Do you want to start a nightclub business and want to know the cost? If YES, here is a cost breakdown for opening a nightclub and the profit margin/ROI.
Starting a nightclub in the United States can be very exciting. You can decide to start a small cocktail lounge with a jukebox or a resounding piano in the corner. Your medium-sized club can also look like a neighborhood bar during the lunchtime hours, then spring to life with a popular band at night.
If you have a big enough budget, your club might be a large dance club where the most fashionable people and hippest celebrities hang out every weekend. No matter the personality you choose for your club, you have to be prepared to spend a great deal of time and money on promotion to create an attractive vibe. Clubs can make plenty of money if they are managed properly.
Estimated Cost Breakdown to Open a Nightclub
Opening a nightclub in the United States can run between $240,000 and $840,000, due to equipment, lighting, air conditioning, and other expenses — on top of alcohol permits. A nightclub is an expensive undertaking with a high failure rate.
You will be expected to pay the lease, the DJs, security, door people, promoters, waiters, bartenders, and even attraction magnets such as celebrities and hot chicks. Your typical starting expenses will include everything that goes on behind the scenes to get your establishment up to code and ready for opening day.
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Licenses and Permits
Licenses and permits are number one when it comes to opening a nightclub. The liquor license is likely the most crucial one, but most localities require a number of operating licenses. If you are doing any construction, just ensure you obtain the proper building permits.
And don’t forget to consider the associated legalities if you are planning on serving food. Expect to spend anywhere from $4,500 to $11,000.
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Rent/Mortgage Payments
The price of this one can vary extensively depending on your location. It is advisable you do some detailed research and plan on having at least 6 months’ worth of pay put away — it can take some time to turn a profit, but you will have to keep your doors open in the meantime.
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Insurance
Expect to spend $2,000 to $6,000 in premiums to start.
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Renovations and/or Remodelling
Have it in mind that this cost will vary greatly depending on how much of an overhaul you are planning on doing and what you expect your end result to look like. On average, factoring interior design and decorating, fixtures, furniture, stereo equipment and lighting, expect to spend about $65,000 for a thorough overhaul.
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Employee Salaries
This will vary depending on the size of your operation, but every club needs employees. Most clubs function with a manager, bartenders, and bartender’s assistants to really operate smoothly. If you are serving food, you will need kitchen staff (chefs, line cooks) and serving staff (servers, buzzers).
Consider paying your employees competitive salaries based on individual experience. As the owner, you will need to pay your employees even if you are not turning a profit yet. Make sure you have the funds on hand.
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Payment Software/POS System
Ensure you accept the major forms of payment and are set to accommodate customer payment requests like splitting the bill. You can get a basic cloud POS system for about $1,200 to start or opt for a more robust version for up to $20,000.
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Operating Reserve
Note that this fund covers anything that will need to be replaced from normal use and act as a safety net to cover the costs of operating your club during off times. Experts suggest $100,000 for healthy coverage, but the reality is many clubs operate on less.
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Bar and Kitchen Equipment
Note that a beverage-only club will need much less equipment than a club that serves food. The bare-minimum club will require taps, refrigeration, and glassware. Expect to spend upwards of $8,000 on those items, depending on the size of your operation.
Food menus can range from simple to extensive and will impact how much kitchen equipment is needed. Also, note that you will need some basic appliances if you are serving food. If you are economical, you can probably get by through a bare-bones menu for about $5,000 or outfit a professional kitchen set – up for $20,000 to $40,000.
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Signage
Your club will need a detailed and clear sign. Expect to spend about $1,000 on average.
10. Inventory
For your club to boom, you have to ensure you are well-stocked. For food and alcohol, you are looking at $6,000 to $13,000. You will know your customer base best, but a good starting inventory percentage breakdown is 45 percent beer, 40 percent liquor, 5 percent wine, and 10 percent mixers. Adjust as needed.
11. Emergency Funds and Miscellaneous
It is important you lay some cash out in case of emergencies. The ideal is $50,000. Although it might sound steep, you should at least make it a point to have something put away for potential disasters. Miscellaneous expenses can range from legal or consulting fees to a great advertising opportunity you just have to seize. It is recommended to factor in at least $3,000 for miscellaneous expenses.
How Much Profit Do Nightclubs Make in a Year?
Nightclub businesses make money by selling drinks, possibly food, charging for admission, and where possible, for special seating and/or special services offered to the customers.
Note that these special services can be anything from “lap dances” at strip clubs to bottle service (customers buy a full bottle of liquor to be exclusively served to them for a special price) at VIP tables in the best spots right next to the entertainment.
According to industry reports, drinks in nightclubs sell at the lowest prices of $1 per glass for a cheap beer or a shot of cheap liquor, or up to hundreds of dollars for a bottle of fine wine, expensive champagne, and “top-shelf” alcohol. In the main American cities, the average drink sale is $2.50 for a beer and $5.00 for liquor drinks. Blended drinks sell for around $10.00 each.
However, for nightclub owners, the key is to manage the “PC,” which stands for the percentage of the cost. The lower the PC the more profits for the club. A typical smaller club will make its owner $1,000 to $5,000 per week ($50,000 to $250,000 per year). A large metropolitan club can make a $50,000 profit in a single night.
Conclusion
Opening and maintaining a nightclub requires a lot. Day in and day out, you invest your time, energy, and focus into creating something great. However, your primary job is to find trustworthy people to help you and then watch them very carefully to prevent stealing.
You will find this very difficult to do because there are dozens of ways people will steal from a club and it is the owner’s job to catch them and replace them with, hopefully, a more honest person.