Nightclub Owner The Buzz


When people think about owning their own nightclub or bar, what often comes to mind is beautiful people in beautiful surroundings.

The atmosphere may be glamorous, but don't expect that life will be a party if you decide to tackle this type of self-employment opportunity.

"The reality of running a business has very little to do with glamour, but has a whole lot to do with blood, sweat and tears," says Ray Ford. He is the co-owner of a management services company.

Ford knows what he's talking about when it comes to the hospitality business. His company has offered consulting and marketing services for hotels, restaurants, cyber cafes, nightclubs and bars since 1983. Ford is also one of the co-founders of a famous food and dance chain in the United States. Overall, he has some 30 years of experience in the hospitality business.

Ford cautions those who are thinking about opening their own club or bar to keep in mind that this is a competitive business where success does not come easily.

"The average life of a nightclub or bar is two years," Ford says. "Some people say if you stay in business a year, you are a success. That is how competitive and tough it is. You really have to want to be in the business, you have to want to serve people and you have to know the business."

The first step is market research. You need to determine your audience and the location for your business.

"Look at the social economics in the area you will serve, and the age and income [of people in the community]," Ford says. "You have to look at all of those types of things to get an overview of the market. Then you want to find out if someone else is [already] doing something similar in the area."

The second step is creating a business plan.

"The business plan is the road map of how you intend to operate your business," Ford says. "This shows a lender, financial person or potential partner or investor what type of business you will operate, how you intend to operate it and, most importantly, your qualifications for operating that business.

"After you get the funding," says Ford, "you can virtually take your business plan and read it out like a game plan for the Super Bowl. You should be able to execute the whole thing and operate your business from your business plan."

There is no average size of a nightclub, Ford says, and no average cost to build one.

"You can take a 10,000-square-foot space and put $100,000 into it, and you could take a 10,000-square-foot space and put $2 million into it," Ford explains.

"Both of those instances have been done many times, so it gets back to the market research, the type of market that you have to serve and how you intend to do it....It depends on the area and socio-economic condition of that area."

Rick Hynum is a vice-president for the publishing company that produces Nightclub and Bar Magazine. He agrees. "Start-up costs vary according to type and size of the operation....You can spend anywhere between a few hundred thousand dollars and tens of millions of dollars to open a new club or bar," he says.

"High-cost items include a state-of-the-art lighting and sound system, decor and furnishings, and security technology for nightclubs. In addition, many states require that bars have a strong food component -- in other words, you cannot serve liquor without serving food. Thus, you get into kitchen costs as well."

Licensing is a big issue when it comes to operating this type of business.

The most important license you will need to secure is a liquor license. It ranges in price, depending on what state and municipality you plan to open your business in. "In some states they are $50, and in some states they are $25,000," Ford says.

Ford also warns that some states limit the number of liquor licenses they issue. "The liquor license in the state of New Mexico is virtually impossible to get. They don't issue any more, or very few, so you have to buy an existing one," Ford says.

"In states where existing licenses can be bought and sold, there is a tremendous market for them, depending on the needs of the community. Liquor licenses are administered by the state, but there is a lot of local input."

There are other steps within the licensing process you should expect to go through. These include:

Location:   Once you find a location, you have to sign a lease.

Remodeling and air conditioning, water and sewer:   You have to have a building permit.

Business license:   If the business is going to be in a multipurpose facility (like a shopping center), you might have to go through a zoning board.

Occupancy permit:   These are usually connected with the fire and safety department.

Dance permit:   Some municipalities require this type of license if you sell liquor and have a dance floor.

"None of these things are standard," Ford says. "They can differ from state to state and from municipality to municipality."

Hynum adds that it is crucial to familiarize yourself completely with state and municipal laws before you even take the first step toward opening such a business.

But getting the right licenses and permits is only a small piece of the big picture, the experts agree.

Ron Ledohowski is the corporate vice-president and director of marketing and entertainment for a chain of hotels. He stresses that the nightclub and bar industry is a very competitive one.

Your background and experiences will be a major factor in your success. It is vitally important to get a good feel for the marketplace, Ledohowski says.

"Being in the business, having a job in the business, whether it is as a manager, supervisor, bartender or waiter or waitress, so you will have some understanding of what it is about [is important]," he says.

"You still won't get a full understanding, but at least you will have some idea about the hours and the hassles that are involved. Getting in at whatever level you can and buddying with the manager to get whatever additional information and understanding of what is involved [is also a good idea]."

Ledohowski's company, which has five inns with affiliated restaurants, nightclubs and other facilities, likes employees to have a good education.

"Education is absolutely important, especially from a numbers perspective," Ledohowski says. "You are dealing with three of the most volatile things that can go out the door -- food, beverage and money. Having an understanding of controls is important. So having some type of commerce degree is a good thing. But it isn't the only thing."

Ledohowski cautions prospective nightclub and bar owners to get into the business for the right reasons. "If you are making your own club because you want to have your own playground, it is the wrong reason," he says.

Links

Nightclub and Bar Magazine
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