Leasing a bar - Questions

clio_16v

If this is in the wrong section, I apologize! I have a few questions regarding leasing a bar. I have never owned a business, run a business etc but have many years experience in bartending / managing bars. I'd love to have a bar of my own in the next few years and am wondering how much money I'd need and what I'd need to get started.

I know it depends on the size of the bar / location of the bar etc etc. But what costs, other than lease / vat / staff / overheads would I have? I'm in the early stages of a plan for the next few years and apologize if the questions seem stupid!

Dazzler88

clio_16v wrote: »

I know it depends on the size of the bar / location of the bar etc etc. But what costs, other than lease / vat / staff / overheads would I have? I'm in the early stages of a plan for the next few years and apologize if the questions seem stupid!

it depends on where the bar is based.its a very tough market to be getting into.Is there much competition in the area?what are the water rates locally like??

clio_16v

I know it depends on location etc. Not sure of water rates for there. If the lease was say 500 a week, what costs other than electricity / heating / Sky / staff etc would I have?

Is there a rule of thumb that you need X amount to cover yourself? E.G. you need 6 month's / 1 years worth of costs in the kitty? Sorry if these questions appear stupid but I am completely new to this and am trying to find out the basics before I lease a place in a year or two

Jo King

There was a firm called Smith Management Services which specialised in the pub trade. Organised finance negotiate with suppliers etc. You should contact someone like that. I know of one pub in a large country town where a deposit of 30K had to be paid over to the owner of the premises. It cost a couple of grand to organise the transfer of the licence through the courts. After that there was no credit from the suppliers for six months. All stock had to be paid for on delivery.

Dazzler88

clio_16v wrote: »

Is there a rule of thumb that you need X amount to cover yourself?

there is no rule of thumb that applies to all bars.with your experience,you'll be aware of the costs.How well do you know this bar?why is it up for lease?could you approach the people that are leasing it and they can probably give you better advice than anything you'll get on here.

amn88

Hi,

Here is a list of the things I can think of.

Wages
PAYE
PRSI
Income Levy
VAT
Bar Purchases
Rent
Bank charges
Rates
Licensing Fees
Music/entertainment
Insurance
Repairs & Maintenance
Utilities
Telephone
T.V./.dues & subscriptions
Advertising
Printing & reproduction
Professional Fees (Legal/accounting)
Office expenses
Security
Staff expenses

amn88

On top of the above. What else have you to put into the pub? Is it ready to go? Do you plan to make renovations? This is when costs really start to add up. A lot of costs I’ve mentioned above will depend on size of pub and turnover etc. But if you’re looking at a pub that maybe has being closed up for a while.
Then you could be looking at things like. Tills, plasma tvs, fridges, glass washer, ice machine, sound system, lighting, cctv etc etc along with a few little renovations , you could be at 100 k very easily , tills alone can cost up to 8k each! My advice would to try get all these things second hand. Watch out for all the pubs closing down around the country!
I’ve being running a bar for two years and am in a similar position to yourself, now considering opening my own bar. But the owner of the bar has being clever and hasn’t let me anywhere near the accounts side of things and I’ve never dealt with any suppliers, he is doing his very best to keep in running his pub as I’ve taken it from the lowest earner in the town to the top. So I also am lacking knowledge needed to move on to a place of my own.
I’d expect turnover of 10k a week. Roughly how much would I expect to have to tie up in stock?
I see in an earlier post that no suppliers will give credit for the first six months? So after that would I be able release the capital I have tied up in stock?
I’m also considering a rent to buy option, thoughts on this anyone?
The pub I’m looking at is actually a building that used to be a pub and no longer has a license! But I’m looking at going into partnership with a friend/investor who can transfer a license from another building and we will pay little rent for the license each month. He is paying for the whole venture and I will be running it full time. 50/50 split on profits.
One question I have is in relation to suppliers; Do Diageo require a large deposit in order to get ‘credit’ with them? And for everything else other than Diageo products, I’m sure its just a case of shopping around for best prices etc and then building up a relationship and in time get credit?

shelang

If one takes over a lease with outstanding rent/rates, is he/she liable for this?

Evolution Enter

I just left the pub trade, two and a half years of leasing after over 10 years of experience.
Trust me when I say this, the costs come at you from everywhere.

Silly example, if you need Tv's, jukebox etc In this case IMRO comes in and starts billing you for playing music showing TV (on top of satelitte subs and tv licence) then PPI come in and charge you for people listening to the music and watching the TV! Quickly runs to €1000 a year. Then on top of rates, you will also be hit with water rates which are often as big if not bigger. Many councils have actually started billing businesses for the water leaving the premises as well as entering it

SKY - aaaaagh, the Vintners even sent around a letter this year to its members questioning the value of SKY as their subs increased, and even if you try scale back to just Sky Sports 1, you will find them putting marquee games onto SS2! You'll end up with the biggest package or non at all

You asked for a rule of thumb, one I've heard is that your rent shouldn't be more than 10% of turnover. Consider stock and Vat will be roughly 60%-70% of your takings, so you gotta cover rent and all overheads out of little over 30%, and that includes staff costs as well as wages for yourself.

Unless this is an absolute little goldmine, be very careful getting into this trade. People haven't gotten used to the last budget cut, it's only going to get harder

amn88

If you have margings of 65% in a pub, when vat is added would you really only have 30-40% of your takings to cover everything else?

Say if I have takings of 600,000 in 2010 in a bar. And i have margins of 65%, Can someone tell me how much my purchases and my vat bill would be?

Also i estimate 60,000 in wages. 1 full time employee (the owner) and 6 part time staff! Can anyone give am approximate figure on Prsi/pension contributions or anything else the pub would have to pay in tax?

Mighty_Mouse

It sounds like your idea has progressed past concept/BS stage.

Now you need a plan.
If you are really serious about investigating this idea then sit-down and do a business plan or get an experienced business advisor to help you draft one.

The plan does not have to be over-complicated.
The draft can be very simple bullet points on each relevent area.
But it will force you to consider all the issues in a logical step-by-step process.

e.g.
Market ---- pub trade dropping, increased closures...... etc
Marketing Strategy

---

How willl you beat the market?
Why will people choose to drink in a new establishment when less people are drinking out?
What type of bars are still making profit at the moment?
What type of crowd are you going for?
Alternative live music grungy, funky alternative posh hippys (get fish), vodca-n-redbull orange chick brigade (weekend crowd)...........
Students? Older solid guiness drinking crowd?

Products - increasing number of alternative beer/bier houses?
Why? - Is this a growing market? Is the marking on these imported beers bigger? Is less expensive to sell budvar than give huge deposit to diageo?

Management/ Employees -
Security - cash business easily ripped off. Has closed many pubs.

Finances:
3 year projection
Expenses --- wages, light & heat, royalty license,
Capital items - tills, rennovations, music systems.

Answer all the main questions.
No hidden surpises after you have raised the money required.

What expenses can you afford or not? sky or not?
Live music facilities or not?
What capital needed?

You have plenty of experience.
You can answer most of the obvious questions from the top-of-you-head.
Writing it down will give you confidence that you have covered the issues and shows your serious to people you will need to deal with.

You will need a plan for bank loans, enterprise board grants etc
Once it is done then your are really on the right path.

ps
local enterprise boards are really helpful.
They might even give you a grant towards a feasibility study/ business plan costs.

pps
will you serve food?
The margin is significantly higher than alcholol.
Increases turnover, increases profit.