Bars & Nightclubs

Increasing sales can be difficult due to flat alcoholic beverage consumption. Per capita consumption of alcoholic beverages has remained relatively constant, at about 25 gallons per person annually. Declining demand for beer (the majority of the market) offsets consumption gains for wine and hard liquor. Increased public focus on responsible drinking and stricter drunk driving and underage drinking laws have helped limit demand growth.

Bars and nightclubs face competition from restaurants, hotel lounges, and customers who entertain at home. Restaurants, which offer better food options, value bar business because alcoholic drinks are especially profitable. Hotel lounges, which compete for the tourist market, may also offer entertainment and dancing. In addition, some consumers avoid the high retail markups on alcohol by drinking and entertaining at home.

Federal, state, and local government regulations can restrict a company’s operations, and changes (like earlier closing times) can significantly affect sales. Sales can decrease after a state enacts a smoking ban, a loss that struggling bars and nightclubs can't afford. Liquor law violations, particularly those involving underage drinking, can result in various penalties ranging from a stiff fine to permanent closure. In addition, excise tax increases can result in higher distributor prices, affecting profitability.