Before you sink a big chunk of cash into opening up another bar, it is wise to explore all the possibilities with the assets you currently have. Some ambitious operators get tunnel vision when they become obsessed with opening up multiple locations. While this intense focus is not necessarily a bad thing, it can result in missing out on easier opportunities to increase your profit without the large amount of work required for opening another bar. So before you start thinking about casting your net even wider, you may want to consider the following ideas.
1. Buy a Bigger Piece of the Pie
If you own a greater percentage of the profits that are already in place, you can theoretically earn more while doing the exact same amount of work. In the bar industry, this is usually between shareholders in the corporation and lenders or banks that provide debt.
Ask yourself:
- Are there partners that would sell some or all of their ownership stake to you?
- Additionally, do you have any extra money you can put towards paying the debt off faster?
- And while on the subject of debt, when is the last time you sat down with your bankers and asked them for cheaper debt?
I was surprised the last time I spoke with my bankers about the cheaper debt options that were available. Despite the doom and gloom of interest rates constantly rising and defaults increasing across the board, there are still products and certain lenders willing to lend money at reasonable rates. And cheaper debt means a faster path to more ownership. Whether with partner buyouts or reducing debt, this is one of the faster ways to get more profit out of an asset that is already in place.
2. Gaming Revenue
If you offer gaming in your bar, and the maximum permissible amount of slot machines for your license has not been met, there is room to grow this area of your business.
How can you fast track the process of getting more machines? By encouraging people to gamble as much as humanly possible, that’s how! AGLC (which is the governing authority for gambling in my area) determines the placement of these machines, which is based mainly on gaming sales in your venue and gaming sales in the area. This will be different for your business, depending on how the gaming authorities grant these machines in your locale. There are other metrics, but those are the two main ones they use to decide how many machines you can get.
With that knowledge, the question then becomes: How do you design your bar, your service, and your marketing to encourage more gambling than is already taking place?
Here is one good idea on how to design a bar for maximum gambling revenue: I had a very interesting conversation with someone that derives the majority of their income from gambling. They told me that building a separate, walled-in area for the slot machines located right by the entrance / exit, as well as spending the extra money for a private bathroom in the gaming area, was one of the best things they could do to increase gambling revenue.
My client explained that the private bathroom was vital to keeping people in “their own little bubble” where they had everything they needed and never had to leave. Part of this strategy was also ensuring guests had privacy so people in the main area couldn’t see if they were winning or losing. Additionally, the gaming area’s location by the entrance / exit was deliberate. The intention was to give gamblers the ability to get in and out without having to make eye contact with anyone, just in case they were ashamed of themselves after losing all their money. I know another guy that took this strategy to another level and built a separate entrance/exit just for the gaming room. The door is literally at the back of the building, speakeasy style.
Another great idea is to treat all your gamblers as if they were royalty. And I mean, really go the extra distance to win them over and keep them returning. People at slot machines should absolutely be on the short list of people the owner, head chef, and manager on duty should be going out of their way to do a table touch for, learn their names, and exchange some friendly banter.
If you have a loyalty program, all gamblers should be encouraged to sign up, and then you can follow up with them perpetually using email, direct mail, or even text message.
If you treat all gamblers like they are your VIPs and work at maintaining contact with them, your gambling revenue will increase.
3. Lease Versus Own
Is there any possibility of making a deal with the landlord to buy the property your business is located in? If you can, your long term financial security is pretty much guaranteed off that one business when the real estate is paid off. Only a small percentage of people I work with own their business and real estate.
I have rubbed shoulders with a handful of entrepreneurs that told me buying the underlying real estate of their business wasn’t the sexiest move, but it was definitely the easiest way to guarantee a significant payout when everything was paid off.
Now, before you dismiss this idea by saying, “oh my landlord would never make a deal like that,” remember that with the proper incentive and the right timing, everything is for sale. But sometimes, you have to wait to catch people in a change window before they are willing to deal.
I know one person that is renting a space for his business, and despite repeated attempts at asking the landlord to sell to him, his requests were always rejected. However, after a few years had passed, the landlord developed health problems, and his adult son stepped in to manage the property. After some coaxing, my friend discovered that the son was willing to sell the property when his dad passed away. If he is successful, this one move will set my friend up to own a commercial building that will be worth more than his house (and possibly his business) once it is paid off. If you can pull off a similar move for your business, you can add a tremendous amount of value to your enterprise that further increases your profit without a ton of extra work.
4. Liquor Manufacturing and Building a Strong B2B Program
If you manufacture good liquor products and put a ton of energy into getting them into liquor stores and into other bars, you stand to benefit from the sales activity of others. And unlike running a bar, this opportunity is unlimited because it is not restricted to a physical space or capacity limits. It’s not an easy thing to do, and only a small percentage of liquor manufacturers become successful, but if you can pull it off, you can create more profit per square foot than is physically possible by only serving food and drink.
There is also the added benefit of manufacturing products that your other bars can buy at cost, which can create significant cost savings. I know someone that owns a chain of bars and a distillery. Now all the vodka poured throughout his venues comes from his own distillery. The cost savings per ounce is not super ridiculous. I mean, it only works out to about $0.10 per ounce cheaper than another comparable vodka. However, when you factor in that his company as a whole is serving on average 12,000 ounces per week, that cost savings becomes $1200 per week, $62,400 a year. If he creates similar efficiencies for rye, house lager, and ale, it all adds up to major cost savings. If you are thinking of ways to maximize the profit out of an existing venue, liquor manufacturing may be one way you can achieve this.
Kevin Tam is a Sculpture Hospitality franchisee with more than a decade of experience working directly with bar, restaurant, and nightclub owners on all points of the spectrum. From family-owned single bar operations to large companies with locations on an international scale, Kevin works with them all and understands the unique challenges each kind of company faces. He’s also the author of a book titled Night Club Marketing Systems – How to Get Customers for Your Bar, a regular writer/contributor for Bar & Restaurant, and publisher of an eBook called: The 5 Commonly Overlooked Areas That Kill Your Food Cost.
Plan to Attend or Participate in Bar & Restaurant Expo, March 27-29, 2023
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