ways of reinvesting your profits.

Post: #18

To the more experienced members of this thread on the internal working of bars/clubs. I have a question.

I have some associates looking into the technical detail of this app. I am wondering, given your experience with bars/clubs, do you see this app bringing real value to clubs/bars?

(08-27-2013 05:14 AM)Nemencine Wrote:  .......
Girls Night Out App(potential name G-SPOT.me). - An app that allows Girls to know which random bars around them is letting girls in without cover or with reduced cover charges(and by how much and for how long into the night). Also, which bars/clubs has drinks at reduced prize for the ladies during the night....promotional tie-ins for clubs/bars...If a girl shows the bar/club promotional code on the App and bring 5 friends or more, they get even cheaper alcohol...further increasing foot traffic into bars/clubs.... .

I mean, just because an app sounds great in theory doesnt necessarily translate to reality. Input(constructive criticism or otherwise) from people with practical knowledge of the working mechanics of bars/clubs will be appreciated.

regards,

--Nemencine

Post: #19

(10-20-2013 12:43 PM)Nemencine Wrote:  To the more experienced members of this thread on the internal working of bars/clubs. I have a question.

I have some associates looking into the technical detail of this app. I am wondering, given your experience with bars/clubs, do you see this app bringing real value to clubs/bars?

(08-27-2013 05:14 AM)Nemencine Wrote:  .......
Girls Night Out App(potential name G-SPOT.me). - An app that allows Girls to know which random bars around them is letting girls in without cover or with reduced cover charges(and by how much and for how long into the night). Also, which bars/clubs has drinks at reduced prize for the ladies during the night....promotional tie-ins for clubs/bars...If a girl shows the bar/club promotional code on the App and bring 5 friends or more, they get even cheaper alcohol...further increasing foot traffic into bars/clubs.... .

I mean, just because an app sounds great in theory doesnt necessarily translate to reality. Input(constructive criticism or otherwise) from people with practical knowledge of the working mechanics of bars/clubs will be appreciated.

regards,

--Nemencine

How does the app make money? Advertising? Subscriptions?

In California that wouldn't fly. Technically lady's night is illegal here; you're not allowed to offer women one price for entrance/drinks and men another price.

But regardless of that, I don't see that being particularly valuable except to struggling bars/club, in which case free drinks/entrance can help...some.

The places that I see run promotions like these are always struggling. I think it's of more value to club/bar/restaurant owners to address the root cause of why they're not busy.

The other problem with this app is it's counterproductive to any club worth a damn, because all the app does is attract a bunch of cheapskates and fuglies that couldn't get into a decent club.

However, I can see the app being widely used giving a strong user base. Again, it's all a matter of how your associates mean to profit from its use.

Post: #20

(10-18-2013 09:26 AM)worldwidetraveler Wrote:  According to what was posted, we are talking about a 20% return which was shocking to me.

You can actually do much better than that by purchasing shares of successful publicly traded restaurants, etc.
Easy, no work involved.

For example Chipotle is up over 1000% in the past 5 years :
http://www.finance.yahoo.com/echarts?s=C...g;range=5y


Starbucks 650% :
http://www.finance.yahoo.com/echarts?s=S...x;range=5y

There are many other examples such as Buffalo Wild Wings and Panera Bread

Post: #21

Come on, steve9. this is an overkill, and you know it.

the man just want to open a bar/club. sit back and relax. let the money flows in. and use his status as the bar owner to fuck the hottest chicks at the afterparty.

all these stocks stuff makes thing... unnecessarily complicated and sophisticated. analyzing macro trends, economic news releases, ebitda, forward guidance, management fitness, p/e ratios, debt to equity, overheads, etc. that is not fun at all. steve9.

(10-20-2013 04:34 PM)Steve9 Wrote:  ...You can actually do much better than that by purchasing shares of successful publicly traded restaurants, etc.
Easy, no work involved.

For example Chipotle is up over 1000% in the past 5 years :
http://www.finance.yahoo.com/echarts?s=C...g;range=5y


Starbucks 650% :
http://www.finance.yahoo.com/echarts?s=S...x;range=5y

There are many other examples such as Buffalo Wild Wings and Panera Bread

Post: #22

(10-20-2013 01:57 PM)thedude3737 Wrote:  How does the app make money? Advertising? Subscriptions?

advertisement for bars/clubs...and subscription(free download and trial for 2 or 3months, then paid monthly subscription by users. facebook linked, timeout magazineetc. dj promotions, etc.)

(10-20-2013 01:57 PM)thedude3737 Wrote:  ....
In California that wouldn't fly. Technically lady's night is illegal here; you're not allowed to offer women one price for entrance/drinks and men another price.

that is a huge market off the table. wonder what the case is with NYC.

(10-20-2013 01:57 PM)thedude3737 Wrote:  .....The other problem with this app is it's counterproductive to any club worth a damn, because all the app does is attract a bunch of cheapskates and fuglies that couldn't get into a decent club.

You mean like uni/college students? or recent graduates dreaming of living the sex-and-city life? volume versus price point is always a debate. If you get an exponential increase in volume, it will more than compensate for the decreased price of alcoholic drinks. I take it from this that the targeted demographics cannot be upscale bars. it has to be clubs/bars that cater to university students or people of that demographics.

since when do most men have problem hitting on fuglies? fatshamingweek is a testimony to that.

i take it you work at high-end establishment.... so, basically, what you are saying is that this app is designed for the walmarts of bars not the saks fifth avenue or neiman marcus of bars. So, if my associates want to market this or field test it, they should focus on that low-end demographic. cool point. thanks.

(10-20-2013 01:57 PM)thedude3737 Wrote:  However, I can see the app being widely used giving a strong user base. Again, it's all a matter of how your associates mean to profit from its use.

advertisement for bars/clubs.(initially free advertisement for clubs, then they have to pay.)

monthly subscriptions for users.(following a free 2 to 3 months free trial.)

Post: #23

(10-20-2013 07:16 PM)Nemencine Wrote:  You mean like uni/college students? or recent graduates dreaming of living the sex-and-city life? volume versus price point is always a debate. If you get an exponential increase in volume, it will more than compensate for the decreased price of alcoholic drinks. I take it from this that the targeted demographics cannot be upscale bars. it has to be clubs/bars that cater to university students or people of that demographics.

This is the main area of focus right here and it sounds like you have a solid handle on marketing the app.

Walmart might be a bit extreme but yeah, there's a huge segment of "middle ground" when it comes to nightlife venues and this would be your target demographic.

I do work in high end, but I've also worked in delis and more working class joints. I always recommend prospective business owners and operators target high volume, high price point market shares, simply because it's there and why sell yourself short?

I highly suggest you and your associates take a look at http://www.blackboardeats.com It's a website much like what you describe: the restaurants pay a very nominal fee to run some sort of special or promotion to generate business. It works, but at the same time I can look at every restaurant on there and know that they're doing it because they're hurting for business.

Post: #24

(10-20-2013 06:53 PM)Nemencine Wrote:  Come on, steve9. this is an overkill, and you know it.

the man just want to open a bar/club. sit back and relax. let the money flows in.

Maybe...however the OP seemed to be more interested in returns than being a bar owner, so I thought it was worth highlighting that you can make decent returns from investing in popular cafes/restaurants that most of you would be familiar with. This way is probably less risky that buying a neighborhood bar.

I myself was seriously considering buying a cafe a few years ago, but ended up using the money to buy shares in companies like Starbucks instead. I probably spend around 6-8 hours per year following my Starbucks investment.

The beauty of owning shares is that you can sell all or part of your stake at the click of a button. If OP has an interest in making money, learning a little about shares could be the way to go if he is interested.

You don't necessarily have to go into all those financial details. Find a great restaurant franchise that is rolling its concept across the US.

I am not from, or live in the US, and have never eaten at Panera Bread. However I brought shares in Panera (PNRA) last week at $160 because they plan to open hundreds of more stores in the next few years.

I think there is a good chance that this investment will have at least doubled in 5 years. So Im just sitting back and relaxing while Panera management is doing all the work for me.

Obviously with this method you have no "bar owner" status. If that is OPs aim then he will need to actually purchase a bar.

Post: #25

I'm actually with Steve9 100%. While I don't own any shares in foodservice companies, for someone that's not experienced in hospitality operations I'd recommend simply investing that way.

I have zero experience in managing real estate, so I own shares of a REIT fund.

If I were to ever invest my own money in any hospitality venue, I would need to have some capacity of decision-making and control over the operation, otherwise there's no way in hell I'd ever get involved. I've simply seen too many places fail, and seen too many prima donnas, hacks, lowlifes, thieves, con men, and criminals in this industry.