How profitable is a pub establishment?

Data provided here comes from our team of experts who have been working on business plan for a pub establishment. Furthermore, an industry specialist has reviewed and approved the final article.

pub profitabilityWhat is the average profitability of a pub establishment, and what income can one expect from running a pub?

Let's check together.

Revenue metrics of a pub establishment

How does a pub establishment makes money?

A pub makes money by selling food and drinks.

What are the common products sold in pub establishments?

Pub establishments commonly sell a variety of alcoholic and non-alcoholic beverages, including beer, wine, cocktails, and spirits like whiskey, vodka, and rum.

These beverages are often served in various sizes and styles, catering to different preferences. Alongside drinks, pub menus frequently offer a range of pub-style food items such as burgers, fries, sandwiches, chicken wings, nachos, and other finger foods that complement the drinking experience.

Some pubs also provide heartier fare like steaks, salads, and pasta dishes.

Snacks like peanuts, pretzels, and popcorn might be available at the bar. In some cases, pub-goers can find specialty or craft beers, showcasing local or unique flavors.

Additionally, many pubs offer non-alcoholic options like soda, juice, and mocktails for those who don't consume alcohol or prefer a lighter option.

What about the prices?

In a typical pub establishment, the prices of items can vary widely depending on factors such as location, type of pub, and the quality of offerings.

Generally, non-alcoholic beverages like sodas, juices, and water might range from $2 to $5. Basic draft beers often fall between $4 and $8, while bottled or craft beers can go from $5 to $12 or even higher. Wine by the glass could be priced around $6 to $12, while cocktails, which are more complex and can include premium spirits, might range from $8 to $15.

When it comes to pub food, appetizers like fries or nachos might range from $4 to $10, while burgers and sandwiches could fall between $8 and $15.

More elaborate dishes, such as steak or seafood, could start from $15 and go upwards of $30 or more.

Item Price Range ($)
Non-Alcoholic Beverages $2 - $5
Basic Draft Beers $4 - $8
Bottled/Craft Beers $5 - $12+
Wine by the Glass $6 - $12
Cocktails $8 - $15
Appetizers $4 - $10
Burgers/Sandwiches $8 - $15
Steak/Seafood $15 - $30+

business plan tavernWho are the customers of a pub establishment?

A pub establishment can have customers of varying ages, interests, and backgrounds.

Which segments?

We've made many business plans for projects like this. These are the groups of customers we usually see.

Customer segment Description Preferences How to find them
Young Professionals Individuals in their 20s and 30s, working professionals seeking after-work relaxation and socialization. Craft beers, cocktails, trendy ambiance, live music, social games. Advertise on social media platforms, partner with local businesses, host networking events.
Students College and university students looking for affordable hangout spots. Student discounts, cheap drinks, pub grub, popular music. Collaborate with nearby educational institutions, promote during exam breaks.
Sports Enthusiasts Fans who want to watch live sports events in a lively atmosphere. Large screens, sports-themed decor, beer towers, game-day specials. Advertise during major sports events, partner with local sports clubs.
Tourists Visitors and travelers looking for local experiences. Local brews, traditional food, welcoming atmosphere, local music. List on travel websites, collaborate with hotels and tourist attractions.
Couples People seeking a romantic and cozy setting for dates. Candlelit tables, specialty cocktails, soft music, intimate seating. Offer date-night packages, collaborate with event planners, promote on dating apps.

How much they spend?

When examining the financial dynamics of running a pub, we observe that customers generally spend between $20 to $50 per visit. This expenditure encompasses what might be spent on drinks, food, and any applicable entertainment services provided by the pub.

Frequency of visits can vary widely depending on the customer's social habits and the pub's appeal and programming, but a reasonable range to consider is that a regular might visit once a week to once a month. This range accommodates both the more casual patrons and the dedicated regulars.

Calculating an average customer's lifetime value involves considering their habits over a span of time, such as a year. If a customer visits once a week spending $20, their annual expenditure is $1,040 (52x20). Conversely, if they visit just once a month spending $50, they would spend $600 annually (12x50). So, the lifetime value over a year could range from $600 to $1,040.

Considering these factors, we can deduce that an average regular customer might bring in around $800 in revenue per year to the pub. This figure strikes a balance between the various types of patrons.

(Disclaimer: the numbers provided above are estimates based on averages and generalized behaviors. Individual customer spending habits and visit frequency can vary significantly, thereby impacting the specific financials of any given pub establishment.)

Which type(s) of customer(s) to target?

It's something to have in mind when you're writing the business plan for your pub establishment.

The most profitable customers for a pub establishment are often those in the age range of 25 to 45, as they tend to have more disposable income and a higher likelihood of frequenting pubs.

Additionally, customers who visit the pub during peak hours and weekends contribute significantly to profits due to higher spending.

To target and attract them, the pub should focus on creating a vibrant and welcoming atmosphere, offering a variety of quality beverages and food options, and hosting events like live music or themed nights that cater to their preferences. Marketing efforts should include social media promotions and targeted advertising to reach this demographic effectively.

To retain these customers, providing excellent customer service, maintaining consistency in food and drink quality, and offering loyalty programs or special discounts for regulars can help build a loyal customer base that continues to choose your pub for their entertainment needs.

What is the average revenue of a pub?

The average monthly revenue for a pub varies widely, typically falling between $5,000 and $50,000, depending on several factors such as location, size, and services offered. Here's a detailed breakdown.

You can also estimate potential revenue for your own establishment, using different assumptions, with a financial plan tailored for a pub.

Case 1: A cozy, local pub in a small town

Average monthly revenue: $5,000

This type of pub is often a quaint, family-owned establishment located in a small town. It doesn't accommodate a large number of patrons, possibly serving around 50-100 regulars throughout the month.

Such pubs typically don't offer a wide variety of services. Their revenue comes primarily from selling beverages, and perhaps a limited selection of pub food. The ambiance is casual, with little emphasis on extravagant decor or live entertainment.

Assuming an average spending of $50 per customer and a consistent clientele of 100 patrons per month, the revenue for this small local pub would be approximately $5,000 monthly.

Case 2: A popular pub in the city's nightlife district

Average monthly revenue: $25,000

Positioned in the heart of the city, this type of pub attracts a much larger and diverse crowd, thanks to its prime location in the urban nightlife scene. It caters to several hundred customers per month, potentially up to 1,000, especially on weekends.

Unlike the small-town pub, this establishment offers a broader range of services. Besides an extensive menu of drinks, it may serve a full dining menu, host live music, or offer pub quizzes and other forms of entertainment. It's a place not just for a drink, but for an experience.

With customers likely spending more due to the wider range of offerings, average expenditure might be around $100 per visit, including food, drinks, and entertainment. If the pub attracts 250 customers per week, it could generate monthly revenue of $25,000.

Case 3: A high-end, themed pub with unique offerings

Average monthly revenue: $50,000

This pub represents the upper echelon of the industry, often located in an affluent part of the city or in a trendy area. It stands out with its unique theme, sophisticated interior design, and an exclusive range of beverages, including rare or craft products.

Beyond standard pub fare, it may offer gourmet food, curated live performances, and even membership options for special services. This pub targets a clientele that comes for the ambiance and stays for the exclusivity.

Given the upscale nature, customers might spend $150 or more per visit. The establishment could be serving over 300 customers per week, taking into account busier nights and special events. Thus, with consistent traffic, this premier pub could be looking at a monthly revenue of $50,000 or more.

It's important to note that these figures are estimations and actual revenues can vary based on a multitude of factors including operational costs, customer spending habits, and economic conditions.

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The profitability metrics of a pub establishment

What are the expenses of a pub establishment?

Pub establishment expenses include alcohol inventory, bar equipment, rent or lease payments for the pub, staff wages, and marketing efforts.

Category Examples of Expenses Average Monthly Cost (Range in $) Tips to Reduce Expenses
Alcoholic Beverages Beer, wine, spirits, kegs $5,000 - $10,000 Source directly from breweries, optimize inventory management
Food Costs Ingredients, groceries, kitchen supplies $4,000 - $8,000 Source ingredients locally, reduce food waste, negotiate with suppliers
Labor Costs Salaries, wages, benefits, payroll taxes $10,000 - $20,000 Optimize staffing levels, cross-train employees, offer performance incentives
Rent and Lease Pub space, kitchen equipment lease $4,000 - $8,000 Negotiate lease terms, consider energy-efficient equipment
Utilities Electricity, water, gas, internet $1,000 - $2,500 Monitor utility usage, upgrade to energy-efficient appliances
Insurance Property, liability, workers' compensation $500 - $1,500 Shop around for insurance providers, implement safety measures
Marketing and Promotion Advertising, events, social media marketing $1,000 - $3,000 Focus on digital marketing, collaborate with local businesses, offer loyalty programs
Maintenance and Repairs Equipment maintenance, facility repairs $500 - $1,500 Maintain equipment regularly, address issues promptly
License and Permits Liquor license, health permits, entertainment licenses $500 - $2,000 Stay compliant with regulations, renew permits on time
Entertainment Live music, trivia nights, game tables $1,000 - $3,000 Optimize entertainment options based on customer preferences, seek local talent
Miscellaneous POS system fees, professional services, supplies $500 - $1,500 Review contracts, explore cost-effective alternatives

When is a a pub establishment profitable?

The breakevenpoint

A pub becomes profitable when its total revenue exceeds its total fixed costs.

In simpler terms, it starts making a profit when the money it earns from selling drinks, food, and possibly hosting events, becomes greater than the expenses it incurs for rent, beverages, salaries, and other operating costs.

This means that the pub has reached a point where it covers all its fixed expenses and starts generating income; we call this the breakeven point.

Consider an example of a pub where the monthly fixed costs typically amount to approximately $15,000.

A rough estimate for the breakeven point of a pub would then be around $15,000 (since it's the total fixed cost to cover), or selling between 1500 to 3000 pints per month, assuming the price per pint ranges from $5 to $10. This doesn’t include revenue from food sales, which can also help reach the breakeven point quicker.

You have to know that this indicator can vary widely depending on factors such as location, size, pricing, operational costs, and competition. A large, central pub would obviously have a higher breakeven point than a small one that doesn't require much revenue to cover their expenses.

Curious about the profitability of your pub? Try out our user-friendly financial plan crafted for pub businesses. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.

Biggest threats to profitability

The biggest threats to profitability for a pub establishment often revolve around rising operational costs, fluctuating customer demand, and competitive pressures.

Rising costs, such as rent, utilities, and staff wages, can eat into profits, making it challenging to maintain healthy margins.

Additionally, changes in customer preferences or economic downturns can lead to unpredictable fluctuations in foot traffic, impacting sales.

Intense competition from other pubs and alternative entertainment options can also divert potential patrons.

Failing to manage these challenges effectively, maintain a loyal customer base, and adapt to changing trends can jeopardize a pub's profitability in the long run.

These threats are often included in the SWOT analysis for a pub establishment.

What are the margins of a pub?

Gross margins and net margins are key financial metrics used to assess the profitability of a pub business.

The gross margin represents the difference between the revenue earned from selling food, beverages, and possibly other services, and the direct costs associated with creating those offerings.

Essentially, it's the profit remaining after deducting the costs directly tied to the operational aspect of the pub, like purchasing drinks, food ingredients, staff wages, and utilities.

Net margin, conversely, incorporates all expenses the pub incurs, including indirect costs such as administrative expenses, advertising, rent, and taxes.

The net margin offers a more comprehensive insight into the pub's financial health, encompassing both the direct and indirect costs.

Gross margins

Pubs generally have an average gross margin between 60% and 80%.

For instance, if your pub generates $20,000 per month, your gross profit would be roughly 70% x $20,000 = $14,000.

Let's illustrate this with an example.

Consider a pub that sells 1,000 pints of beer in a month, with each pint priced at $5, leading to a total revenue of $5,000.

However, the pub incurs direct costs such as purchasing beer, paying for bartenders, and utilities. If these costs amount to $2,000, the pub's gross profit equates to $5,000 - $2,000 = $3,000.

Consequently, the gross margin for the pub is $3,000 / $5,000 = 60%.

Net margins

Pubs usually have an average net margin from 15% to 35%.

In simple terms, if your pub brings in $20,000 per month, the net profit would likely be around $4,000, representing 20% of the total revenue.

Using the same example for consistency, imagine the pub has a total revenue of $5,000 from beer sales.

The direct costs were previously calculated at $2,000.

On top of this, the pub incurs additional indirect costs such as marketing, insurance, licensing fees, taxes, and rent. Assuming these indirect costs come to $1,300.

After deducting both direct and indirect expenses, the pub's net profit is $5,000 - $2,000 - $1,300 = $1,700.

Thus, the net margin for the pub is $1,700 / $5,000, equating to 34%.

As a pub owner, comprehending the net margin (in comparison to the gross margin) is crucial as it elucidates the actual earnings of your establishment, accounting for the entire spectrum of costs and expenses incurred.

business plan pub establishment

At the end, how much can you make as a pub owner?

Understanding that the net margin is key to deciphering your pub's profitability is crucial. It essentially shows what’s remaining after covering all operating expenses.

Your earnings are significantly influenced by your execution quality and management efficiency.

Struggling pub owner

Makes $1,500 per month

Envision a small pub, possibly starting with minimal investment, standard beverages, limited marketing, and perhaps not the most desirable location. Such conditions could limit your total revenue, maybe capping it at around $10,000 monthly.

If expenses aren't kept in check, which is often the case with establishments not leveraging bulk purchase discounts or efficient staffing, the net margin might not exceed 15%.

Consequently, this would leave you with meager monthly earnings, likely around $1,500 (15% of $10,000). This isn't an encouraging scenario for any pub owner.

Average pub owner

Makes $7,500 per month

Now, consider a more strategically located pub with a decent ambiance, a good selection of drinks, some live entertainment, and a bit of marketing thrown into the mix. These factors could boost your total revenue to, say, $40,000.

If you manage your operational costs effectively, perhaps through smart supply chain management and energy cost reductions, you might be able to secure a net margin of around 25%.

This scenario could see you drawing monthly earnings of about $7,500 (25% of $30,000), representing a typical outcome for a pub owner who's doing things right but without any exceptional strategies.

Successful pub owner

Makes $50,000 per month

Finally, imagine a pub that's become the talk of the town. You've invested in a prime location, diversified into gourmet food, crafted drinks, themed nights, special events, and perhaps even merchandise. Strong community engagement and strategic marketing might elevate your monthly revenue to a stellar $200,000.

Suppose you're savvy with your finances, negotiating hard with suppliers, innovating in energy usage, and optimizing staff costs without compromising on service quality. In that case, you could achieve an impressive net margin of 40%.

In such an ideal scenario, your monthly take-home could be a whopping $50,000 (40% of $125,000). This level of success requires not only hard work and smart strategies but also a passion for the hospitality industry and a deep connection with your community.

Your journey to becoming a thriving pub owner starts with a solid, comprehensive business plan, a clear vision, and relentless dedication to customer satisfaction. Cheers to your success!

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