What are the best indicators of a bar's success? Sales per square foot are one option. To calculate sales per square foot, divide annual sales by total interior square footage including kitchen, dining, and storage space to get a net rentable foot in the leased location.
For the year 2018, the bar and nightclub industry in the United States has increased to $28 billion in revenue with steady growth since 2013. In total, 35 percent of sales come from beer selection and ale, another 35 percent from distilled spirits, and 10 percent from wine drink prices and other beverage items. The American Nightlife Association says the bar industry averages $64 of revenue per employee, which is an attractive opportunity for potential bar owners looking to dive into the business. A U.S. bar industry with 65,000 establishments has grown big and flooded this part of the restaurant industry with competitors.
Bar ownership requires a large financial commitment. This means getting through the significant barrier of initial startup costs. An approximate budget for a bar that rents or leases its location has a wide range and can vary depending on the space. A bar that uses money from mortgages to acquire and finance its location has an average startup cost of $175,000 to $850,000. A seller can quickly obtain a starting investment of as little as $25,000 through established businesses. Costs such as buying the physical assets needed to open a bar are in here. Licenses, permits, and insurance are also needed.
Other controllable expenses and operating costs--overhead expenses, labor costs (and other labor-related costs), customer acquisition cost--are needed to run and maintain a bar. When ordering alcohol inventory, it is recommended to purchase 45% beer, 40% liquor, 5% wine, and 10% mixers. An average of $13,000 per month is needed for a properly staffed, average-sized bar.
The sales/square foot ratio is one useful way to look at the sales volume of a bar, and this method can be used to see a restaurant's potential for profit. Revenue per Square Foot is used to compare the total sales of the store to the total square footage of the interior, including bathrooms, storage rooms, and other places in the bar. In a leased building, net rentable square footage is the amount that is usually equivalent to this.
In most cases, full-service restaurants should average at least $150 per square foot, while limited-service restaurants should average at least $200 per square foot. High profit bars can easily double those sales metrics.
Revenue per square foot provides an accurate representation of how effective you are at selling your products, so you can use it to show off your restaurant's/bar ability to expand.
How to calculate Revenue per Square Foot:
Sales / Square Foot = Sales per Square Foot
Revenue per square foot, or sales per square foot, is another way to conceptualize your revenue. It helps you determine sales efficiency. Its formula is Revenue ÷ Retail Space.
Retail space is anywhere you make sales. The higher the sales per square foot, the more efficient your space is. If you want to increase your revenue per square foot, you might consider upgrading your menu or investing in enthusiastic waitstaff. You might also run campaigns advertising popular menu items.
Sales per square foot are the most reliable indicator of a restaurant’s potential for profit. To calculate sales per square foot, divide annual sales by the total interior square footage including kitchen, dining, storage, restrooms, etc. This is usually equal to the net rentable square feet in a leased space.
While a bar's earning potential is tied to the specifics of the bar itself, such as location and size, an average week's profit is estimated to be around $25,000 to $30,000. These are calculations on drinks costing $8, main dishes costing $13, and appetizers costing $6. Bars are known to turn a large profit on each drink served, with profit margins of up to 400 percent on every drink.
A typical bar's gross profit margin ranges from 70 to 80 percent. Considering that general retail and automotive makeup only 25 percent of all businesses, that is a significant amount. And liquor prices are the main reason for this. The heart of a profitable bar or restaurant is a beverage program with low pour cost.
Bars have an average net profit margin of 10 to 15 percent. The gross profit margin is calculated by subtracting the total cost of goods sold from the total revenue generated by the restaurant. After deducting all operational costs, the net profit margin is what is left of the gross profit margin. Numerous things determine the number of people who can fit in your bar.
BNG Point-of-Sale are POS solutions that improve your bottom line. With a full selection of POS systems for bars, restaurants, and retail businesses, you'll find the right tool to grow your business with the personalized support you need. Connect with us HERE to learn more.