Buying a bar?

I only recently moved to a new city, and planned to open/buy a bar in 2020 after settling, but the opportunity came up partner with a friend who has a lot of the skills I am lacking so I have decided to bring the plan forward to meet his schedule and am now currently trying to do the research needed as quickly as possible.

Our background in a nut shell... My strengths are mostly in promotion with experience working as an event manager and freelance nightlife promoter. His are in managing bars/restaurants and having a much larger network than myself. I would say he is the more valuable partner, but he would struggle to finance the business alone, and would like to share the cost/risk.

I already know that running a bar is a challenge, and many fail. We plan to do thorough research into the place we purchase, and have all financial records, licences, etc. checked by a lawyer before going ahead.

But apart from having hundreds of "brilliant ideas/concepts", this is as far as I have come in terms of planning/research.

So I would like to ask the wonderful people on here for some advice.

Firstly, in terms of my partnership with my friend, I was thinking if it might be a good idea NOT to be equal partners, as I see disagreements becoming an issue, especially as we both have strong personalities. There would be benefits to either being a minor or major partner, and I would generally be ok with being either, but how would such a partnership work out and what kind of percentages would be a good idea to go with?

Once we have that sorted out, how should we plan our finances to cover the running expenses of the bar? We plan to look for relatively successful businesses that are already turning profit in a busy central area, but running the business "paycheck to paycheck" doesn't seem like a smart idea... So how much should we really need on top of the upfront payment? And what is a good way to manage this fund?

Lastly, does anyone have any general advice for me in this kind of venture?

Thanks so much in advance for any help anyone is able to give. And I promise to keep this post updated on how it goes, no matter the outcome

 

Check all figures you are presented with when looking at a business. Believe nothing until you have seen or been able to find proof. The seller and the seller's agent if they have one are not working for you and are not on your side. Nor is their solicitor working for you.

And make an agreement with your partner about what happens when things go sour. The forums are littered with businesses that develop problems or go under with no agreement between the parties.

 

A lawyer cannot advise you on the accuracy of figures you are given. You need a specialist accountant as well

 

1. Never start a partnership - they nearly always end up in tears!

2. Most bars fail. Bars run by people who have little or no experience of the bar trade ALL fail.

3. If you buy a bar, get proper paid-for advice from someone who knows how to negotiate a bar sale (and that will NOT be a lawyer or an accountant!)

4. In the bar trade, everybody is out to gouge everybody else. That's why the barkeep is counting straws, does not close the till drawer properly, uses too much crushed ice, drives a van and likes to come in early.

5. Brewery and wholesale contracts can kill you. Vending machine contracts can kill you.

 

This.
Solid advice.

 

Thanks for all the replies so far!

Yes I already know how cut throat and dishonest the nightlife industry can be first hand, and was already considering how to check the accounts are accurate and not altered. But how could I do this? I was assuming that with the help of a lawyer, going over the tax returns should be enough, and if they were altered it could be proved and they could be sued for such a violation?

In regards to paid consulting... Our budget is already quite small. I definitely will seek advice from a lawyer, although plan to keep that to the bare minimum just for our safety and hopefully at friend rates. It just wouldn't make any sense to spend half of our budget on legal, accounting and brokering advice.

What did you mean by this?



A bit of additional information, our joint budget is undecided but likely around 50,000 EUR which does seem to be enough for our location. And the bar will be located in Madrid where I have just moved to (my partner speaks fluent Spanish and has experience managing bars is in this city). And yes I know brexit is likely to cause some problem but am hoping something will be a little clearer by the time this all goes through. Also it might actually be helpful to my visa situation to own a business here. I'm looking into the immigration issues as they evolve.

 

You say the business is located in Madrid and I have no knowledge of how tax there works. However if the business was located in the UK I wouldn't even bother asking a lawyer to check a tax return. You need an accountant to look at the figures to see if the declared figures add up to a profitable business. Ideally the accountant should be able to look at the back up records.

 

You definitely don't want a UK lawyer looking at anything if the business is in Madrid.

 

I have absolutely zero knowledge of Spanish law, but in Germany (unlike English or Scottish law) you can have a contract with a building or even with a tenancy. A friend bought a bar and wanted to kick out all the vending machines. The previous tenant told him nothing about any contract with vending machine companies and so he was stuck with them, after the vending machine company sent him copies of the contracts with the previous tenant.

A lawyer friend went through those contracts and saw that the location of the machines was not stipulated. As this was a gay bar, he moved all the machines into the ladies' loo. It later became a lesbian bar and they all had to march into the gents'. After that the machine operator gave up and took the damn things away!

My first language was German and I have lived in Germany for three decades. I am married to a German and my children all live in Germany and we speak German with one another. I did a two year course in business studies in Germany, so I understand most, though not all, of the ins and outs of doing business there. That is fluency.

You two may need a local with real business experience OWNING bars (not just running, but actually owning) to hold your hands.

It probably will never happen. This administration is just too incompetent to cope with such a gigantic and complex task - and as the opposition is totally out-to-lunch, Norway Light is probably the most Brexit we shall get.

My money is on delay-after-delay' followed by a 2nd ref. and a big 'stay-in' vote - and then we all go back to worrying about important World issues, such as the Royals, Andy Murray's legs and Bake-Off.

 

Thanks, that is good to know. Actually I am finding it quite a learning experience to hear all the problem stories and failure stories and am definitely going to be as diligent as possible as this seems to be the main reason people fail.

We have also decided we want to go with a smaller bar than we originally had in mind to keep risk as low as possible. But we are still not sure how much money we should have on top of the upfront payment. Assuming that the bar is at least breaking even (and this has been checked), we don't plan to have any renovations/closed days, and let's say that the monthly expenses not including inventory comes to around 5000 per month. How much money would be reasonable to have prepared?

And also what do you guys think of my idea of making the partnership 60-40% instead of 50 50, or what else could we do to avoid other disagreements? I will of course prepare a very detailed partnership agreement and also have a lawyer to check over it.

 

We will find out about Brexit in about 10 days or so.

Expect lots of screaming by politicians. May be worth investing in rope ....

 

Hi noz03
You mentioned your partner speaks fluent Spanish - a must. Has he experience with the Spanish mafia and drug culture. This would be my fear - apart from losing all my money. I lived in southern Spain for just over a year, trying to start up a guest house business , and was totally beaten and held up my hands. If you don't have the language and are relient on your partner for this please really think again, about moving forward. Could you go back to your original plan, and improve on your language abilities ? good luck p/l

 

Two prerequisites enjoy 'must-have' status, if a partnership is to stand even a remote chance of working long-term -

1. Not having a partnership at all, but dividing the business up into two separate businesses that work together.

2. Both partners must be very easy-going and a joy to work with. I have a partnership with my wife and in over 40 years of being together, we have never had a single serious disagreement. We are just too phlegmatic and affable to bother with such strenuous activity!

A very close friend of mine opened a restaurant in Spain, after marrying a local girl and member of a local Mafia family. His business blossomed until they broke up - then the family just told him he can either leave Spain after signing over the restaurants to his ex, or get killed.

 

I will ask him about mafia, but he has been managing and working closely with the owner of this previous bar for a while so I think he knows how things work here. Also I think Madrid is a little more developed than the south or the tourist areas, I'm sure there is still organized crime but hopefully it is a bit better managed in the capital.

I find it quite interesting that no one seems to comment on how much money I should have? I guess it is a difficult question to answer and specific to every business, but I really have no idea if it is totally fine to run a business just with the down payment, or if I should have 6 months worth of running costs stored up... What is the norm in this, or are there any rough guidelines to follow?

 

Far more than you think you will ever need. The first step is to do a cash flow to work out what you think you need. Then double the timescale and double the cost of everything.

 

We work closely with a lot of bars and hotels, it's a tough business but in our experience the best performers have something unique i.e. captive market, top chef, regular deals, animals for the kids, special location, top DJ.. etc I know this isn't answering your questions above but I hope it offers some help, best wishes

 

This!

Were I too be daft enough to open a bar, I think I would go with something like a kinky gay bar. Or maybe quasi-gay, they all seem to work well. Add some bites-to-eat at a fiver each.

Of course having 68-yr-old straight behind the bar would not work, so I would have find some good looking boys as wait staff.

 

Ha ha, what can I say - kinky bar gay or straight would be a niche but how big is the market?

 

Why not?
Got a nephew who works in a gay bar in the UK, couple of nights a week on far more than minimum wage and great tips. Business doesn't spend much money on uniform. Its a pair of shorts.

 

Saving on uniform but costly heating bills - joking apart, bar staff play a big part in the success of a bar he must be a good kid