How to Open a Cocktail Bar: Starting a Cocktail Bar Checklist

How to Open a Cocktail Bar: Starting a Cocktail Bar Checklist

It was not so long ago that the search for open cocktail bars would often run up dry. Days of stay-at-home orders and social distancing had an especially devastating impact on bars. But today, cocktail bars are not just alive and flourishing, they’re roaring back with a vengeance. After a few years in decline, the market size in the U.S. rallied 16.4% in 2022 and is now an eye-popping $8.3 billion industry, according to IBISWorld. From groovy tiki rooms to sleek modern lounges, cocktails are joyously being shaken, stirred, and sipped all over the country.

Whether you’re a budding entrepreneur looking for a new adventure or a longtime bartender, it’s a great time to open a cocktail bar. However, keeping the art of mixology alive requires more than premium liquors and epic mixing skills. The purpose of this checklist is to familiarize you with all aspects of how to open a cocktail bar. It’s a practical reference that takes you from the initial concept through business structures and business plans to the big day: the grand opening. We’ll touch on funding, marketing, and hiring staff and provide resources to guide you through the labyrinth of bar permits and licenses.

Choose your concept

You’ll make many key decisions in your cocktail journey, but creating a brand and choosing a name is perhaps the hardest. What do you see when you envision the cocktail bar of your dreams? A mysterious speakeasy with a hidden door? Perhaps a hotel rooftop lounge serving fruity umbrella drinks? Or maybe you want to recreate an “old favorite” neighborhood bar with cozy seats and sports on the TV. To begin, check out eight popular “Bar” styles that we’ve detailed in our handy guide, and then get the creativity flowing with some cool themes and concepts. As part of your research, write down your restaurant’s mission, vision, purpose, and core values. Then it’s time for a bit of market analysis: who are your customers, and what is the local competition like? 

Once you’ve honed your vision, the next step is to pick a succinct name and an eye-catching logo. You’ll want something memorable to help you stand out but that also makes sense with your overall concept. Not a design expert? Not a problem. In our article How to Make a Bar Logo we walk you through the steps.

It’s not long after the first cocktail is poured that the happy customer is looking for something to nibble on. Cocktails cry out for food, and customers won’t want to settle for a bowl of pretzels or nuts. At this point, you’ll want to determine what type of food you’re serving, whether bar snacks or a more extensive menu. While you don’t need to know the exact dishes at this point, you should have a solid vision for food that complements your drink menu.

Set up your business structure

As a future bar owner, you should start thinking about an organizational structure early on, as the decision affects your business in significant ways — including taxes and personal liability. A business structure defines who owns your bar and how the profits are distributed. Here are the most common types:

• Sole proprietorship – The most straightforward way to structure a business, a sole proprietorship, is when one person owns a restaurant and is liable for all financial obligations and debts. 

• Partnership – This is when two or more people own the business. There are two types within this category, and “general partnership” is the most common when all partners are involved in the day-to-day operations. In a limited partnership, the second type, one or more partners are “silent” investors or not involved in the daily management. 

• Corporation – Also known as a C-Corp, this structure creates a business entity independent of its owners. While it’s more complex and paperwork-intensive than a partnership, this type is often favored by those who need to raise funds.

• LLC – This hybrid structure brings together features of partnerships and corporations. 

Write your cocktail bar’s business plan

Kicking off your cocktail bar with a strong business plan will put you ahead of the curve. In a nutshell, this document will outline your short- and long-term goals, your strategies for success, and any obstacles you need to overcome. A business plan is necessary to attract potential outside investors, but beyond that, it will provide you with a solid blueprint to follow during the often-tumultuous startup process. Start your research with our business plan overview, which is tailored specifically to bars. You can plug your parameters into our free business plan templates to generate a working draft.

Figure out funding

Good news, there are more options for financing your small business than ever before. Banks are a solid option, but they’re just the beginning. The number one way to maximize your odds of securing funding is to have a thorough business plan. Here’s a tip for writing it: when it comes to the money — like operational and startup costs — don’t leave anything out. Include detailed information about fixed and variable costs and what you’ll need to break even. If your business plan is vague or peppered with “fuzzy math,” investors will fill in the blanks with their own imaginations, and you don’t want that. 

Here are three common financing options: 

Loan options

Bank loans are the most traditional option — sometimes requiring collateral — and come in many forms (short and long-term). They can be used for various expenses, from working capital to commercial real estate. Most major banks will offer the option to apply for a Small Business Administration (SBA) loan, which is geared toward entrepreneurs and has stricter qualification requirements. Despite that, SBA loans have enticing loan terms and unique options for minority business owners, and the government will guarantee a large portion. 

Investors

Angel investors, friends and family, and venture capitalists are the three primary types of investors, and each tends to shine during different stages of your bar’s development. Friends and family are typically best for supplying seed money during the initial stages since they’re not accredited. Angel investors often swoop in during early rounds of investments, and venture capitalists tend to fund after the business has proven itself and there’s less risk. Of course, this is just a general rule of thumb and will vary depending on your unique situation.

Crowdfunding

The rise of online marketplaces provides more avenues to connect with funders. Peer-to-peer lending sites act as a middleman, connecting you to small business investors for a fee. Crowdfunding is a variation on this, opening up investment opportunities to the general public or anyone interested in your idea. The difference with crowdfunding is the money isn’t a loan but a payment for something from your cocktail (read: equity in your company or early access to a product or service).

Follow the legal requirements

Tax identification

This is like a social security number for your cocktail bar. Just like every U.S. citizen has an SSN, every business must register for a tax ID (also known as an EIN) with the IRS. You’ll need one to file business-related taxes and hire employees. 

Licenses and permits

As soon as you’ve secured a tax ID, the next step is to get the ball rolling on the licenses and permits needed to operate a cocktail bar. While getting a tax ID is relatively painless, the permit process can take between 30 and 90 days and cost hundreds of dollars in fees. Requirements for each state and county vary, but to get a good sense of what’s in store, check out 14 Licenses Needed to Open A Bar. 

Insurance

Owning a bar has unique risks not found in other industries: from property damage to drunken accidents and even bar fights, it’s essential to have proper insurance to protect your business from suffering any unforeseen consequences. There’s a policy for just about every aspect of the bar biz, such as liquor liability, workers’ comp, assault and battery, commercial property, and more. Finding the right mix of policies may require a bit of legwork. Some types may even be required by law in your state. 

Accounting

You can’t bask in the glory of your success if you don’t track the numbers. Bar accounting is a broad term that encompasses nearly all financial matters related to your establishment, from accurately recording daily transactions to defining budgets and income benchmarks, and is an essential component of your business.

Choose a location

Like the old saying goes, the three most important factors in determining a desirable property are location, location, and location. Visibility, parking, space size, affordability, and crime rates are all things to consider when choosing the site for your cocktail bar. In developing your concept and business plan, you’ll need to decide whether to lease a commercial space, buy an existing space, or build it from the ground up.

According to Toast data, average startup costs for a rented or leased bar space run between $110,000 and $550,000, making it more affordable than buying, which averages between $175,000 and $850,000. But if you have the money to invest, buying or building a property has its upsides: you can customize it to your heart’s content. Perhaps more importantly, it could become a great asset if the property appreciates. If you decide to close your bar or change locations, you can rent out the space and add another revenue stream to your growing entrepreneurial empire.

Design the layout

The cocktail is just one of the essential ingredients that makes a bar so great. Nowadays, who doesn’t have a delightful drinks list, curated craft beers, and local wines?  For a cocktail bar to be truly great, it must have a comfortable, enjoyable environment. The floorplan should be the first thing on your to-do list when it comes to design. According to our guide, How to Design a Bar Floorplan, Layout, and Blueprint, many states require blueprints before they issue building permits. Here, you’ll find inspiring floorplans aplenty, from the obvious (drinking areas) to the not-so-obvious (restrooms and emergency exit maps). 

Design

The most successful cocktail bars are defined as much by mood as they are by the mixology. Begin by thinking about the kind of experience you want for your customers, and then take a comprehensive look at your property and floorplan — including the cashier station, behind the bar, the parking lot, and the entrance. The next steps involve working with your local planning and building departments, seeking help from professionals, and considering feasibility and costs. 

Tech

Consider how to incorporate restaurant tech into your design plan. The customer side is bursting with innovations, from digital drink menus and QR codes to contactless or touch-screen POS payment systems. Some bars even offer self-service beer taps. Behind the bar and in the kitchen, more and more restaurants are rolling out digital displays that help staff keep track of orders. 

Equipment

Many practicalities will affect your equipment choices, including your bar layout, your drinks menu, the size of your food menu, the amount of cold and dry storage you’ll need, and, last but not least, your budget. Whether you buy or rent equipment or have a large or small bar, you’ll want enough storage and workspace for everything to fit comfortably.

Build your menu

The menu is a key element of your branding and the foundation of your business. The average customer probably doesn’t realize how much research went into your list of signature cocktails. Even with tried-and-true drinks on every bar menu — like Martinis, Screwdrivers, and Greyhounds — there are myriad garnishes, alcoholic brands, and customer preferences to accommodate. Factor in drink trends and weekly specials, and maintaining a dynamic drink lineup can be just as tricky as a food menu. Luckily, our Basic Menu Builder tool will help get you started and keep you on track.

Of course, you’ll want your menu to reflect the vibe of your bar and put your brand front and center. We share strategies for picking a layout, setting prices, and printing your menu in our guide to cocktail menus (along with a nifty cocktail menu template).

Choose your suppliers & vendors

Once you’ve created your perfect bar menu, you can begin to determine which suppliers and vendors will fit within your grand scheme. Ideally, premium liquors are best, but importing a Craigellache whiskey from the Scottish Highlands may not be in the cards. Essential bar suppliers go beyond liquor vendors; you’ll need to consider laundry, equipment, and food suppliers. Your choices  will ultimately come down to a balancing act of quality, price, convenience, and customer service.

Hire staff

How do you hire the right people for the job? Attracting high-quality employees is always challenging, especially in a tight labor market. Toast recently surveyed restaurant employees to find out what makes them tick, what motivates them to work in the industry, and how they job hunt. Turns out, most new employees find jobs from friends and social media, and 71% come with prior restaurant industry experience. 

You’ve got a lot to think about when launching a cocktail bar. Perfecting your interviewing techniques may not be at the top of your list. But if you ask the right questions and come prepared, it can make the entire process much smoother and lead you to high-quality employees. Since so much online advice is for the job seeker, we created an interviewing guide just for bar operators, including dozens of clever questions to ask your candidates.

Create your marketing plan

Bars no longer survive on drink specials or word-of-mouth alone. A comprehensive marketing plan is crucial to spreading the word about your fabulous cocktail mecca to new customers. It can also strengthen bonds with existing customers, helping to create loyal clientel. 

Whether you do some or all of the strategizing yourself or hire marketing professionals all the way, it’s important to allot money for marketing in the startup phase and include it in your budget as an ongoing expense. 

Plan your soft opening/grand opening

Here’s the fun part of your cocktail adventure — when your hard work comes together, you can finally fling open the doors and yell, “Cheers!” A soft opening is an invite-only preview of your bar for friends, colleagues, and other close acquaintances. It’s an ideal opportunity to work out kinks and fine-tune before you officially open for business, not to mention it can create quite a buzz around your business. For the grand launch, consider inviting the media and issuing a press release to get coverage in local news outlets. 

While the business outlook is bright, we know you’re in it for the love of the cocktail. The situations to indulge in a cocktail hour are endless, and there’s probably nothing more enjoyable than meeting up with friends and loved ones for a drink at the bar.