Q: What is the average management fee for a bar/restaurant consultant? My partner and I have experience in nightclub marketing and promotions, but neither of us has ever run or operated a bar, lounge or nightclub. We know we need to hire a consultant who can help us with developing the investor package and the operating numbers, and then be involved with ordering, staff hiring, running the place, etc.
A. Typically, management fees contain up to four components. These are:
1. Initiation Fee: This can typically range from $10,000 – $50,000, based on the size of a property/operation. This fee compensates the management company for all the work related to the start-up, including internal controls and systems, accounting formatting, financial reporting, budgeting and inventory systems.
2. Management Fee: This fee is always established as a percentage of revenue. Typically the percentage can range from 4 - 7 percent, based on the size of the operation. This fee causes the management company to benefit from improved sales or lose compensation if sales go down.
3. Bonus Profit Incentive: This fee provides the management company with a part of the profits of the business, ONLY if the business exceeds budgeted profitability as a bonus for exceeding expectations.
4. Accounting Fee: This is a small fixed monthly fee to cover accounting expenses. This fee will vary depending on the size of the operation, but typically is $500 - $1,200 per month.
Of course, many of these fees are negotiable. Equally important are the exact responsibilities your management company provides and the depth of authority you authorize for them. Typically they should prepare a complete budget for your approval within 60 days of taking over operations. Then they have complete authority to write checks and perform other “owner functions,” but only when within budget guidelines. Any expense or action outside of your approved budget must be approved by ownership.
Management companies are very different, and each concept needs its own disciplines (dance clubs, sports bar, ultra lounges, casual dining, etc). So, make sure the company you select has proven abilities in promoting, marketing (revenue growth), cost management and developing a great experiential experience for your concept.
—Jon Taffer, Taffer Dynamics