In the US bar and nightclub industry there’s about 45,000 establishments. These establishments include single-location companies and branches of multi-location companies. Combined they have an annual revenue of almost $20 billion dollars.
Bars, unlike nightclubs, are geared more towards the customers who want to drink and watch sports with some of their buddies. Nightclubs spend a lot of their time focusing on entertainment: live music, DJs and dancing. It’s a place for people to come socialize and dance until they can’t anymore. Looking from the outside in you may think running a nightclub is a dream job and easy to do but it’s not all fun and games. Yes, beautiful people and great music surround you, but keeping your club afloat can be a very difficult job.
According to The Small Business Administration, 80% of businesses fail within the first year. Each year about one in five eating and drinking places fail within the first year of opening their business, this includes nightclubs; nightclubs can have some of the highest failure rates. Not only do nightclubs have to deal with the competition from other clubs and bars but they also face competition from hotel lounges, restaurants and of course those who enjoy entertaining at their own home.
Opening up a nightclub can be very expensive and take a lot of time and planning. Poor planning and lack of funds are some of the main reasons those in the nightclub industry fail. Usually independent operators need to be financed but banks are very reluctant when it comes to handing out money because the high failure rates associated with nightclubs. It can take up to a few hundred thousand to several million dollars upfront depending on the quality of nightclub you’d like to have.
Location is a big deal as well. You can establish an extravagant nightclub but if it’s in a horrible location it can fail majorly. For a successful nightclub your mission should be to place you’re nightclub in an area that drives traffic and doesn’t bother those living in the community, like a downtown area. I guarantee you’ll receive proper zoning from the local government and you wont have to worry about neighbors complaining about the loud music and belligerent drunks. Place events like ladies night and happy hours on a certain day of the week. It’ll surely bring in faithful customers.
Other factors that play a role in the downfall of nightclubs are potential litigation. The owner of the club is responsible for those customers that have been drinking. Any case of death or injury can be placed on the bar and end in a lawsuit. There’s also the possibility of theft within the business, which can cause debt.