Why do wine bars fail?

It’s naive to think most restaurants and bars don’t go belly up at some point. I’ve developed a mild curiosity in the wine bar business but am treading lightly. If I ever do decide to go this career route, I’m sure it won’t be until I have piles of cash reserves to keep such a capital-intensive business afloat. When one brainstorms, I’m sure it’s all too easy to dawn the rose-colored glasses that cloud one’s view of what makes a successful business. It’s a tough game out there, especially in Chicago. I know most people fail. I want to know why they fail. Thanks!

I don’t have a background in this, but I suspect it’s no different than why other small businesses fail:

  • Under capitalized, lack of financial resources
  • Poor management, e.g. not a “hands on” owner, doesn’t understand numbers
  • Poor service
  • Failure to analyze market - bad location, competitive pressures, pricing, etc.
  • Cost management - managing cost of goods, shrink / loss prevention, wages

I used to live in Chicago years ago and had a friend tell me he recently stopped by Pops for Champagne. I was surprised that place was still open after all of these years. No idea of ownership changes, profitability, etc., but clearly they’re doing something right.

I think Scott covered it pretty well. Sometimes you can get away with bad location if you develop a following by niche marketing or changing strategies to appeal to a specific revenue source.

I think it’s obviously the bad margins.

The markup for a well drink is like 10 times for a $5 drink.

The markup for a glass of wine is like 4 times for a $20 glass of wine.

Not many people will drink too many $20 glasses of wine.

Scott has it pretty well covered.

Location Location Location is the first thing. I’m sure it’s the same in all cities, but having been in NYC for 11 years now it’s amazing how a particular spot just doesn’t work out, whether it’s a restaurant or bar, because of the location. I’ve seen storefronts at specific spots turn over 4-6 times now and nothing ever seems to work in that spot, regardless of the theme. Whether it’s bad for foot traffic, or a bit too far off the beaten path, or too big a space and it just doesn’t do enough volume to pay the rent, etc. etc.

Has anyone seen a BYOF wine bar? Perhaps focusing on a younger demographic and partnering with food trucks?

A lot of states tie in their liquor license with certain food requirements if you are on-premise versus off-premise. Breweries may not have the food requirements because they are selling their own creation, same as a winery. If you are purchasing wine through wholesalers to sell BTG to the public, you might be required to have food production on site. Maybe not, don’t know Illinois liquor law, but that may be why nobody’s done it before.

I’ve also seen some restaurants and bars in the city that sell consigned artwork. I always wondered how often a restaurant/bar moves their artwork and how much they usually take in through commissions.

Less of a revenue maker, more of a ‘contribute to the local art scene/free rotating ambiance’ vibe.

It’s also a way to decorate the walls of a business for “free,” rather than invest $$$ in the business purchase of the artwork.

A restaurant/bar that sells much of the displayed artwork is more the exception to the rule. Most people who go out for a drink and/or a bite aren’t usually
psychologically motivated to think about buying art at the same time.

Bruce

50% is the number I have heard and I know a few restaurants that do it. But it also depends on the artist and community. As mentioned above, it isn’t as much a money maker as it is a a vibe, free way to decorate and, likely most importantly, supports the local art community.

Off the top of my head, the wine shops that I know have gone out of business both did so because of 1) lack of inventory-poor inventory and 2) poor service.

JD

Well, it’s not just the margins, but the setting. If you’re in a nice restaurant setting, esp. one without BYOB, it’s easier to convince people to pony up for a $20 glass of wine (esp. if the by-the-bottle pricing is on the high side). A smaller % of your customers are wine geeks, and a $20 glass of wine is “bargain” compared to $75-$100+ bottles of wine. By contrast, in a wine bar you have a higher % of wine geeks who will know the retail price. In addition, in many restaurants you can get by on just a limited number of BTG selections; obviously that doesn’t work in a wine bar. Unless you’re constantly pouring through entire bottles in a wine bar, that’s a lot of vino that may go flat/dull after the bottle has been opened for a while.

Bruce

I think that risk has been somewhat lessened by devices such as Coravin and Pungo. Was talking to a chef and somm on Friday and they say it works great in their restaurant. If I’m a wine bar, I would be investing in some form of preservation equipment to reduce spoilage.

I like the idea of using those automated wine stations and constantly rotating out bottles. Although they are expensive out of the gate, they definitely cut down on employee payroll costs and virtually eliminate slippage and spoiled wine.

Let me throw a hypothetical out there. If you decided to rely solely on wine station machines, only selling btg, how many machines would yield a profitable outcome? I know some people think those machines are a money pit/ horrible idea, but just for s#!ts, let’s say your bar had to rely solely on them. How many bottles (each machine holds 4) would you make available and how often would you mix up your selections?

I was also thinking of putting an empty in the front window of every wine you have on tap. Every time you swap one producer for another, you’d swap the display as well. Then, with social media, you can keep your followers up-to-date on your constantly rotating wines.

Hard to tell about the wine stations. The M Hotel in Vegas has (last time I checked) 200+ wines in those machines, in one room, and presumably does well. The first place (at least in the Western US to use them was Vino Venue (in SF) and they lasted maybe 5 years IIRC. Both of those venues have(had) little staff and it seemed to work for them. Both offer(ed) small tasting pours as well as glasses.

After working with one in a setting where the concept is to act like a wine bar inside a retail shop (tables and a small food menu) I think it works just fine for BTG, but our owners feel that people expect/prefer a more personal service so we do the BTG service for most guests, so no real staffing savings. IMHO people prefer to sit if they’re drinking glasses, but are fine with standing for tasting pours (which are self-serve). I add that because I think that the tables can change the customer’s expectation of the experience. Also… most people want the personal touch of someone talking to them about the wines, so most don’t seem to like self-serve BTG.

We have one 8-bottle unit. Except for 2 or 3 “house” selections the bottles turn fairly quickly. What goes in is a combo of new items, things we know will sell better if tasted, and last bottles (not the best idea if you want to use the unit to sell wine). How long they last is mostly a function of your traffic (with a clunker now and then).

Had one of these in downtown Napa about 8 years ago. Lasted a little over a year. There was no parking near it and they had to rely on people walking/shopping downtown. They also never added anything as an attraction beyond 30 wine stations, some couches and chairs. Looked upscale but $35 for an ounce pour of Cabernet didn’t go well.

As a caveat, we are a wine bar, with the wine bar ancillary to retail and on-line sales. We also sell cigars. It is not uncommon for visitors to the valley to come and want to “taste” wines and we have to explain we are a bar. Half of them are looking for free tasting or $25 for a flight of six wines.

A local wine tasting room, (two wineries), added live music 3 nights a week and turned a dying operation into a pretty active place thursday, Friday and Saturday.

I think ‘wine bars’ are a fad. Remember Champagne bars? Pretty much extinct now.

I’d say have a strong ‘x program’ that happens to have a great wine selection. Vinyl sales are on the rise, what about a record store/coffee shop with a well curated BTG list?

Huh? Please delete.