How Does a Nightclub Make Money?

The first thing that a club owner must do to produce a profit is to find a niche that suits a particular location. A low-key, dingy dive bar can be a hit in a college town, but an utter failure on Rodeo Drive in Beverly Hills. Certain neighborhoods may look like cash cows, but ultimately turn out to be frustrating. The wealthier communities may charge higher fees for licensing, or may be very strict about regulations than a less ritzy location. However, that wealthy town can handle top-shelf liquor prices.

The owner has to strike a balance that takes into account the clientele, customer flow and supply costs. They have to consider extras, such as whether to have a small bar menu of casual fare or no food at all. The more levels of service the club adds, the more they will have to pay for licensing, permits and staff.

Nightclubs are notoriously short-lived enterprises, especially in big cities where costs can skyrocket. Bar owners need to establish certain memes in the public's mind in order to get people in the door, and to get them coming back.

Return business can be achieved through several methods. It's well known that nightclubs attract more male customers than female. Therefore, nightclub owners have to work to strike a gender balance in the crowd. Clubs often offer free entry for women or discounted drinks; another method of gender control is the practice of requiring high-price table service for parties composed mainly of men. A further method is to vary the age of males and females, requiring men to be slightly older than women to gain entry.

A nightclub needs to stun people from the moment they enter the venue. Therefore, many clubs will resort to ornate decor, go-go dancers and performance artists to entertain guests. Big-name DJs and celebrities will also draw people in. All of these are fun, but they point to one area of the club--the bar.

Bars don't make their money off entry fees. They make it at the bar. The bells and whistles are there to attract people early on. Ultimately, a smart nightclub owner aims to get people in the door and keep them drinking as long as possible.

Many clubs will offer two-for-one drink specials before midnight. This is an easy way to get cash for several reasons. First, the discount drinks seldom contain expensive spirits. Instead, they use lower quality liquors. The club wants people to imbibe and not think twice about plunking down $3 or $5 more for the next drink that will, invariably, not be during specials hour.

Bars also know that "Can I buy you a drink?" is a common pickup line. Therefore, they may discount drinks for ladies, but seldom for men. Women rarely buy men drinks, but the reverse happens all the time.

The bar is a great money maker. Think of the price of a case of longneck beers at the liquor store. That $12.99 retail pack sells to bars for $7.99 a case wholesale. The bottles then sell to patrons for $8 in places like New York City. One bottle of beer pays for the entire twelve pack.

Nightclubs also make good profits from hosting special events. The more special events a club holds, the stronger an image it can cultivate among a particular clientele.

For instance, a club may rent out its downstairs area for $5,000 to a fashion designer for an after-show party. The designer gets staffing and some free alcohol for the cost; they may also have access to the club kitchen for catering needs.

The club, meanwhile, gets a percentage of proceeds from the bar, along with money from extras such as coat check or valet parking. A club may waive any of these fees if the event is for a benefit or non-profit, however.

The plus for the club is that some of the guests may come back. In fact, they may bring new guests. The nightclub business is one that depends on showing people a consistently good time that makes a mark in people's memories. Without that, clubs inevitably fail.