The use of fermented beverages have been integral in society for centuries, dating back to the first century A.D. The word ‘pub’ is actually derived from the term ‘public roadhouse’. Public roadhouses emerged as the Romans created their infrastructure of paved roads, and was known as a place that provided alcoholic beverages, as well as providing shelter for those that were passing through. The influential role pubs and bars have played in our culture, especially during the transition into colonial America, is amazing. Even during prohibition, we can see that the demand for a place to come together with all sorts of people, including women and minorities, and drink was so high that everyone did it anyway. History shows that even today, the nightclub and bar industry has a permanent place in our society.
Information and Statistics
The nightclub and bar industry relies heavily on the state of the economy, as well as current trends. If a company is not staying up-to-date on what consumers want, chances are their business will not last very long. While the nightclub and bar industry took a major hit, as did most companies and industries, during the 2008 recession, people are feeling much more financially secure today, leading to an increase in capital and profitability in the nightclub and bar industry.
However, nightclubs, more than any other business in this industry, need to be completely revolutionizing the nightclub scene. It can no longer be what it used to be, unless of course you are in Las Vegas. Studies on the nightclub industry have shown that younger bar-goers do not want to splurge their limited income on over-priced drinks and loud music where you cannot have a conversation. Adults under 35 value authentic experiences with their friends and family more than going to an overpriced nightclub. That does not mean there is not still hope and room for growth in this industry, as long as nightclub and bar owners are willing to invest the time and money into growing with the new demands of the nightclub and bar industry.
Essentially, any business that sells alcoholic beverages (as well as breweries and distilleries that make their products on-site) for on-premises consumption falls under the nightclub and bar industry. Some of these places, if you really want to bring in more customers, sell food. I want to let every nightclub and bar owner know that to make your customers incredibly happy and willing to spend more money, consider having food options available, either through a kitchen or by setting up an agreement with a local food truck.
While there are many aspects of the nightclub and bar industry that are evolving, the nightclub and bar industry owners that are changing with the demands of their consumers have gone above and beyond predicted statistics in the past few years. Even after the 2008 recession, certain nightclub and bar businesses were able to turn things around. By 2015, the nightclub and bar industry generated over $26 billion in sales revenue, with numbers expected to surpass that in 2016 and the next few years. Large sales in the nightclub and bar industry have led to an increase in jobs as well. In 2015 alone the nightclub and bar industry employed over 590 thousand bartenders across the United States; this number does not even take into account all of the other behind the scenes employees! The nightclub and bar industry is also an incredibly unique business to be in because there are only small, local companies competing against one another. Due to the complexity of the state-by-state regulations of manufacturing, purchasing, and selling alcoholic beverages, creating one major franchise would be nearly impossible. This has allowed a diverse and competitive market to emerge, leading to a highly fragmented industry – the 50 largest United States companies account for about 5% of the revenue.
Industry Trends and Why A Nightclub or Bar Would Need Financing
It is fairly easy to open up a nightclub or bar in this industry because capital costs can be relatively low, however this leads to increased competition among the bar and nightclub industry. There are many ways for a new or current bar or nightclub to stay on top and ahead of the competition, especially when changing with the evolving demands and technology. Unfortunately, a majority of these costs can be expensive, so researching the different types of financing options available to your business are important.
- Marketing and social media are dominating every single industry, yet many industries are failing to keep up due to the complexities of social media marketing. While plenty of bars and nightclubs use social media, many of them are not utilizing these tools to their full advantage. Even doing simple things like promoting people to check in on Facebook while at your establishment with a picture can boost your likes and bring in more customers. Plenty of places even offer a discount on a drink for doing this. According to Boris Bugarski, CEO and president of emarketing agency ShoutAmp Inc, “A nightclub needs to understand how to get people in droves to use Instagram, Facebook, or Twitter within their four walls while the guests are there. People don’t get rid of photos on Facebook or Instagram; people come back and go through everyone else’s photos”. As every great business owner knows, photos on social media get seven times more likes and ten times more shares than just a link!
- Payroll is always a must in any industry, especially in the nightclub and bar industry. Quality bartenders are essential, but can also demand higher salaries depending on their expertise. Having the right bartender for your atmosphere is essential; everyone wants a quality experience and great service, as well as top of the line and creative drinks.
- Inventory is probably one of the most important financial priorities in the nightclub and bar industry. You simply cannot make any money if you do not have any alcohol to sell to your customers! And sometimes, business can be slow, but you still need capital to purchase inventory, especially during peak seasons. Reviewing your financing and loan options can be a major asset to your nightclub or bar business during those slow times.
- Renovations and expansion are always a possibility for business owners that want to stay trendy and current with today’s demands. People are jumping on the green bandwagon. They want organic, they want rustic, they want authentic. Making sure your business has the look to go with the product are essential but expensive. Keeping in mind that there are a variety of financing options available to your business can help.
- Technology is no longer an option in today’s society – it is a necessity. Many nightclub and bar owners are making the shift into the current technologies that are available to them to make their businesses thrive. One of the most popular implements of technology into the nightclub and bar scenes is “near field communications”. This technology allows operating systems to “talk” to each other. Boris Bugarski claims, “There’s nothing you can’t do with NFC. NFC is going to be a major marketing push in American over the next couple of years… it will get in all four walls of restaurants, nightclubs, and bars”. Back of the house technologies are also making a push into nightclubs and bars, allowing operations in the kitchen and the bar to come together and operate more efficiently.
- Catering to younger adults is going to be difficult for well-established bars and nightclubs, however it will be essential to keep your business on top. (LINK8)Event-like thinking, such as pre-sales and advertising, are giving incentives to a variety of people, bringing more and more people to the doors. Implementing a cocktail and beverage list based on the season, the latest trend, fresh herbs and spices, farm-to-table concepts, craft beers, and so much more are going to lead to a huge increase in profits.
Types of Bar Business Loans
|Bank||6-10%||3-7 years||14-30 days|
|SBA||6-10%||3-7 years||10-30 days|
|Line of Credit||5-15%||1 – 3 years||7-30 days|
|Alternative||6-25%||1-5 years||5-7 days|
|Cash Advance||1.16-1.55||3-24 months||1-3 days|
Bar Loans From Banks
While they are very difficult to get, a bank term loan and/or line-of-credit are the best financing option for nearly every business, regardless of industry. To get traditional financing you need to have pristine credit and trailing financials. Bank loans don’t fund quickly, so you need to have patience and have your companies documentation in order.
- Rates: 5-8%
- Terms: 1-10 years
Alternative Bar Loans
Since traditional financing is difficult to obtain — especially for a bar or nightclub — a good source of financing may be to get an alternative loan. Alternative business loans require much less documentation than bank loans (application, tax returns, P&L) and fund in less than two weeks. Credit needs to be good, but not fantastic (600-650).
- Rates: 8-25%
- Terms: 1-5
Asset Based Bar Loans
Asset based loans are a way for bar or club owners to obtain financing by using their business or personal property as collateral for funding. An asset based lender can lend up to 50% of the real estate’s value in 1st, 2nd or even 3rd position.
- Rates: 8-20%
- Terms: up to 3 years
Equipment Financing For Bars
Equipment leasing is a way for a bar or nightclub to obtain business equipment by having an equipment leasing company purchase the equipment for the club, and then lease it to the business for a period of time. This is a great resource for companies that don’t have the money to purchase the equipment outright.
- Rates: 5-15%
- Terms: 1-10 years
Bar Merchant Cash Advance
Merchant cash advances are becoming more common in the bar, restaurant and club industries. Cash advances (both MCA and ACH loans) are the sale of future earnings for upfront funding. MCA loans are the sale of a bar’s credit card transactions, whereas an ACH business loan is the sale of future bank deposits.
- Factor rates: 1.16-1.50
- Terms: 3-24 months