If you’ve ever dreamed of owning a bar, one of the very first decisions you’ll need to make is whether you’re going to start from scratch with an independent bar of your own, or if you’re going to buy into an established bar franchise.
There are pros and cons to both, of course, but it’s becoming more and more common for prospective bar owners to go the franchise route because it tends to be an easier, more efficient introduction into this exciting industry.
If that’s what you’ve decided to do (or if you’re even leaning in that direction,) here’s what you need to consider before buying a bar franchise:
Building any commercial facility from the ground up is going to be a challenging undertaking. One of the key benefits of working with a franchise operation is the fact that they’re going to be very interested in helping you get off on the right foot, directly involved in the initial steps of vetting locations and ensuring all legal requirements are met.
After all, their success depends on your success, so it’s in their best interests to help you do the best you possibly can. That’s a powerful benefit because the initial search for and development of a commercial location can be complicated.
While it’s theoretically possible to build a bar in most commercial locations, finding the right location for a bar that’s going to succeed can be challenging. The ideal location needs to be an adequate plot of land that’s zoned correctly, has access to the right amount of pedestrian and vehicle traffic, has ample parking available (or space to build a parking lot,) and isn’t in an area that already has a number of established watering holes you’ll need to directly compete with right off the bat.
Most towns and cities already have plenty of bars operating, along with other nightlife options like restaurants and entertainment venues that serve alcohol too. So, it can be difficult to locate that perfect spot in most areas where there are enough people to support yet another bar.
Identifying smaller towns and cities that are likely to see an explosion in population boom is a good idea. For instance, if a large manufacturer is building a plant, tech startups are beginning to grow, or a new highway is planned, there’s a good chance population in the area is going to spike. It could be a great opportunity to start fresh with a brand-new bar where that kind of growth is likely.
Buying a bar that’s already been operating for some time is a great option if you’re not free to locate that perfect location and/or for some other reason, building doesn’t work out. It’s much less expensive to rebrand an existing bar to operate as a franchise location than to build a brand-new bar from scratch.
To determine which available bar franchise location is best for you, review the following list of seven important factors. But don’t just go through it on your own. Leverage your connection with the parent company which likely has a wealth of information and experience, as well as experts on staff who can be of great help. It’s also a good idea to pull together your own team of experts, including an experienced business broker, a local commercial real estate agent, an accountant, and a lawyer, preferably all with experience in evaluating local business sales. Their advice can prove invaluable during the initial selection and due diligence phases that precede making your offer.
- Listing—Begin by seeking out a reputable franchises-for-sale listing. National business listing services that specialize in franchises are most likely to have the best selection of verified listings available to compare, especially if you’re open to considering more than one geographical area.
- Location—If you already know where you want to situate your bar franchise, your available listings will be fewer. That means you’ll probably need to be patient while waiting for the right type of franchise bar to go up for sale in that area, then start evaluating it in terms of appropriateness. If you’re not tied to a specific area, there will be many more possibilities to choose from and you can prioritize listings based on other important factors.
- Budget—Regardless of which specific bar you end up choosing, it’s important to realize that buying a bar franchise location and running it successfully is likely to require more up-front investment than just the purchase price. The help you receive from the franchisor should ease this burden somewhat, as they can help you hit the ground running with a turnkey system. Nonetheless, budget to cover at least six months of operating expenses (including franchise fees) when starting out.
- Caution and legal matters—This is another area where choosing a franchise location can prove beneficial: generally, franchisors will have their own legal experts on hand to review your prospective purchase to make sure everything is in order. This protects both you and them. Additionally, they likely have pre-approved documentation for every aspect of buying and operating the franchise bar, so keeping things above board should be fairly simple. Just make sure there aren’t any “skeletons in the closet” (like back taxes, outdated inspections, or liquor license issues) if you’re buying an existing independent location and converting it into a franchise location.
Let’s say you’ve found the perfect franchise bar in an ideal location, and it’s within your budget. Before you sign on the dotted line, here are some more important factors to consider:
- Personnel—Again, the franchisor likely has plenty of established processes and documentation to make this process easier. As the owner, though, you’ll need to make a concerted effort to get to know any existing employees and managers very early in the transition process and decide if they’re the right fit going forward. You’ll also need to review employment records and financials looking for ways to save time and/or money.
- Customers—Assuming the previous owner was able to turn a profit, there’s likely already a core group of repeat customers you can rely on. Make just as much effort getting to know these folks as you do getting to know your new employees. Regular customers are the lifeblood of any bar, and are easily your most powerful marketing resource. Regulars may be nervous about a change in ownership, especially if the bar is switching from independent to franchise, so be ready to accommodate that fear.
Once the purchase is made and you officially own the bar, you can put your time and energy into actively moving your business toward a successful, profitable future. And, more than anything else, that has to do with marketing. What you do in the first few months can set the tone for years to come.
- Marketing—In most cases, the franchisor will supply at least some level of marketing support on a regional or national level, so learn what’s involved in tapping into that program and take full advantage of what they’re offering. However, there’s likely much in the marketing program that will be left up to you. If it’s not directly administered by the parent company, each of these marketing suggestions warrant consideration:
- Consider creating a loyalty program to encourage repeat customers and word-of-mouth advertising.
- Pay attention to online reviews and respond professionally where and when it’s appropriate to do so. Encourage your happy customers to leave reviews online for you.
- Make your bar a great place to visit through excellent customer service and quality products, then encourage your happy customers to bring their friends.
It’s important to note that there’s a lot more involved in making an educated decision regarding buying a franchise bar location. For more valuable information on the topic, check out the following excellent resources:
- An attorney’s summary of the Franchise Disclosure Document;
- Common-sense recommendations from the Small Business Administration;
- The current and future prospects for the bar and nightclub sector.
As with any entrepreneurial effort, buying a franchise bar—even one that’s already successful—involves a level of risk. But, by paying attention to these key tips and learning all you can about successfully buying a bar franchise, you’re giving yourself the best possible chance of success.
About the Author
Bruce Hakutizwi is the U.S. and International Business Manager for Dynamis LTD., the parent company of us.businessesforsale.com, one of the largest online global marketplaces for buying and selling a business. Bruce is passionate about helping small businesses succeed and regularly writes about entrepreneurship, mergers and acquisitions, succession planning and business growth. Connect @BizforSaleUS.