Texas has many lively cities where residents and tourists flock to enjoy a night out on the town. For this reason, it’s a great state to consider opening a bar. But, before you make that decision, it’s important to make sure you know everything that is involved with the process.
This means doing extensive research and realizing that you’ll need to set yourself apart because you are entering an extremely competitive business. Before you start, make sure you do a market analysis, look at the competition, and make sure you’re up-to-date on industry trends. Then, you’ll need to obtain the proper permits, which may include a food and beverage certificate, and the appropriate liquor license.
Getting Started With Your Bar Business
When starting any type of business, including a bar in Texas, there are specific steps to take. While you don’t need to have a business plan right off the bat, doing so can help you ensure you’re following the right path, meeting all the legal requirements, and basically giving yourself a leg up in the business.
Market Analysis and Business Plan
Your business plan outlines everything you plan to accomplish with the business of opening a bar in Texas. Here, you’ll include the financials including projected growth over a number of years. You’ll also outline the type of business you want to provide, such as strict bar service with alcohol and mixed beverages or whether you want to be upscale and take table reservations, too. Then, you’ll identify your customer base and how to advertise, such as on local commerce websites.
Doing an analysis helps you determine what there is a need for in the market. Perhaps there are dive bars and the area is in need of more entertainment venues where people can go to dance and unwind. It can also help you develop an appropriate theme such as creating nostalgia bars that draw people in with the wow factor.
Choose the Type of Establishment
As with any type of business, the first thing you must do after you’ve done your research and created your business plan is to determine based on the bar’s location if you’re going to open a regular neighborhood bar where the locals gather, a sports bar with screens playing the top games, or go more upscale and offer a venue with all of the bells and whistles like a dance floor. If you live in an area with many universities, you might be better off catering to the locale and opening a college bar.
Choose Your Business Type
Once you’ve chosen the type of establishment you’re opening, then it’s time to choose your legal business structure. You can open a sole proprietorship, a limited liability company (LLC), or a corporation. An LLC or a corporation will offer more in the vein of protection than a sole proprietorship, which when you’re opening your own bar,: forming a Texas entity is a better option because it will safeguard your personal assets, whereas a sole proprietorship does not.
Licenses and Permits You Need
Before you even begin the process of opening, you need a name, your business tax certificate, a federal tax ID number, and a Texas employer identification number so you can pay Texas employment taxes and the Internal Revenue Service. You’ll also need a business license. You can get your federal tax ID number online through the IRS, and your Texas employer identification number and your business tax certificate through the state licensing offices.
For food service establishments, if you plan to do more than just sell booze, such as serving food, you’ll need to have a local food handler’s permit, also known as a health and safety permit, which means you’ll need to have the city or county safety department visit your food business for an inspection and make sure your staff is trained on food safety.
Sales tax permits are a must because you need to pay the state and county, typically on a quarterly basis for your food or bar business. Planning to play music? Texas law requires that you have a separate license for this. You want to make sure you fulfill all the legal requirements before attempting to open a bar, otherwise you run the risk of getting shut down.
In order to sell mixed drinks, beer, wine, and alcohol, you’ll need to have a liquor license that you’ll obtain through the Texas Alcoholic Beverage Commission (TABC). It is illegal to do so without the proper TABC licenses and permits. The licensing process can take a bit of time, so be sure to get your application in early and be sure to ask for help if you need it when applying for your distilled spirits, beer, or wine permit because any mistakes can cause a delay in opening your bar in Texas.
Getting Your Liquor License
One of the most important aspects when considering how to open a bar in Texas is that you obtain the proper beverage certificate in order to offer even a single alcoholic beverage.
Three Main Tiers
There are three main tiers you’ll encounter when applying for your liquor license. They are:
- Manufacturer – This is for establishments that make their own liquor and spirits to sell to distributors and individual bars or stores. This can include craft or local beer or harder liquor.
- Distributor – This type of liquor license applies to those who are looking to buy alcohol in bulk and distribute it to area locations.
- Retailer – A retailer liquor license is for those who plan to serve alcohol and alcoholic beverages on premises or sell it directly to the consumer for consumption, whether onsite or off-site. This is the tier your business will be associated with when you apply for a TABC permit for your bar.
It’s important to know the type of permit to apply for when you’re opening a bar in Texas, because you can only hold licenses and permits in one category. If you choose the wrong one during the application process, it can set back your opening date and cost you a lot more in the long run.
The Application Process
Once you know what licenses and permits to apply for, you can begin the application process which is done through the Alcohol Industry Management System (AIMS). Through this system, you can file your application and then pay applicable fees all in one location.
The first thing you need to do is go through the onboarding system. You do this by creating an account and you can do this whether you have an existing license, are a first-time applicant, or offer licensing services.
Gathering the Necessary Paperwork
The application can take up to 90 days to process and it’s imperative that you send all of the necessary information in during this time. That means having all of your documents together and ready to go. While the type of documents you might need vary depending on the licenses and permits you’re applying for, but could include:
- Zoning permits
- Insurance documents
- Floor plans
Meeting the Criteria
All applicants for an alcohol or mixed beverage restaurant permit must meet the criteria as outlined by Texas law. These include:
- Age – Applicants must be of legal drinking age per Texas law, which is 21
- Criminal record – must be free of felonies in the past five years preceding the liquor license application
- Cannot have cross-tier interests – Applicants can only hold one type of liquor license
- Moral turpitude violations – cannot have any violations within the six months preceding the application date.
If the applicant does not meet all of these criteria, they could be denied a license.
Follow the Texas Alcoholic Beverage Code
Once you get your proper licenses and permits, it’s critical that you follow the Texas Alcoholic Beverage Code. Failure to do so can result in the suspension or revocation of your beverage certificate.
Following the code set forth by the TABC includes avoiding the following types of violations:
- Selling alcohol to minors
- Selling alcohol to patrons who are visibly intoxicated
- Selling alcohol without the proper licenses and permits
- Allowing or engaging in illegal activities on the bar location where the license is approved. This includes prostitution, drug use, or gambling.
- Selling alcohol in a private club to non-members
Not only do you risk losing your license should you violate these laws, you also run the risk of facing criminal charges brought on by the Texas government and authorities. This could mean fines, jail time, or both. Stay within the code and Texas laws at all times.
Additionally, it’s important to abide by other guidelines, including:
- Sign display – you may need to post a notice that you intend to sell alcohol on the premises. This sign needs to be visible and outdoors, and you will have to submit proof via the AIMS system that you did so. Not everyone needs to post a sign. To determine if you do or not, speaking with a liquor license attorney can help clarify.
- Specific sales hours – Texas law does not allow for the sale of liquor between 2 a.m. and 7 a.m., if you violate this, you could lose your license and face criminal charges.
In some cases, there will be community members who oppose the approval of a liquor license for some reason. In the event that this happens, you will have to defend your application at a public hearing in order to move the application process forward.
Renewing Your License
Once you have your permits, such as your mixed beverage permit, pay attention to the renewal dates. It is important that you renew your TABC liquor license and pay the applicable fees on time. You do have a small grace period, but failure to renew by the specified date will result in your license being withdrawn.
If that happens, you will have to start the process all over again from the start. This could take up to 90 days, just like the initial application, and that means during that time, you cannot do business. In addition to losing your license, you’ll also lose income and in some cases, that could result in a permanent closure.
How Much Does it Cost to Open a Bar in Texas?
It can be expensive to open a bar in Texas, because there are a number of fees including that you’ll pay for permits such as your food and beverage certificate. And then, if you’re not purchasing an existing bar, your overhead costs will be much more. Bear in mind that you’ll need to account for other expenses such as bar equipment if you’re setting up a new location that doesn’t already have it, and zoning permits if you’re building. Then, you’ll need to hire employees to keep it running and pay taxes to the state and federal governments, and sometimes the county as well. For a detailed breakdown of the expenses involved, read our comprehensive guide on the Texas liquor license cost to understand the financial aspects of obtaining a liquor license in Texas.
How Monshaugen & Van Huff, P.C. Can Help
Whether you’re just getting started as your own boss or you’re opening your tenth bar in Texas, we can help with all of your licensing and permitting needs. Call (713) 880-2992 or contact us for a free consultation.