72241 Bars & Nightclubs in the US Industry Report

WWW.IBISWORLD.COM Bars & Nightclubs in the US September 2014 1

IBISWorld Industry Report 72241Bars & Nightclubs in the USSeptember 2014 Andy Brennan

Drink up: Revenue will stay strong as consumer spending increases

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4 Industry at a Glance

5 Industry Performance5 Executive Summary

5 Key External Drivers

7 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13 Products & Markets13 Supply Chain

13 Products & Services

14 Demand Determinants

14 Major Markets

15 International Trade

16 Business Locations

18 Competitive Landscape18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

20 Basis of Competition

21 Barriers to Entry

21 Industry Globalization

22 Major Companies

23 Operating Conditions23 Capital Intensity

24 Technology & Systems

25 Revenue Volatility

26 Regulation & Policy

27 Industry Assistance

28 Key Statistics28 Industry Data

28 Annual Change

28 Key Ratios

29 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


This industry includes bars, taverns, pubs, lounges, nightclubs and other drinking places that primarily prepare and serve

alcoholic beverages for immediate consumption. These establishments may also provide limited food services.

The primary activities of this industry are

Operating licensed bars

Operating nightclubs

Operating wine bars

Operating licensed establishments with limited food service

44531 Beer, Wine & Liquor Stores in the USThese establishments primarily retail packaged alcoholic beverages not for immediate consumption on the premises.

72211a Chain Restaurants in the USThese establishments primarily prepare and serve food and alcoholic beverages to patrons who order and are served while seated and pay after eating.

72211b Single Location Full-Service Restaurants in the USThese establishments engage in preparing and serving alcoholic beverages and providing food services to patrons who order and are served while seated and pay after eating.

81341 Civic, Social & Youth Organizations in the USThese establishments promote the civic and social interests of their members and may operate bars or restaurants for members.

72221b Coffee & Snack Shops in the USThese establishments primarily serve alcoholic beverages and provide food services to patrons who generally pay before eating.

72221a Fast Food Restaurants in the USThese establishments primarily prepare and serve alcoholic beverages and provide food services to patrons who generally pay before eating.

Industry Definition

Main Activities

Similar Industries

About this Industry

The major products and services in this industry are

Admissions to special events and nightclubs, including cover charges

Sale of beer and ale

Sale of distilled spirit drinks

Sale of meals and nonalcoholic beverages

Sale of wine drinks

Other (accommodation, cigarettes, rentals and packaged liquor)


About this Industry

For additional information on this industry

www.ttb.gov Alcohol and Tobacco Tax and Trade Bureau

www.ablusa.org American Beverage Licensees

www.discus.org Distilled Spirits Council of the United States

www.nciaa.com National Club Industry Association of America

www.nightclub.com Nightclub & Bar Magazine

www.census.gov US Census Bureau

Additional Resources

IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com


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2008 10 12 14 16 18Year

Consumer spending

SOURCE: WWW.IBISWORLD.COM

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2006 08 10 12 14 16 18Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2014)

36.4%Sale of beer and ale

2.4%Admissions to special events and nightclubs, including cover charges

32.5%Sale of distilled spirit drinks

11.4%Other (accommodation, cigarettes,

rentals and packaged liquor)

10.4%Sale of meals and

nonalcoholic beverages

6.9%Sale of wine

drinks


Key Statistics Snapshot

Industry at a GlanceBars & Nightclubs in 2014

Industry Structure Life Cycle Stage MatureRevenue Volatility Low

Capital Intensity Medium

Industry Assistance Low

Concentration Level Low

Regulation Level Heavy

Technology Change Low

Barriers to Entry Low

Industry Globalization Low

Competition Level High

Revenue

$23.5bnProfit

$1.4bnWages

$5.6bnBusinesses

69,391

Annual Growth 14-19

2.1%Annual Growth 09-14

1.4%

Key External DriversConsumer spendingConsumer Confidence IndexPer capita expenditure on alcoholHealthy eating index

Market ShareThere are no Major Players in this industry

p. 22

p. 5

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 28



Key External Drivers Consumer spendingConsumer spending measures the total amount Americans spend on services, new goods and net purchases of used goods, both domestically and abroad. Changes in overall consumer spending are significant because they reflect specific trends, including alcohol spending. Consumer spending is expected to increase during 2014, representing a potential opportunity for the industry.

Consumer Confidence IndexChanges in consumer sentiment significantly impact household discretionary expenditure, including

expenditure on entertainment and liquor, particularly outside of the home. As consumer sentiment increases, households are more likely to increase discretionary spending in bars and nightclubs. Consumer sentiment is expected to increase during 2014.

Per capita expenditure on alcoholAttitudes toward general alcohol consumption, the type of alcohol being consumed and where alcohol is being consumed (e.g. at home or at a bar) are changing. Binge drinking, particularly among the younger generation, is now an area of particular concern for the

Executive Summary

Having emerged from the recession relatively unharmed, the Bars and Nightclubs industry turned around in 2010 and has continued to make strides over the past five years. Revenue growth has been slow, however, hampered by shaky consumer confidence and stubbornly high unemployment, meaning people have been more content to drink at home rather than at bars or nightclubs. The industry is expected to grow 1.4% per year on average to $23.5 billion over the

five years to 2014. Industry revenue is expected to grow by 2.8% in 2014 alone as consumer confidence and disposable income pick up, allowing people to spend more of their pay at bars and nightclubs.

Bars and nightclub operators have attempted to respond to lackluster growth by diversifying into a range of new concepts such as wine bars, cocktail lounges and brewpubs to attract new demographics. New operators are consistently entering the industry to

satisfy new consumer trends. As a result, the industry has become more fragmented as drinking establishments cater to a larger range of niche markets. Many of the remaining establishments have adapted their menus and entertainment offerings to accommodate consumer tastes. While per capita expenditure on alcohol is expected to rise at an annualized rate of 1.4% over five years to 2014, a rising number of consumers prefer drinking packaged beverages at home rather than alcoholic beverages at clubs or bars.

Over the five years to 2019, the industry is projected to continue facing competition from in-home alcohol consumption and nonindustry establishments that also serve alcohol, such as restaurants. In spite of these factors, the industrys financial performance is forecast to strengthen as the economy improves and consumer spending increases. Bars will continue to introduce healthier and upscale products like craft beer and organic food to their menus. In the five years to 2019, industry revenue is forecast to increase at an annualized rate of 2.1% to $26.1 billion.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

New operators are consistently entering the industry to satisfy new consumer trends


Industry Performance

Key External Driverscontinued

government, and regulatory constraints relating to excessive alcohol consumption are increasing for industry operators. Decreasing alcohol consumption negatively affects demand for bars and nightclubs. Per capita expenditure on alcohol is expected to increase slowly over 2014, but still represents a potential long-term threat to the industry.

Healthy eating indexThe current Dietary Guidelines for Americans set forth by the US

Department of Agriculture (USDA) recommend that women do not consume more than one alcoholic drink per day and that men do not consume more than two alcoholic drinks per day. Alcohol is listed by the USDA as one of the highest-calorie beverages consumed by adults. Consequently, demand for industry products is inversely correlated with the healthy eating index. The healthy eating index is expected to increase in 2014.

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Per capita expenditure on alcohol


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Consumer spending



Go out or stay home? Personal income and entertainment needs drive demand for the Bars and Nightclubs industry. Per capita disposable income is expected to increase 1.0% per year on average over the five years to 2014, after declining 1.3% in 2009, the first such decline in more than a decade. As a result, consumer spending has increased 2.3% per year on average over the past five years as consumers have begun splashing out on discretionary purchases thanks to rising incomes. Still, growth in both spending and household incomes has been much slower than prior to the recession, in part because consumers have been wary of the economic outlook. Some consumers have become more selective about how they spend their

disposable incomes and are now more likely to drink alcoholic beverages at home instead of visiting bars and other drinking establishments. This has been, in part, a reflection of the price paid for alcohol at different locations. Between 2004 and 2014, the price of alcohol purchased at retail stores increased 17.7% compared to a 41.6% rise of the price of alcohol purchased at bars, according to the Department of Labor Statistics.

Consumption trends After peaking in 1981, per capita alcohol consumption slowly declined until the mid-1990s, before undergoing a brief resurgence. Over the past five years, per capita alcohol consumption has remained flat, reflecting increased awareness of the harmful effects of overdrinking and zero tolerance laws in some states regarding underage drinking. Stricter laws for drunk driving and public intoxication have also influenced consumption patterns, and industry revenue has been

hurt by an alcohol consumption trend toward consuming wine, spirits and ready-to-drink products at home or in other licensed venues instead of drinking at the bar.

Rising consumer interest in higher quality food and beverages (known broadly as premiumization) has helped boost the industry as hundreds of gastropubs, brewpubs, wine bars and other establishments with a focus on quality have opened at the expense of

The Bars and Nightclubs industry has performed modestly over the past five years as the negative consequences of slow economic recovery have weighed on the minds of consumers. Consumer drinking patterns have also changed, forcing seasoned bar operators to adapt their menus to suit changing consumer tastes. Although industry revenue has increased in every year since 2009, as the economy has recovered and consumer spending rates have steadily increased, growth has

been slow as delicate consumer confidence has meant spending per customer has only just managed to reach its prerecession high. Much of the industrys growth has been due to rising alcohol prices, rather than higher volume. IBISWorld expects industry revenue to grow at an annualized rate of 1.4% over the five years to 2014 to $23.5 billion. In 2014, the industry is expected to grow 2.8% as broader economic conditions continue to improve, driving consumer spending.

Current Performance

Some consumers are more likely to drink at home, rather than visiting bars



Consumption trendscontinued

traditional dive bars and sports bars. The rising popularity of craft beer, cider, specialty cocktails and wine has helped sustain the industry. No longer a beer alternative limited only to local brewpubs and small-time hobbyists, the craft beer has emerged as one of the fastest-growing alcoholic beverage industries in the United States. Consumers have increasingly purchased

craft beer for its perceived higher quality, greater attention to detail, finer ingredients and wider variety of flavors than traditional light beers. Likewise, the market for hard cider, once considered a niche alcoholic beverage industries relegated to local cider houses across New England, has grown into a major competitive force in the market for alcoholic beverages.

Downsizing The number of industry establishments has declined over the past five years as unprofitable businesses exited the industry in response to a sustained period of decline or low revenue growth. Most bar operators can usually ride out tough economic times by reducing labor costs or operating hours. However, many businesses could not fully recover from the recession and were forced to close up shop altogether. As a result, the number of industry establishments is expected to decline 0.6% per year on average to 70,042 over the five years to 2014. Profit margins increased over the past five years,

but remained low as a percentage of revenue as the industry has remained highly competitive. At the same time, industry employment has declined at an average annual rate of 0.2% to 371,989, as operators have been forced to seek ways to reduce operating costs such as labor.

Many businesses could not fully recover from the recession and were forced to close



Beer, wine and premiumization

The craft beer trend represents an opportunity for the industry. Microbrewers have experienced double-digit growth over the past five years as younger demographics are increasingly taking to beers with fuller flavors. Cider is also growing rapidly in popularity with millennials (those born in the 1980s and early 2000s), and many operators may decide to diversify their offerings to include more craft beers and ciders on menus. However, small- to medium- sized restaurants that offer a greater range of food services will compete with bars for market share. Competition will remain fierce and serve to keep operators innovating to serve constantly evolving consumer preferences.

Interest in local and imported wines is forecast to grow over the five-year period.

Growing interest in wine among millennials, who represent a larger portion of demand than baby boomers (those born between 1946 and 1964), will also drive growth in this segment. Future wine drinkers embracing high-priced wines will also benefit wine bars and wine sales at drinking establishments.

Furthermore, demand for liquor and spirits is expected to grow over the next five years, largely due to continued premiumization and a resilient cocktail culture. To perform well, establishments will need to anticipate and respond quickly to cocktail trends. Bars and nightclubs that continue to identify niches and adapt their drink menus to meet consumer demand and changing customer tastes will ensure steady business, regardless of market conditions.

Industry Outlook

Bar and nightclub owners will reap the rewards of increasing household incomes and consumer spending over the next five years. Consumer spending is projected to grow 2.8% per year on average over the five years to 2019. The industry will benefit from an improving economy, lower unemployment rates and increased discretionary spending. Alcohol consumption is expected to increase only minimally as moderate alcohol consumption remains an accepted part of the American adult lifestyle. Despite this, the movement toward premium beverage consumption will continue as the economic recovery supports the average persons disposable income. As a result of these trends, industry revenue is

expected to grow at an annualized rate of 2.1% to $26.1 billion by 2019.

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2006 08 10 12 14 16 18Year

Industry revenue




Future risks Lingering concerns over a possible rise in binge drinking rates, particularly among young adults, could place the industry under increased government scrutiny. Data from the US Department of Health indicates that the highest prevalence of binge and heavy drinking occurs in young adults between the ages of 18 to 25, peaking at 21 years old. More than one third of young adults are classified as binge drinkers. As a result, further restrictions on alcohol sales and promotions could be placed on the industry to combat binge drinking. These restrictions may include controls over the

sale of kegs, happy hour promotions, beer sales of pitchers and large containers and alcohol advertising, limiting potential revenue growth. However, it is unlikely that alcohol laws will change significantly during this period, especially with lobby groups influencing both sides.

Establishments to expand

Industry employment is forecast to increase marginally, at an average annual rate of 0.3% to 376,874 people over the five years to 2019, as labor remains an important component of the industrys cost structure. IBISWorld projects only a marginal improvement in industry profitability through 2019. Profit margins will continue to be tight due to ongoing competition within the industry and from other licensed premises that sell alcoholic beverages, such as restaurants. Over the period, consumers will increasingly seek a leisurely drinking experience and demand the wide menu options restaurants provide with their drinks.

As a result of increased demand, new bars and restaurants are expected to open. While some areas of the industry have reached or are approaching their saturation point, there is still plenty of room for growth, especially in medium-size cities with above average economic growth. Traditional bars that have not updated their concept in years face the biggest threat as small, intimate settings that provide a casual ambience have become increasingly popular with consumers. For these reasons, establishment numbers are expected to increase 1.2% over the five years to 2019 to 74,475. Furthermore, the industry will continue to remain fragmented and no major consolidation is expected.

Concerns about binge drinking rates could place the industry under government scrutiny


Industry PerformanceAlcohol consumption patterns are shifting toward drinking packaged forms at home and away from on-premise consumptionThe gradual aging of the population will result in a fall in overall alcohol consumptionThe industrys contribution to the economy is slowing

Life Cycle Stage


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% Growth in number of establishments

-10 -5 0 5 10 15 20

DeclineShrinking economicimportance

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a Mature Industry

Revenue grows at same pace as economyCompany numbers stabilize; M&A stageEstablished technology & processesTotal market acceptance of product & brandRationalization of low margin products & brands

Beer, Wine & Liquor StoresEgg & Poultry Wholesaling

Chain RestaurantsFish & Seafood Wholesaling

Bars & Nightclubs



Industry Life Cycle The Bars and Nightclubs industry is in a mature phase of its life cycle. This is due to stagnant growth in per capita alcohol consumption and changing consumer preferences toward at-home consumption. The industry is highly competitive and is facing increased competition from other industries, such as casinos, full-service restaurants, as well as establishments that sell packaged alcohol, such as supermarkets and convenience stores. Alcohol consumption patterns are shifting toward drinking out of bottles and cans at home, especially wine and imported beer. The number of industry establishments is expected to grow at an average rate of just 0.3% per year over the 10 years to 2019.

Over the 10 years to 2019, industry value added (IVA), which measures an industrys contribution to GDP, is

expected to grow at an average annual rate of 1.8%, lower than average annual GDP growth of 2.5% over the same period. The industrys lower contribution to the US economy and increasing competition indicates that the industry is mature.

In response to flat revenue growth, some segments of the industry are transforming to focus on higher quality drink and food offerings with higher margins, as well as trying to appeal to families and younger patrons. Gluten free and organic food is now commonly found on bar menus and craft beer is increasingly served on tap. In many cities, traditional establishments, such as Irish bars, are making way for upscale cocktail bars and wine bars. The industry is expected to become increasingly fragmented to serve a greater number of niche segments.

This industry is Mature


Products & Services

Sales of liquor, wine and beerThe overwhelming majority of industry revenue stems from alcoholic beverage sales, accounting for about 75.0% of the total. IBISWorld estimates that distilled spirit sales account for about 32.5% of total revenue, while beer and ale account for 36.4% of sales. Wine accounts for 6.9% of sales. Sales of packaged alcohol account for less than 2.0% of revenue. Over the past ten years, there has been a general decline in the proportion of alcohol-related revenue derived from

beer and ale, though this trend has been offset by increasing consumption of wine, distilled and mixed spirit drinks.

This segment is highly sensitive to economic factors which affect the on-premise consumption of alcohol. During the past five years, consumers became more selective about how they spent their disposable income. Consumer spending declined and discretionary leisure activities like visiting bars, nightclubs and drinking establishments were reduced or cut out. Some consumers

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

9901 Consumers in the US The overwhelming majority of revenue is derived from households.

KEY SELLING INDUSTRIES

42444 Egg & Poultry Wholesaling in the US This industry supplies poultry for menus.

42446 Fish & Seafood Wholesaling in the US This industry supplies fish and seafood for menus.

42447 Beef & Pork Wholesaling in the US This industry supplies meats for menus.

42481 Beer Wholesaling in the US This industry supplies beer and ale.

42482 Wine & Spirits Wholesaling in the US This industry supplies wines and distilled spirits.

Supply Chain

Products and services segmentation (2014)

Total $23.5bn

36.4%Sale of beer and ale

2.4%Admissions to special events and nightclubs, including cover charges

32.5%Sale of distilled spirit drinks

11.4%Other (accommodation, cigarettes,

rentals and packaged liquor)

10.4%Sale of meals and

nonalcoholic beverages

6.9%Sale of wine

drinks



Products & Markets

Major Markets Over 90.0% percent of the total revenue earned by bars, nightclubs and drinking establishments is derived from households. The biggest spenders on

alcohol per capita, according to the US Census Bureau, are those aged 34 years and younger. However, due to the size of the population aged between 45 and 54,

DemandDeterminants

Income and expenditureThis industry is sensitive to factors that affect the growth in household disposable income, because drinking at bars and nightclubs is usually discretionary (as opposed to necessary). Household disposable income growth is affected by changes in labor market growth (i.e. employment rates), tax and interest rates, gas prices. The decline in industry revenue during the recent recession illustrates the extent to which the industrys performance relies on growing income, high consumer confidence and a robust economy. Low consumer confidence, anemic growth in disposable income and rising unemployment lead to tighter household budgets and encourage people to save more and spend less by drinking at home rather than going out.

Health consciousnessRising health consciousness about the negative impacts of excessive alcohol consumption can have a negative impact

on industry demand. As government campaigns and the media raise awareness of the negative consequences caused by heavy drinking, such as disease, injury, crime and lost productivity, the number of people attending bars and clubs may decrease. Also, rising health consciousness can impact the food options provided by bars and clubs. Consumers have become increasingly concerned about fat content, fried foods and salt content, especially when dining out. Consequently, rising concerns over the nutritional value of meals at bars and restaurants are likely to influence demand for certain foods on menus, thus encouraging industry establishments to alter their product mix.

RegulationSignificant price rises, caused by excise duty increases, can also hamper demand, as can alcohol consumption regulations. For instance, since the late-1980s, it has been illegal to sell alcohol to persons aged less than 21 years in all states.

Products & Servicescontinued

opted to drink in their homes instead of visiting bars. Consumers who continued patronizing drinking establishments tended to visit them less, spent less when they did go out and often chose more affordable establishments.

OtherFood and meals, largely for consumption on the premises, and sales of nonalcoholic beverages, account for about 10.4% of sales. This segment can

include prepackaged food, appetizers and even full meals. The number of bars serving food has increased over the past five years because consumers are increasingly time poor and want to go to establishments that are a one-stop shop for their eating and drinking activities.

Revenue from cover charges and admissions to bars and nightclubs represents about 2.4% of total industry revenue. Other revenue is derived from sales of cigars and cigarettes and from slot machines.


Products & Markets

International Trade As a retail industry, the Bars and Nightclubs industry is not technically engaged in importing or exporting products, so international trade is not relevant to the industry. The industry consists largely of small business owners that serve the domestic market. Although many products sold by the industry are imported from overseas, these are calculated at the manufacturing level and therefore do

not count toward trade in the Bars and Nightclubs industry.

The industry also derives a portion of its revenue from international visitors to the United States. The amount of revenue earned from foreign consumers depends on international tourism patterns. Overall, the number of international visitors entering the United States has trended upwards over the past five years as the global economy has improved.

Major Marketscontinued

this segment is the industrys biggest market. Older consumers also tend to spend more on additional items such as food. Alcohol consumption tends to decline substantially once a person reaches 65 years of age.

According to a survey by Centers for Disease Control, about 56.0% of those aged 18 to 45 are current regular drinkers, compared with 50.0% of the total population. Given these findings, customer demographics will vary according to whether the establishment is located in a college town or elsewhere, and depending on the concept, which

could be a neighborhood bar, an on-premises beer-brewing tavern, a sports bar, a wine bar or a nightclub.

Some revenue is derived from the private sector, such as businesses which may seek to rent conference rooms or other facilities for a special function or occasion. These occasions may include a product launch or a seasonal staff function. The major markets for this industry have remained relatively stable over the five years to 2014. Older consumers account for a growing percentage of industry sales due to the ageing demographics.

Major market segmentation (2014)

Total $23.5bn

20.0%Consumers aged 45 to 54 years

6.5%Consumers aged under 25 years


6.5%Private sector



11.5%Consumers aged 65 years and older



Products & Markets

Business Locations 2014

MO1.8

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.2

MA2.2

RI0.6

NJ2.6

DE0.1

NH0.1

CT0.7

MD1.4

DC0.2

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ1.4

CA7.2

NV1.5

OR1.9

WA1.9

MT1.4

NE1.4

MN2.4

IA2.3

OH5.4 VA

0.3

FL4.3

KS1.1

CO1.9

UT0.4

ID0.8

TX6.0

OK0.9

NC1.4

AK0.4

WY0.4

TN0.8

KY0.8

GA1.0

IL6.5

ME0.3

ND1.0

WI7.2 MI

3.9 PA6.9

WV1.1

SD0.8

NM0.3

AR0.3

MS0.2

AL0.6

SC0.8

LA2.0

HI0.5

IN2.6

NY7.8 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations As a service-based retail industry, bar and nightclub operators are dispersed largely in line with population and income distribution. The industry is concentrated in the West, Great Lakes and Mid-Atlantic regions, mainly due to population distribution and size. Most of these regions have a large number of relatively small establishments, in terms of employment and revenue. However, the industry tends to also be under-represented in the Southeast region. Licensing restrictions in some states also have an impact on this industrys operations and location.

Research by the US Department of Agriculture indicates that the states with the highest per capita consumption of distilled spirits are New York, Florida, Texas and California. The Adams Handbook indicates that the states with the highest consumption of domestic and imported beer are: Texas (Southwest region), Florida (Southeast region), Illinois and Ohio (Great Lakes region), and New York and Pennsylvania (Mid-Atlantic region). The information also points to beer consumption as a key indicator of this industrys geographic spread, along with population size. Because beer consumption is only decreasing slowly on a per capita basis, no significant change is expected in industry distribution over the short term. Therefore, IBISWorld does not expect

the level of geographic concentration to change in the near future.

Operators will attempt to situate themselves in high-profile areas with a high rate of foot or automobile traffic. This indicates that rent costs may be high as bars and nightclubs are paying for the privilege of exposure.

The current distribution is not expected to change significantly over the next five years, as IBISWorld does not expect any substantial demographic changes or population shifts during the period, and the same fundamentals remain at play.

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EstablishmentsPopulation

Distribution of establishments vs. population



Cost Structure Benchmarks

ProfitIndustry profit is based on earnings before interest and taxes. Profit varies among players depending on the size of the firm, with larger operators generally benefiting from economies of scale. Operators in the Bars and Nightclubs generally rely on high product turnaround to break even. However, this means bar and nightclub owners operator off slim profit margins, making them highly susceptible to any adverse changes in demand. IBISWorld estimates that in 2014, the average industry operator will obtain profit equivalent to 5.8% of revenue. The average industry profit

margin has increased slightly over the past five years as demand has improved and costs have remained steady, however, the competitive nature of the industry limits the ability of operators to access profit margins much higher than their current level.

PurchasesThe major cost operators are exposed to is purchases, such as alcohol, food, and other incidentals including paper towels, cleaning equipment and glassware. Alcohol is the biggest cost within this category, usually representing between 20.0% and 30.0% of total revenue. Food

Key Success Factors Having a loyal customer baseIt is important to ensure a high level of regular customers who spread good word-of-mouth recommendations to others.

Ability to quickly adopt new technologyEstablishment operators should have appropriate levels of technology in areas such as stock control, which is a major cost area.

Ability to control stock on handOperators must have control over stocks, particularly stock losses, and have sufficient stock in line with expected demand.

Effective cost controlsHaving effective cost controls and systems in place is essential because this is a relatively low profit margin industry.

Must have licenseOperators are required to have the appropriate licenses to operate and always meet the conditions of the licenses.

Access to niche marketsIt is important to have a very good understanding of the markets serviced by your location and customers changing needs.

Market Share Concentration

The industry is highly fragmented and consists of a large number of small businesses that are often family owned and operated. The top four players in the industry account for well under 5.0% of total revenue. Census information indicates that just more than 77.6% of establishments are small businesses employing up to nine people, and a total of 98.3% employ less than 50 people. There are limited

economies of scale to be found than earning more than one venue due to the labor intensive and location-specific nature of the industry. Also, the varying state liquor laws makes it difficult for owners to form large chains. Due to the fragmented and small-business nature of this industry, especially in the way it operates, the level of concentration is not expected to change over the next five years.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

and beverages are usually purchased from wholesalers, particularly from operators that can guarantee both prompt delivery and quality foodstuffs. Fluctuations in the cost of food and liquor significantly impact industry revenue and profit. In the short term, many of these cost increases cannot be passed on to the client. Therefore menus, portion sizes and other inputs into food service have to be continually monitored. The other major source of inefficiency is waste, due to fluctuations in demand, oversupply of meals or excess ingredients that cannot be used and subsequently spoil. IBISWorld forecasts that in 2014, purchases will account for 44.0% of an average firms revenue.

WagesWages are high due to the labor-intensive nature of preparation and serving drinks and food. There is a high labor

component associated with serving customers and providing meals. The use of hourly staff typically assists with adapting to variations in customer demand. Over the past five years, labor costs, including wages and benefits, such as health, workers compensation and unemployment insurance, have increased. Wage costs are expected to account for 24.0% of an average firms revenue in 2014.

OtherOther costs include insurance, accounting and legal costs, stationery and office costs. These costs account for 15.2% of industry revenue. Rent and utilities also account for 6.5% of industry revenue and are high due to the need for locations in high-visibility areas.

Other costs include those incurred in the normal course of business, such as insurance, accounting and legal costs,

Sector vs. Industry Costs

Profi t Wages Purchases Depreciation Marketing Rent & Utilities Other

Average Costs of all Industries in sector (2014)

Industry Costs (2014)

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16.4

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6.51.23.2

44.0

24.0




Basis of Competition The Bars and Nightclubs industry is highly competitive, with competition coming from both within the industry (internal competition) and from operators in similar industries (external competition). This owes to the relatively low barriers to entry associated with opening a bar or nightclub. There are a large number of small business establishments and the industry is highly fragmented.

Internal competitionPrice is an important competitive factor. Operators that can serve food and beverages at the most value will normally attract and retain patrons, even during times of anemic economic growth. Location is another important competitive factor for a bar or nightclub. Establishments are usually located in areas where people congregate for entertainment purposes and businesses are prominent. Bars and nightclubs also take advantage of agglomeration, meaning they will usually benefit from being located within proximity to competitors.

Service is one of the most important competitive factors for bars and

nightclubs, especially those with a high-end focus. Upscale bars and nightclubs need to provide world-class service to guests that expect a seamless and enjoyable visit. Front-of-house staff like bartenders and wait staff are trained to be professional, courteous and accommodating and to portray concern for the well-being of patrons. It has become increasingly common for operators to chase higher earning patrons by renovating venues and providing higher quality beverages and menus. Within the changing alcohol consumption market, bars have moved toward providing cocktails and providing high-quality food in unique environments.

External competitionThe industry also faces competition from the wider on-and-off premises alcohol consumption market. The industry exhibits a high level of external competition from licensed restaurants and cafes, to supermarkets, casinos and retail liquor stores. Many of these compete with bars off-premises alcohol sales on a price basis, particularly for high turnover products.

Cost Structure Benchmarkscontinued

licensing fees, stationery and office costs. These costs account for an estimated 15.3% of the average bar or nightclub operators revenue. Marketing is another cost that varies depending on the establishment. Some bars have a large

budget for promotional activities, while others do not spend a cent on marketing. Rent and utilities also account for 6.5% of the average operators revenue, although this varies considerably depending on the city and the location of the bar.

Level & Trend Competition in this industry is High and the trend is Increasing



Industry Globalization

The majority of operators in this industry are small businesses that are US-owned and earn most of their sales from domestic activity. No significant or major international operators exist in this industry and international trade

is nonexistent. The industry is therefore subject to a low level of globalization. IBISWorld does not expect the industrys level of globalization to change significantly in the coming years.

Barriers to Entry Capital investmentLike many industries, the main barrier to entry new operators face is access to capital. Opening a new bar or nightclub can be an expensive venture: equipment must be purchased, buildings must be leased and fitted out and suppliers and staff paid with reserve capital until the business can maintain a positive cash flow. Capital requirements can be alleviated to some degree by renting or leasing equipment. As a large amount of revenue in this industry is generated by owner-operators, it may also be possible to enter through the purchase of an existing business or recently closed bar or nightclub operation. However, refurbishing costs may be required with this method.

Liquor licenseAcquiring a liquor license can be a significant barrier to entry, especially in jurisdictions that already have a large number of licensed establishments per capita. Some jurisdictions mandate the maximum number of liquor licenses that can be issued at any one time. A liquor license must be acquired at the provincial level through a liquor board or commission that oversees the control, distribution and sale of alcohol in its jurisdiction. Liquor licenses also need to be renewed each year and can be taken away if license terms and conditions are not met.

SaturationIndustry concentration is low, with the top four players accounting for less than 5.0% of total industry revenue. While this level of competition does not restrict the ability of new bars or nightclubs to open, the saturation of establishments in many locations does pose a hurdle to those establishments that cannot offer a unique value proposition.

Barriers to successOverall, the industrys barriers to entry are low. Meanwhile, barriers to success (i.e. the ability to stay profitable and in operation for more than a few initial years) are significantly higher. According to various sources, over half of new bars or nightclubs close or change hands within three years of opening. Even among those family owned-and-operated bars and restaurants that are successful, owner burnout is high since the hours are often demanding.

Barriers to Entry checklist LevelCompetition HighConcentration LowLife Cycle Stage MatureCapital Intensity MediumTechnology Change LowRegulation & Policy HeavyIndustry Assistance Low


Level & Trend Barriers to Entry in this industry are Low and Steady

Level & Trend Globalization in this industry is Low and the trend is Steady


Other Companies Due to the small and localized scale of bars and nightclubs, there are few major operators, and financial data and other details on their operations are sparse. In 2014, IBISWorld estimates the average revenue per establishment will increase to $335,950, up from $304,670 in 2009. The average number of employees per establishment is estimated to be about 5, with an average annual employee wage of $15,182.

According to Nightclub & Bar Magazines 2014 top 100 list, XS Nightclub in Las Vegas was the top grossing drinking establishment in the United States in 2013, earning between $90.0 million and $95.0 million. Marquee Nightclub was second on the list, earning between $85.0 and $90.0 million. The top 10 bars and nightclubs each earned between $25.0 million and $95.0 million in 2013. Among the top ten, seven are located in Las Vegas, while the remaining three are in Miami Beach, FL and New York City..

Like many other small businesses, a large proportion of bars and nightclubs fail financially within their first five years of operation. However, successful new bars can have a positive cash flow within the first year, and proceed to recover their initial investment over three or four years. This industry varies widely in terms of style and concept. Some operators can be classified as

neighborhood bars, which usually serve drinks and meals and provide entertainment to a number of regular customers. The neighborhood bar is likely the most common concept adopted by the industrys establishments. Sports bars display sporting memorabilia and provide live telecasts of important international, national and local sports events. These operators also provide a wider variety of drinks and meals. The brewpub uses on-premise microbrewing equipment to brew its own special and craft beers. There are also wine bars, nightclubs and cocktail lounges. All of these types of establishments are niche operators, which tend to appeal to a core demographic and, therefore, must provide the facilities and ambience preferred by key customers.

The costs of establishing a bar or tavern also vary considerably, from $100,000 to $200,000 for a neighborhood bar to over $1.0 million for a brewpub or nightclub, depending on location and size. According to the Risk Management Associations Annual Statement Studies, players in the Bars and Nightclubs industry have recently earned gross profit margins averaging about 60.0% of revenue, though profit before interest and taxes have averaged only about 5.0%. The industry is, therefore, highly sensitive to factors that affect demand and cost.

Major CompaniesThere are no Major Players in this industry | Other Companies


Capital Intensity The Bars and Nightclubs industry exhibits a low level of capital intensity. In 2014, for every $1.00 the average operator spends on wages, it will spend an estimated $0.13 on the use and replacement of capital. The industry is highly dependent on human capital due to its service-oriented nature. Although most staff are relatively low-skilled, low-cost workers, no bar can function without quality staff with basic product knowledge. For upmarket bars, staff require a broad knowledge of wine varieties and regions, cocktails and beer types. The average operator spends about 25.1% of its revenue on wages and associated labor costs. The use of staff on hourly rates assists with catering to the variation in the daily

and weekly demands and needs of clients.

Meanwhile, capital costs are moderate for the average bar. The cost of the initial fit out will depend on the size and style of the establishment. However, most bars are small-to-medium in size and do not require extensive, expensive renovations. Once set-up, minimal capital costs a re required.

Operators can significantly reduce their capital investment by renting or leasing establishments, rather than purchasing. In this case, an operators rental expense will be far greater as a percentage of revenue than depreciation expense. The investment required to purchase a bar or nightclub varies significantly depending on size, location

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

r Int

ensi

veCapital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Beer, Wine & Liquor Stores

Egg & Poultry Wholesaling

Chain RestaurantsFish & Seafood WholesalingBars & Nightclubs

Level The level of capital intensity is Medium


Operating Conditions

Technology& Systems

The Bars and Nightclubs industry is subject to a low level of technological change. In general, small business owners do not have a strong incentive to invest heavily in new technology due to the limited economies of scale available. The industry relies on a high level of personalized service provided by bartenders, waiters, servers and managers. The degree of personal service provided by a bar is normally crucial to the establishments performance and can often be the reason patrons are enticed to return. Moreover, many owner-operators rely heavily on their own labor or extended family and friends, usually at relatively low hourly rates. Consequently, the main incentive to increase the use of technology, which is to reduce a reliance on physical labor, is not as prevalent for this industry, particularly at the small-scale end of the industry.

Business efficiencyTechnology can be used by bar and nightclub operators to improve internal business processes, such as ordering inputs and all other back-of-house functions. Back-of-house operations have become more efficient due to technology.

Steam cooking ovens and super ovens that cook items much faster than conventional ovens are beneficial to diners that are expected to offer fast and efficient service. These improvements can deliver a competitive advantage against competitors, which is especially important given the fierce level of industry competition. Computer software is also available to assist bar and nightclub operators to monitor and control labor costs, inventory control and cash management. Front-of-house booking systems are also used as portals for venues to manage patrons and enable guests to seamlessly make reservations through their smartphones.

SmartphonesThe ubiquitous use of smartphones throughout society has had a minimal impact on the industry. Social networking sites are now mainstream and can be used by bars and nightclubs as a sales and marketing tool. Bar and nightclubs that have been the most successful to-date essentially enable patrons to market for them through sharing photos of the establishment on social networks like Instagram or Facebook. The next

Capital Intensitycontinued

and revenue. Establishments in prime metropolitan locations can sell for prices well into the millions of dollars.

Some rise in labor productivity can occur from investment in technology. In recent years, many operators have invested heavily in electronic ordering systems that are linked to kitchens, allowing chefs to more efficiently process and prepare orders. However, the majority of businesses are owner-operated small businesses, and therefore find limited benefits from increased capital investment, preferring instead to concentrate on training their staff to improve services.

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Bars & Nightclubs

Accommodation and Food Services

Economy

Level The level of Technology Change is Low



Revenue Volatility Revenue volatility for the Bars and Nightclubs industry is moderate to low. The industrys performance depends on consumers disposable income levels, their attitudes toward entertainment and their feelings about their financial situations (i.e. consumer sentiment). Regulation, such as liquor-licensing laws, also play a role in the industrys year-to-year performance, as do attitudes toward alcohol consumption. Revenue also depends on the decisions of consumers to purchase alcohol for consumption on the premises, versus alcohol to be consumed off the premises.

Likewise, the choice to purchase hard alcohol over wine and beer also contributes to revenue growth. Over the five years to 2014, all these factors played into the industrys flat sales. The recession also stifled personal income growth, meaning patrons were more likely to cut spending at bars and nightclubs, which caused revenue volatility to rise from its historical low level. Over the next five years, revenue volatility is expected to temper as higher consumer confidence and spending drives moderate growth of bar and nightclub revenue.

Technology& Systemscontinued

smartphone trend that is likely to play a role in the industry is near-field communication that allows phones and other devices to talk to each other. This

technology allows customers to order additional bottles of wine or make payments directly through their phones without the use of a bartender or server.


Volatility vs Growth

Reve

nue

vola

tility

* (%

)

1000

100

10

1

0.1

Five year annualized revenue growth (%)30 10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

Bars & Nightclubs

A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level The level of Volatility is Low



Regulation & Policy The Bars and Nightclubs industry is subject to a heavy, but steady level of regulation that is increasing. There are regulations covering a range of areas, from food safety and standards, to labor conditions and liquor licensing. Most regulation is enacted and enforced at the state level, but many federal laws also apply.

Liquor licensingA license is required to operate in the industry and the issuing of licenses may be restricted in some states, such as limiting the number of licenses in a given area or by population. For example, in Wisconsin, there is a license quota of one license per 500 people. Additionally, states are able to mandate hours of operation, the price of each drink, who is able to serve (e.g. age requirement for servers) and how long an unfinished bottle of wine may be used in the bar.

Operators must comply with state and local service laws, commonly called dram shop statutes. Dram shop statutes generally prohibit serving alcoholic beverages to certain persons such as an individual who is intoxicated or a minor. Nationally, no person under 21 years can be legally served alcohol.

On the national level, a person must be 21 years of age to be legally served alcohol, which has been in place since the passing of the National Minimum Drinking Age Act of 1984. Nonetheless, statistics from the US Department of Health indicate that the highest prevalence of binge and heavy drinking occurs with young adults aged 18 to 25 years, with a peak at 21 years. Binge drinking is classified in 38.7% of young adults; however, at 21 years of age, the rate of binge drinkers jumps to 48.2%. Research by Harvard College further indicates that binge drinking among young adults is highest in those states where binge drinking is highest. Binge Drinking is being highlighted as a serious

problem, meaning additional restrictions on wine sales and promotions may occur, including happy hours, sale of wine in large containers and advertising.

Food safety and standardsThe industry is subject to laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling. The main agency responsible for providing guidance and regulation is the US Food and Drug Administrations (FDA). The FDAs Model Food Code, which is a best-practice guide to food handling and presentation, applies to this industry and is updated each year. The FDA Nutritional Value applies as well. Since 1996, the FDA regulations have set standards for nutritional values of individual foods and meals. If claims like low fat or heart healthy are on a menu, an owner must be able to demonstrate to officials that there is a reasonable basis for the claim. For instance, the meal may be based on a recipe from a health association or a recognized dietary group. Complete nutritional information, however, is not required to be on menus.

Labor relationsThe industry employs a high number of young and low-skilled workers at hourly rates and, therefore, is subject to minimum wage and employee benefits regulations. Workers in the US are entitled to be paid no less than the statutory minimum wage, which as of 2014 was $7.25 per hour. The minimum cash wage for tipped employees is lower, with a federal mandated minimum of $2.13 per hour required to be paid, unless the employee receives total tips equivalent to below $7.25 per hour. On top of this, each state also formulates and regulates its own minimum wage, with some states implementing rates higher than the federal rate.

Level & Trend The level of Regulation is Heavy and the trend is Steady



Industry Assistance This industry receives no tariff protection or other forms of assistance. In some states, restrictions on the number of licenses issued per head of population applies, and this may give advantages to existing license holders.

The industry is supported by a number of industry associations that lobby on behalf of operators, undertake industry research, run training and information programs and promote the industry. These include the National Club Industry Association of America and American Beverage Licensees.

Regulation & Policycontinued

Smoking bansSmoking in bars has also been banned in 60 of the largest US cities, including Los Angeles, New York and Houston. While there is a state-wide ban on smoking in all bars in California and New York, in Texas

these laws are under the auspices of local government. California was the first state to prohibit smoking in bars in 1995. This legislation hampered industry revenue for a time, but most wine bar operators have fully adapted to the change.

Level & Trend The level of Industry Assistance is Low and the trend is Steady


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises Employment Exports ImportsWages ($m)

Domestic Demand

Per capita expen-diture on alcohol

($)2005 21,648.4 6,840.9 71,717 71,185 376,438 -- -- 5,347.2 N/A 9,527.82006 22,201.0 7,304.1 71,124 70,576 386,610 -- -- 5,528.0 N/A 9,814.92007 22,469.7 7,415.0 73,447 72,797 391,548 -- -- 5,621.3 N/A 10,035.52008 22,361.5 7,133.3 72,244 71,588 383,583 -- -- 5,590.3 N/A 9,999.22009 22,004.3 7,217.4 72,224 71,568 375,878 -- -- 5,501.1 N/A 9,842.92010 22,222.3 7,155.6 73,061 72,382 376,239 -- -- 5,555.5 N/A 10,035.92011 22,367.6 7,448.4 72,851 72,161 376,971 -- -- 5,591.9 N/A 10,291.32012 22,505.1 7,471.7 71,535 70,870 379,541 -- -- 5,603.8 N/A 10,517.62013 22,889.9 7,576.6 70,817 70,161 375,746 -- -- 5,676.7 N/A 10,723.02014 23,530.8 7,765.2 70,042 69,391 371,989 -- -- 5,647.6 N/A 11,017.02015 23,883.8 7,881.7 70,672 70,016 372,361 -- -- 5,732.3 N/A 11,326.62016 24,337.6 8,031.4 71,478 70,814 372,733 -- -- 5,824.0 N/A 11,659.42017 24,605.3 8,119.7 71,950 71,281 373,852 -- -- 5,963.8 N/A 12,023.22018 25,146.6 8,323.5 72,900 72,222 374,225 -- -- 6,092.6 N/A 12,345.52019 26,051.9 8,623.2 74,475 73,782 376,874 -- -- 6,098.7 N/A 12,642.8Sector Rank 12/27 12/27 6/27 4/27 12/27 N/A N/A 12/27 N/A N/AEconomy Rank 382/1283 328/1283 126/1282 109/1282 111/1283 N/A N/A 275/1283 N/A N/A

IVA/Revenue (%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue per Employee

($000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2005 31.60 N/A N/A 57.51 24.70 5.25 14,204.73 0.052006 32.90 N/A N/A 57.42 24.90 5.44 14,298.65 0.052007 33.00 N/A N/A 57.39 25.02 5.33 14,356.61 0.052008 31.90 N/A N/A 58.30 25.00 5.31 14,573.90 0.052009 32.80 N/A N/A 58.54 25.00 5.20 14,635.33 0.052010 32.20 N/A N/A 59.06 25.00 5.15 14,765.88 0.052011 33.30 N/A N/A 59.34 25.00 5.17 14,833.77 0.052012 33.20 N/A N/A 59.30 24.90 5.31 14,764.68 0.052013 33.10 N/A N/A 60.92 24.80 5.31 15,107.81 0.052014 33.00 N/A N/A 63.26 24.00 5.31 15,182.17 0.052015 33.00 N/A N/A 64.14 24.00 5.27 15,394.47 0.052016 33.00 N/A N/A 65.29 23.93 5.21 15,625.13 0.052017 33.00 N/A N/A 65.82 24.24 5.20 15,952.30 0.052018 33.10 N/A N/A 67.20 24.23 5.13 16,280.58 0.052019 33.10 N/A N/A 69.13 23.41 5.06 16,182.33 0.05Sector Rank 25/27 N/A N/A 14/27 24/27 23/27 19/27 12/27Economy Rank 628/1283 N/A N/A 1161/1283 481/1283 914/1282 1205/1283 328/1283

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Per capita expen-diture on alcohol

(%)2006 2.6 6.8 -0.8 -0.9 2.7 N/A N/A 3.4 N/A 3.02007 1.2 1.5 3.3 3.1 1.3 N/A N/A 1.7 N/A 2.22008 -0.5 -3.8 -1.6 -1.7 -2.0 N/A N/A -0.6 N/A -0.42009 -1.6 1.2 0.0 0.0 -2.0 N/A N/A -1.6 N/A -1.62010 1.0 -0.9 1.2 1.1 0.1 N/A N/A 1.0 N/A 2.02011 0.7 4.1 -0.3 -0.3 0.2 N/A N/A 0.7 N/A 2.52012 0.6 0.3 -1.8 -1.8 0.7 N/A N/A 0.2 N/A 2.22013 1.7 1.4 -1.0 -1.0 -1.0 N/A N/A 1.3 N/A 2.02014 2.8 2.5 -1.1 -1.1 -1.0 N/A N/A -0.5 N/A 2.72015 1.5 1.5 0.9 0.9 0.1 N/A N/A 1.5 N/A 2.82016 1.9 1.9 1.1 1.1 0.1 N/A N/A 1.6 N/A 2.92017 1.1 1.1 0.7 0.7 0.3 N/A N/A 2.4 N/A 3.12018 2.2 2.5 1.3 1.3 0.1 N/A N/A 2.2 N/A 2.7

2019 3.6 3.6 2.2 2.2 0.7 N/A N/A 0.1 N/A 2.4Sector Rank 12/27 11/27 27/27 27/27 26/27 N/A N/A 26/27 N/A N/AEconomy Rank 602/1283 664/1283 1085/1282 1052/1282 1103/1283 N/A N/A 1025/1283 N/A N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the real growth or decline in industry metrics. The inflation adjustments in IBISWorlds reports are made using the US Bureau of Economic Analysis implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industrys contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industrys life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industrys products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a companys profitability. It is calculated as revenue minus expenses, excluding interest and tax.

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than 20%; high volatility is 10% to 20%; moderate volatility is 3% to 10%; and low volatility is less than 3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

Industry Jargon

IBISWorld Glossary

OFF-PREMISE CONSUMPTION The purchase of alcoholic beverages for consumption at home.

ON-PREMISE CONSUMPTION The purchase of alcoholic beverages for consumption out of the home environment.

PACKAGED ALCOHOL Alcohol packaged for purchase in bottles, cans or similar containers.

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Documents

72241 Bars & Nightclubs in the US Industry Report