How to Start a Karaoke Bar

Part 1 - How to start a Karaoke Bar business - Background

A karaoke bar business provides a location where individuals can sing their favorite songs in front of a sympathetic audience. There are different forms of karaoke bars. Some are “open” bars in which singers perform for all of the occupants of the bar, while others provide small rooms for people to perform in with friends and family. In each case, the bar provides the music and lyrics necessary so the performer can concentrate only on singing.

Our guide is in 3 parts:

• Part 1 - How to start a Karaoke Bar business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a karaoke bar?

The costs of opening a karaoke bar can vary, starting from whether you are building from scratch or leasing an existing location. If you purchase the location you will operate from and start from scratch, your starting costs can range from $175,000 to $850,000. If you are buying an established bar that is for sale, your costs may be as low as $25,000. Why the disparity between the two? A bar starting from scratch must buy all necessary equipment. This includes dump sinks, hand sinks, three-bin sinks, drain boards, ice bins, soda guns, blender stations, speed rails, and coolers, and most importantly a karaoke machine. You will also need a point-of-sale machine system. Buying this equipment alone may cost $26,000 or more, and that is before buying tables, chairs, stools, the bar, and the karaoke machine. Getting an appropriate license may cost up to $5,000 depending on your area. It may cost about $6,000 to get the food and drink for your first month and an average of $6,000 a month to pay the rent or mortgage.

What are the ongoing expenses for a karaoke bar?

The exact amount of your operating expenses is partially contingent on the size of your staff, but some estimate that it may cost $20,000 a month to run a karaoke bar. This amount assumes about $6,000 for food and drink, $6,000 for rent, and up to $8,000 for employee salaries. All of these amounts may adjust up or down depending on region, bar size, and staff size.

Who is the target market?

While karaoke patrons come in all forms, some of your best customers will be young adults in their early to mid-20’s. This is a group that often sees karaoke as a fun form of both socializing with friends and meeting romantic partners, and things like duets offer a chance for such groups (who also have more free time and are more free with their money) to bond.

How does a karaoke bar make money?

At most karaoke bars, your primary income will come from sales of alcohol and possibly a cover charge for entry. Beyond that, the karaoke itself is typically free. The exception is if you offer separate rooms for people to perform in, in which case it is appropriate to charge a separate price for the room rental.

How much can you charge customers?

As mentioned before, the karaoke is free at most karaoke bars, and the business makes its profit from the alcohol it serves. The exact cost of different drink types and brands will vary, but is typically calculated by trying to achieve a twenty percent “pour cost” (diving a bottle of liquor, for instance, into how many drinks it will pour and divide that unit cost by a target pour cost, such as twenty percent. So, a 750ml bottle of bourbon that costs you $20 has a unit cost of $1.18 per 1.5 ounce pour. Divide that $1.18 by twenty percent to get a suggested sales price of $5.91. Finally, add the sales tax for your area (such as ten percent) and you get a cost of $6.51, which you may choose to round down to $6.50 or up to $6.99. If you are renting separate karaoke rooms, it is appropriate to charge between $45 to $90 per hour for a group.

How much profit can a karaoke bar make?

Again, the exact profit of your business can depend on various factors, but the average bar is able to make between $25,000 to $30,000 a month; assuming the previous $20,000 a month operating expenses, then you can generate $5,000 to $10,000 in profit a month, meaning that as an investment, a karaoke bar can pay for itself in a relatively short time.

How can you make your business more profitable?

When buying equipment, consider “gamifying” karaoke. There are now karaoke machines that can score singers similarly to video games such as Rock Band, which can make the experience both more familiar and more fun. Try to have an active presence among online karaoke communities to keep up with the latest trends and what participants desire. Finally, try to synergize with local events and businesses whenever you can: make sure your bar is part of community “bar crawls” and partners with local restaurants and related industries so you can advertise for one another and hold coordinating parties and other events.

Day-to-Day and Growth

What happens during a typical day at a karaoke bar?

Some of your daily activities include preparing drinks for customers, signing customers up for karaoke, and loading their chosen songs so that they can perform. Your “downtime” may be spent cleaning plates and glasses, performing maintenance on your equipment, receiving shipments of drinks, and using various accounting software programs to help manage your business.

What are some skills and experiences that will help you build a successful karaoke bar?

Any previous experience working as a bartender or bar manager is very helpful in establishing this business. Similarly, previous experience as a DJ may give you insight into the hardware and software necessary to successfully run the karaoke equipment. While certainly not required, a formal degree in a field such as business may help you in the initial stages of investing in and marketing your business.

What is the growth potential for a karaoke bar?

The growth potential for such a business is above average; the Bureau of Labor Statistics records that the field of bartending is supposed to grow by ten percent between 2014 and 2024. A karaoke bar is more specialized and may have the potential to draw more customers than a non-karaoke bar.

What are some insider tips for jump starting a karaoke bar?

Make sure you are very comfortable using DJ-style equipment to keep the karaoke equipment in good order. If possible, try to hire yourself out for small karaoke parties to get comfortable with everything before making it a full-time job. If you can afford it, hire someone to be a host/”hype man” to keep crowds energized and enthused. Finally, consider having special prizes and contests each night as a way of making guests feel special.

How and when to build a team

Unlike some businesses, you will need to start your karaoke bar with a team in place. The exact size of the team you need may vary based on the size of your bar space, but you will need to hire various shift managers, bartenders, and possibly wait staff and busboys depending on whether you serve food or not. As mentioned earlier, you may want to have separate karaoke DJs and hosts to keep that element of your business running smoothly.

Part 2 - Is a Karaoke Bar business the right fit for you?

Part 3 - Action plan to launch your Karaoke Bar business in 90 days