This guide was written by John Howell, Editor & Founder of Guides.Global (firstname.lastname@example.org).
It was written on 25 August 2017. The law and practice change all the time. Our guides are updated as frequently as possible - typically every three years - but may be out of date.
Our guides are prepared by professionals from many countries. They are, of necessity, both brief and general and can take no account of your personal circumstances. They are intended to be a good introduction to the subject BUT ARE NO SUBSTITUTE FOR PROPER PROFESSIONAL ADVICE, which our contributors will usually be happy to provide upon request.
The advice and opinions contained in the guides are those of the author and are not necessarily those of Guides.Global.
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This guide is about opening a bar or pub in another country. It covers the pros and cons, the things you need to do to prepare, and some of the issues that will arise if you're running a bar abroad.
Many people dream about running a bar in another country. You're your own boss, you get to meet interesting people, you enjoy the weather and make some money. What's not to like?
The reality often turns out very differently. Hard work. Crippling losses. No spare time. Descent into alcoholism. Sorry to sound a little grim, but the risks are real.
A huge number of bars fail within their first couple of years.
Yet running a bar can be, for the right person with the right drive, a profitable and fulfilling business.
One of the key elements for success is proper planning and preparation. Add professional advice to that mix and you might be on to a winner.
I hope this guide helps you towards success - or puts you off right now if running a bar is not for you!
In my experience, only 10% of the people thinking of opening a bar should actually open one. Make that 2%.
I speak to many people about opening a pub in another country. Often I can see that, for them, opening a bar would be a disaster. I try to suggest this, as gently as possible. Still, quite a few of them go on to do it. Some of them are successful! I don't claim to be infallible.
What sort of person should open a pub in another country?
The first thing I'm assuming is that you like the country you're looking at. Have you been there both in and out of season? A Spanish town in December is very different from the same town in June. If you've not visited us in each of the seasons I suggest you do so before thinking of opening any business, let alone a bar.
Assuming you're still reading, are you cut out to be the owner or manager of a bar? When people think of bars they tend to think of all the good things. Friends, laughter, alcohol, fun. If only it was like that.
The main features of running a bar are - in reality:
Extremely long hours. Especially before you're at the stage of hiring many staff, we can be talking 16-hour days (up with the songbirds to go to the market, and only sleeping after you've closed down properly at 2-3am).
Work that is much heavier than you might expect. Moving beer barrels, cases of soft drinks and all of the other stuff we sell is hard, physical work. This is particularly so if, like many traditional pubs, your store room is in the basement and accessible only by stairs.
Unpleasant tasks. You don't really understand about running a bar until you have (yet again) cleared up someone's vomit or unblocked a toilet during a busy shift. Apart from these delights, there is a lot of day-to-day cleaning, especially if you serve food.
Dealing with drunks. Even for bars that cater to an older crowd, it is unlikely that you'll go a week without having to put someone in their place. For 'party' destinations, make that a day.
Limited income. You'll be earning very little for a great many hours to begin with.
Of course, this is the bad stuff.
On the other side of the coin, you'll be meeting lots of interesting people, learning more about the country you've moved to and - in all likelihood - having quite a lot of fun.
When you get to the stage of employing staff, you might even take some time off!
Probably above all else, however, running a bar in another country often allows an expat a suitable visa.
I have seen countless people open bars and then, very quickly, turn into raging alcoholics.
This has applied particularly who have come to the business thinking that a bar would offer them semi-retirement. Maybe the appeal of the bar was as much the alcohol as the business.
If you have any tendency towards drink, you're probably better not putting yourself into temptation by having it within arm's reach 24 hours a day.
Be honest - is the town you want to open a bar in already saturated with similar businesses? Can you offer anything different? Do your research (part of which should be checking out our country-specific guides, of course!).
As with most businesses, finding the right location is critical. If you think about the place where you live there will be some streets which have a very bad reputation, particularly at night, and which decent people would not want to visit. Don't be tempted just because the real estate is cheap.
Now, there is an obvious problem about choosing the right location for your bar in a country that isn't your own. Even if you've been going there fairly regularly for a number of years, you are not likely to have the detailed knowledge that would allow you to pick something on an entirely rational basis.
In fact, most people choose the location for their business on the basis of a gut reaction that they themselves quite like the area and that they have (probably) spent quite a lot of time in various bars in the area and like the atmosphere.
There is nothing wrong with approaching things in this way. There are many areas where you could run a successful bar and if you are comfortable in this area and it suits you for other reasons that's a pretty reasonable basis for selection.
However, if you don't know the country well, especially if you've not been there in all seasons, I strongly suggest that you make a few extra visits to check out the various areas at different times of the year. Spend time in the area(s) you'd want to open a bar in. Are there customers?
On these trips, it goes without saying that you'll have to spend quite a lot of time in various bars. Life can be tough at times.
When you're doing this work - and remember that it is work - take notes and photographs to remind you what you like and do not like about each establishment. It's probably best not to turn up with a big notepad but a small notebook on which you can scribble is not too obtrusive - or you can go all modern and trendy and make your notes on your iPad or iPhone. I'm always amazed by how much time my customers spend on their phones. I'm a fan of paper for this purpose. You can scribble and sketch much more easily than you can enter stuff on your phone.
At the end of your various visits, you will almost certainly find that you just know that one particular area is right for you and that you've seen nothing in that area to put you off.
Do remember that even within a particular area, the exact location of your bar is very important. What you'll be looking for will depend a lot on the audience you're trying to attract, so if you choose somewhere in the wrong place for that audience you're going to struggle.
Do you want to pick up the daytime crowd on the beach, or catch the tourists in the evening on the main strip? Or would you prefer to cater to locals - finding a property near offices or in the town centre?
There is a huge range of bar sizes. There are tiny, intimate bars where 20 customers would feel quite cosy and 30 a distinct crush. There are huge nightclubs which can easily house 2,000 at any given time.
Somewhere along this continuum, you will find the bar that is right for you.
Part of the choice will be down to personal preference. Part will be down to your decision as to whether to employ staff or keep the work all in the family. Part will depend upon whether you want to serve food. Part will depend upon your financial aspirations and means.
Generally, in my experience, the most successful bars in most parts of the world are the standard units which can deal comfortably with about 50 or 60 people and which are large enough to include food as part of the offering.
Judging by the speed at which so many nightclubs crash and burn, these don't look as if they're a particularly great business proposition - probably because of the relatively short tourist season and the small size of the local population.
Who do you want to cater to?
There is an almost unlimited range of specialist markets - gay bars, jazz bars, bars for sailors, local bars, bars for the retired community etc. New specialties are added all the time. Last year an acquaintance of mine opened a bondage bar and seems to be doing very well.
Equally, there is usually a good market for general bars which appeal to all age groups within a family.
The choice you make will have a dramatic impact on your lifestyle, particularly if you want to aim at a market which likes to stay out until early in the morning.
Be very wary of targeting the "youth" market. Are you the right age? Do you have the right personality? Most of all, remember they are very fickle customers. You bar will be THE spot to be seen one week and deserted the next as they all decide that they like the jungle theme next door.
One of the strange things about the bar industry in expat destinations is bar owners' willingness to have pretty frank discussions with customers about what they like and don't like about their particular bar and - without giving you chapter and verse - how much money you're making from it.
If you are thinking about aiming for a particular market, it's well worth doing some detailed research in this way and, of course, making sure that the market isn't already overserved.
One early decision that you will need to make is whether to take over an existing bar or to start a new one in new premises.
Taking over an existing bar can bring with it its clientele and reputation. However, it can also bring with it all of its hidden issues. If you're taking over an existing bar, extensive due diligence will be needed. See below.
There is almost always a cost associated with taking over an existing bar. The owner will want to make some money for the hard work he has put into building up the business. If there isn't a cost, be very careful. Why is this person keen to get rid of these premises and the business inside them?
If there is a cost, it can often be very hard to validate the cost. Parts of it will be obvious: the cost of the improvements made to the premises, the bar fittings, the equipment and any stock. Other parts will be more difficult to judge. How much is the good will of the business really worth? Your accountant will be able to help you by looking at the figures and giving you an opinion but he will be hampered by the fact that, until very recently, it has been almost universal practice for bars to underestimate (well, underdeclare really) their earnings as far as the tax man's concerned. In some cases this still continues. So you will find a bar where the person saying it will tell you that his income was €200,000 but where the books only show €120,000. Is he telling the truth? How much is it worth paying for this establishment? See below for the due diligence procedures that you might want to adopt.
Of course, the other side of this coin is that starting a new bar will lead you to substantial costs when it comes to setting up the premises and building up the business. For example, one of my friends - he'd better remain nameless - set up a new bar in a renovated building in a European tourist town. I can tell you that his expenses for a bar which had a maximum capacity of 100 people - so slightly larger than average - amounted to €141,982:
Rent (security deposit and first month): €3,250
Improvements to the premises (air conditioning, toilets, signage etc): €18,000
Equipment and fixtures: €43,000
Licences and permits: €35,000
Opening stock: €22,000
Phone and utility setup costs: €150
Pre-opening payroll: €5,550
Opening marketing: €1,000
Legal services: €425
This was for a general bar which offered only very limited food and so didn't have expensive kitchen facilities.
Note that my friend will be the first to agree that he didn't spend nearly enough on lawyers and accountants. He should probably have spent five times the amount. Unfortunately, this came back to bite him when he discovered legal problems with the rental contract for his bar and fell intio a dispute with his neighbours. He also realised that the business structure he'd chosen was hugely tax-inefficient.
My personal view is that I would always go for the option of taking over an existing bar. I just think that it takes a long time to build up a loyal clientele if you go down the startup route and that the cost of setting up the premises is usually far greater than the amount you'd pay to take over a similar, existing bar.
However, do bear in mind that if you are going to take over an existing bar you are going to need to spend more on legal and accountancy services. Your biggest nightmare - which happened to my next-door neighbour - is that you spend a lot of good money taking over someone's thriving and successful bar only to find that he opens a new bar just down the road and takes all of his loyal staff with him. This is where your lawyer comes in. The contract should be watertight and prevent him from doing this.
For more information, see our Guide to Buying an Existing Business in Another Country.
Of equal importance is whether you should buy your premises or rent them.
For most people, this is dictated by how much money they have available.
However, even if you have unlimited money there are some issues that you need to think about.
Buying a bar - that is to say the premises, not just the operation - can cost you a lot of money although, in recent years, rather less than you might expect, as times have been difficult. Could this money be better used elsewhere? For example, in supporting you until the bar starts making a profit or in expanding the business.
Buying has its advantages:
Any money spent improving the premises is spent improving your own premises.
You can - subject to complying with planning and other requirements - alter the premises to suit your needs without having to get the permission of your landlord, who may not want them touched.
The interest you would earn on the cost of the bar will probably be less than the rent you would be paying for the bar so, unless you have a way of making good money from your capital, you may find that ownership is the cheaper option.
In normal times - and we haven't been living in normal times for the last six or seven years - you could legitimately expect the value of your building to increase over time whereas you see no increase when renting the property.
One downside of owning the bar is that you're more or less stuck with it. If you want to expand you will have to sell the old one and buy a new one. It is much easier to break the tenancy and find other rented premises.
Renting your bar has its own sets of pros and cons:
Your landlord can and will put up the rent and the more successful your bar the more he will feel able to do so as he understands perfectly that it is very difficult to relocate a bar.
If you do leave and take the bar elsewhere, he will probably be able to relet the premises to somebody who will take advantage of your existing clientele who just turn up at the building or he can sometimes operate the bar himself at considerable profit.
Watch out for leases which give the landlord the right to a percentage of any money you get when you sell the bar to anyone else and transfer the lease.
It can sometimes be very difficult to get your landlord to carry out repairs to the premises if the lease requires him to do so. Sometimes you will be required to pay for all repairs in addition to paying a slightly lower rent.
You will need professional help when finding a bar in another country.
Understandably, most bars do not display a 'for sale' sign when they are on the market. Those that do are usually in a pretty desperate situation.
You need an experienced commercial property agent who deals regularly with the sale of bars and restaurants. Not all do. Some focus on shops, offices, factories etc.
A good commercial property agent will not only be able to tell you which bars are actively on the market (where necessary, liaising with the other commercial property agents) but will often also be able to tell you about people who they know are thinking about selling their bar, or who could be persuaded to do so for the right price.
You will, from time to time, see bars advertised for sale in the expat press. These are not necessarily a bad buy but the best opportunities never get to the point where they're advertised. They are placed, discretely, by the commercial property agents.
Some companies have set up as consultants to people who want to find bars. This is sometimes because they do not have the qualifications required to get a licence as a commercial property agent. Their consultancy, very often, involves introducing you to bars for sale. You'd be better off sticking with an agent, usually.
Due diligence is the fancy term for checking out that what you have been told by the seller is actually true.
It is, in my view, absolutely essential that you engage an experience lawyer and, where necessary, accountant to advise you about the due diligence needed in your case and to arrange the bits that you cannot do yourself - which will be most of it. Typical things that you will need to check out are:
Does the bar have good legal title, free of all debts, burdens and 'incumberances'?
This is only relevant if you're buying the property.
Does the seller have the right to sell the bar to you?
Is any rental contract fair and are the circumstances in which the rent can be increased clear and reasonable?
Does the bar have all of the licences and consents needed to operate as a bar?
Do those consents and licences cover what you want to do in the premises?
Are the premises in good repair and will they pass the annual inspection? Making sure that you bar complies with the latest rules can be very expensive.
What is the reputation of the seller?
What is the reputation of the bar?
Has the bar been subject to any formal complaint or investigation?
If your bar has been subject to too many formal complaints, you may run the risk of losing the licence or, at least, spending a lot of time convincing the authorities that everything is now in order.
Are the accounts given to you by the seller an accurate reflection of the business done by the bar?
This only applies if you're buying an existing bar.
What is going to be the setup costs of opening your new bar?
Are there any plans in the area (for example, opening a new marina, widening a street or making an area a pedestrian-only area) that could impact on the activities of your bar?
Will you qualify for all the licences that you need to operate the bar? You are not likely to do so if you have a criminal record.
If you intend to own but not operate the bar - i.e. you intend to employ a manager - will your manager qualify for all of the licences required?
A competitive analysis or your bar and its potential in this marketplace. Many people either dispense with this or do it, fairly superficially, themselves.
Will you meet the immigration criteria for someone self employed in the country you're interested in? See our country-specific guides or contact us if you're not sure.
You will need a proper rental contract with the owner of the property.
Especially in the case of a bar, you will need to have the contract prepared or approved by your lawyer. There are lots of critical clauses that can easily sink your business.
Buying a commercial property (such as a bar) is very similar to buying a residential property. This process is different in every country.
The main extra things you (and your lawyer) need to think about are whether there are any restrictions as to what you can do in the building and whether it has either all of the licences needed to operate your business or the scope to be altered so that it can obtain those licences.
The rules around licencing vary massively from country to country. You may need several licences - one to run the bar, one to play music, one to serve food, one for live entertainment...
Your ability to serve food can depend upon the category of licence enjoyed by the bar.
Assuming you are not restricted, you will need to decide upon the type of food you wish to sell and the hours in which you wish to sell it. These decisions will be based upon your expected clientele.
Do not underestimate the importance of the food side of your business. Food can easily account for 30% of profit even if it's not the main focus of a bar.
There are two schools of thought here.
One says that it's your bar and you should call it whatever you fancy. People will still find you.
The other says that the name of the bar is the single most important element in your marketing message and that it needs to be thought about very carefully. I agree with this group of people.
One very important thing about your proposed name is that it shouldn't be close to another name in use locally. I've seen that happen all too often.
Again, there are two schools of thought.
The traditionalists will tell you that the only marketing worth a damn is word of mouth.
Those who view the bar more as a business will say that if marketing works in every other line of business, why should it not work in the case of a bar? They will point to lots of successful examples of bars raising their image and creating a lot more business by advertising and - these days - by social media marketing.
My experience leads me to two conclusions. The first is that marketing by way of advertising definitely works. I have seen my business grow several hundred percent on the back of the advertising that I have done. Colleagues tell me that social media marketing can also create great benefits.
The second conclusion is that you can waste a huge amount of money on inappropriate marketing.
Marketing is important if your customers will be mainly tourists. They do not have time to get to know you by word of mouth - unless you pay to put the word into someone's mouth. Advertising in the local English language, German language and Russian language newspapers has proved successful, if expensive.
Another method of marketing that I have seen have success is to encourage tour representatives to mention the bar as a 'must visit' venue during their introductory meetings. Of course, they need to be 'incentivised' to do this. Many have abandoned this line of activity because it was proving increasingly expensive and very unpredictable as a method of generating business. It also now seems to be banned by many tour operators, who prefer to engage in direct activity with businesses - which is even more expensive.
Of course, you must have a website and promote it.
Talking of the internet, work very hard to get good reviews on Tripadvisor and Yelp. They make a big difference. You need to be quite blunt when making sure that you and your staff always mention Tripadvisor when you give a (happy) customer their bill.
Running a bar - even a small bar - is a complex operation. Add in staff and it becomes even more difficult.
Good planning is essential. As we used to say in the army, "the six Ps": Planning & Preparation Prevents Piss Poor Performance.
This is just as true in a bar in Spain as it is in the deserts of Afghanistan.
Systems can vary from the very simple and paper-based to highly complex software designed specifically for bars and restaurants.
The problem with paper is that you have to transfer all of the information manually into your accounting system and you can get no reports back from it to help you analyse what is doing well, what is doing badly and how your staff are performing. There are a number of such systems available. For a small bar, you can buy some pretty decent software for €400 and you can usually use them for free on a trial basis. It's well worth the money.
Bars are very easy places for dishonest staff to steal from you, whether it's by taking money from the till or by giving their friends free drinks. Make sure you have clear instructions as to who can handle cash. The use of security cameras over the tills helps. Regular inventory control, tied into your bar software, helps even more. If you're using software, each member of staff should have their own login to the till and so any errors (or patterns such as loads of drinks being voided by one barman) can soon be identified.
Don't get me wrong. You wouldn't want everybody to come to your bar - because you've only got space for 50. But you need to make it the natural starting point for a regular and compatible clietele.
This doesn't just happen.
It is well worth employing the services of a marketing consultant. One who specialises in bars. Even if you feel that you would be able to do this job yourself 'back home' you should still consider employing a consultant, because she will have the detailed local knowledge that you lack. She will know the options, the costs and what works.
This is particularly important if you've chosen a bar - especially a new bar - in a secondary location. The good news is that you're probably paying a lot less rent than you would be on the strip. The bad news is that you're going to have to spend a large part of that saving (at least initially) on marketing.
Marketing might well include promotional events; special, low-cost introductory nights on key dates (for example, if you're catering to American clients, 4 July, Superbowl and Thanksgiving); and a special launch party.
There are two issues here.
The first is whether to employ staff at all and the second is, if you decide to do so, who to employ and how to control them. Many people running smaller bars - say with a capacity of 30 or 40 people - choose not to employ staff at all. The bar is run by a couple, perhaps with the part-time assistance of their teenage child.
During busy periods all three will work, whereas on a quiet afternoon only one will be on the premises.
This has the obvious advantage of keeping as much of your earnings as possible in your own hands but it can become very wearing. After a few years, most people move to the point where they employ at least some staff some of the time.
If you do choose to employ staff, you need to think very carefully about who you need and what they need to do.
Try to select staff who will give you an advantage in a particular segment of the market. For example, an ebulliant gay barman can help encourage a gay clientele. Employing staff gives you the enormous advantage that you can employ a native Greek speaker to open up the significant local market.
The things to look out for when employing staff will be pretty much the same as in your own country. The most important is, always, whether they feel 'right' for the job.
In some countries there are are formal qualifications available for bar work and in the catering field generally - and these can be a useful additional indicator when deciding who to employ. But it is the personality and experience of the individual that is going to matter most if they are front of house.
Once you have employed them, you will need to control them.
I've already touched upon some of the issues involved, but you will also need to address the question of working hours. Find out about employment law.
This may not sound like a problem and if you're only looking for local beers, local wines and local food, it usually isn't.
You will also usually find no difficulty in buying in all of the main international brand of whiskey, vodka and so on.
If you want to offer 'food from home' to cater for a foreign audience, things can be a little more tricky.
Most areas have one or two specialist suppliers who bring in British, German, Russian etc food to cater for their own expat communities - but supplies of individual items can be a little spasmodic. This doesn't hep if you try to offer a regular menu. Probably the best solution in these cases is not to offer a regular menu but to adjust the menu so that it changes regularly in accordance with what is available in the marketplace. You will probably, in any case, find this more popular with your customers.
As with any business, you will do far better if you have a business plan. It is beyond the scope of this article to look at the contents of a business plan - especially as they differ from country to country.
Part of your business plan is your budget and cash flow forecast. This is a more or less essential document and monitoring it to see how well you're doing against budget is a key business tool for a successful bar.
When you start the budgeting process it becomes pretty depressing when you begin to realise how much money you need to take to get even a tiny profit!
You will need to allow for many costs that might not have been immediately obvious.
You will also need to discuss this budget with your accountant, who may be able to point out items of income or expenditure peculiar to your case or which, for some reason, don't appear on the spreadsheet.
Always allow a contigency fund of at least 10% of the budget for opening your bar. You will usually spend it.
Your budget figures will depend critically upon whether you are running a bar aimed mainly at the tourist industry or whether you are aiming at the more steady, year-round local resident - whether expat or local.
Don't be afraid to ask existing bar owners for advice - but don't believe that just because they are running a bar they are an expert.
Opening a bar abroad is risky – but it can be rewarding. Are you the kind of person who can make a success of it?
|Doing Business in a Foreign Country
This guide looks at some of the first things you need to think about if you are interested in doing business in another country. It is for people whose business will remain based "back home" but trade internationally.
|Starting a Business in a Foreign Country
This guide is intended for the person who wants to start up a business based in a foreign country. This might be their only business or a branch of a business "back home".
|Buying a Business in a Foreign Country
This guide is about buying an already-established business or company in a foreign country. It looks at the pros and cons, as well as the process of buying a business.
|Funding your International Business
This guide is about how to obtain funding for your international business: a business based in one country but offering its services in another or a business you have set up in a 'foreign' country.
I hope you have found this guide useful. If you need any further help, please contact me.John Howell 28 August 2017
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