Problems a Nightclub May Encounter
To those considering the business, the glitzy decor, music, drinks and people dressed up for a night on the town might make a nightclub owner's job seem more fun than work. In reality, however, nightclub owners face a range of potential problems and must work hard to combat them while providing each guest with a favorable experience. This business requires not only a flair for entertainment but also good business, management and marketing skills.
Sometimes cash flow can become a problem for a nightclub. This might happen because of poor marketing strategies or slow nights. For example, if a nightclub is open Thursday through Saturday night, but only reaches its income goal on Friday and Saturday night, it might have trouble paying its bills. However, cutting out the additional night may not prove an option, as doing so could make it hard to compete with other clubs that do operate on Thursday night. In addition, owners might face cash flow problems when their target market chooses other entertainment options, including attending other nightclubs or drinking at home.
In some cases, the combination of alcoholic beverages and crowds can take a violent turn. As such, nightclubs usually have to employ bouncers to help with crowd control and to remove drunk or disorderly individuals from the premises. A nightclub owner might also deal with such issues as people bringing weapons into the building. To deal with this, some nightclub owners install metal detectors or instruct employees to search each guest for weapons prior to admittance. In addition, many nightclub owners hire off-duty police officers to provide additional security, which adds to the overall costs of running this type of business.
Nightclub owners have to put measures in place to prevent illegal behavior. For example, underage individuals might try to use fake IDs to gain entry to the nightclub or to buy alcoholic beverages before they turn 21. Likewise, nightclub customers might attempt to smuggle drugs onto the premises and use or sell them on the grounds. Owners face the balancing act of ensuring that their clubs provide fun and entertainment while upholding local laws. If owners willfully serve underage drinkers, they risk the loss of their liquor licenses, fines and possibly even criminal prosecution. Likewise, allowing guests to sell or use drugs on the premises can lead to criminal prosecution, fines and the shutdown of the club.
No nightclub experiences success based on the owner's efforts alone. Instead, a successful nightclub requires managers, bartenders, hosts, waiters and waitresses, doormen and DJs. If the club serves food, the staff must include chefs, dishwashers and busboys as well. Sometimes these businesses have a high turnover rate, and finding and training new people can prove an ongoing challenge. In addition, owners have to focus on choosing the best people for each job. A slow bartender, for example, might annoy customers and make them less likely to return.
Nightclub owners often face significant insurance premiums and need several different types of coverage. In general, nightclubs need property, general liability and liquor liability insurance. These types of insurance provide coverage in the event of property damage, personal injury and damages that could result if a guest drinks too much and then causes an accident. Most nightclubs also need worker's compensation insurance, which provides protection in case employees suffer injuries on the job, and business interruption insurance, which helps replace lost income if the nightclub must cease operations temporarily. Often, nightclub owners also seek commercial crime insurance, which provides coverage in the event of fraud, forgery, theft or robbery.