Bar / Tavern Tenants - Pros & Cons

[David Bardwell]

I'm currently analyzing a property in a C grade neighborhood, where the 1st floor is a tavern and upstairs is 4 apartments. I would love to hear from any investors who have experience with this type of property--or any other relevant experience. There are certainly some obvious concerns, but I don't want to overlook the opportunity just because I have some preconceived notions of the headaches that may or may not ever materialize.

I'm planning to do more research on the particular bar both on social media and in public records. And I guess I might as well just show up one night for a few drinks to see what the place is like.  I'll probably stick out like a sore thumb, but that may be even more telling.

One specific area I could use help with, is knowing what questions to ask and other possible sources to pursue. 

Also, are there any special benefits that I might not be thinking of--besides maybe drinking for free :) 

Thanks!

[Joel Owens]

I am very experienced with food.

Bar the beer is very little money especially if bottled beer. Tap has some profit in it. Specialty mixed drinks is where the real money is at. Having an excellent bartender staff that makes great drinks consistently is key and does accurate pours. You do not want them using to much alcohol ratio. The patrons with too much alcohol in one mixed drink will get  buzzed too fast and not be able to have more drinks.

For food main meals there is not much profit. Profit is all in the sodas, appetizers, and desserts. If a customer gets water to drink and main meal special with nothing else then almost zero profit they are just adding to sales total.

You need to see who is guaranteeing the lease. Is it a remote LLC the bar can bankrupt and walk away? Do they own other locations backed by the lease? Do they disclose ongoing personal and business financials? How worn down is the bar? Is it old and filthy with equipment breaking down? Do they have outdated terminal equipment for sales or even worse just a written ticket system?

Is there a personal guarantee on the lease?  What is their personal liquidity and net worth to back the guarantee? What is the rent per sq ft to annual sales for the health ratio of the business?

There are many,many,many other questions I underwrite but this should get you started.