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Key Takeaways
- The sustainable monthly operating budget for the Karaoke Bar is projected to exceed $90,000, primarily driven by $40,084 in payroll and substantial fixed overhead.
- Payroll is the single largest cash outflow at $40,084 monthly, closely followed by an extremely high Cost of Goods Sold (COGS) averaging 145% of revenue.
- Despite the high monthly burn rate, the financial model forecasts the business can achieve operational break-even within three months (March 2026).
- Securing significant upfront working capital, totaling a minimum of $592,000, is essential to cover initial CapEx and early operating losses before reaching profitability.
Running Cost 1 : Staff Wages and Salaries
2026 Payroll Commitment
Your 2026 monthly payroll commitment is approximately $40,084, supporting 12 Full-Time Equivalents (FTEs) across six distinct roles needed to operate the venue. This number reflects the investment required to deliver the upscale, high-touch experience your target market expects.
Staffing Cost Structure
This $40,084 monthly cost covers 12 FTEs across six positions essential for premium service delivery. Key salaries include the $5,833 Restaurant Manager and the $5,417 Head Chef. Honestly, these fixed labor costs are high because you promised an upscale atmosphere, not a dive bar.
- Total FTEs: 12
- Manager Salary: $5,833
- Chef Salary: $5,417
Optimizing Labor Spend
Manage this cost by tying schedules strictly to projected demand, especially for the 12 FTEs. Overstaffing during slow Tuesday nights means labor eats all your contribution margin. A common mistake is failing to cross-train staff; aim for flexibility to reduce reliance on unnecessary hires.
Labor vs. Rent
At $40,084, payroll is the dominant fixed operating cost, significantly higher than the $12,000 lease payment. If actual covers fall short of projections, you must have a plan to flex staffing quickly; otherwise, this high base defintely pressures cash flow.
Running Cost 2 : Lease Payments
Fixed Rent Floor
Your base operating cost starts here. The monthly lease payment is a firm $12,000, setting the minimum floor for your fixed overhead before payroll or utilities hit the books. This number doesn't change if you sell one drink or a thousand.
Rent Budget Impact
This $12,000 covers the physical space needed for the upscale karaoke bar and restaurant. It is the largest single fixed cost, significantly higher than the $2,500 utilities or the $1,100 in monthly licensing and fees. You need this commitment before opening day.
- $12,000 fixed per month.
- Largest fixed expense item.
- Must be covered regardless of sales.
Covering the Commitment
Since the rent is set, optimization means driving sales volume fast to cover it. A common mistake is signing a lease before confirming sales projections can support the $12k plus other overhead. If onboarding takes 14+ days, churn risk rises, delaying revenue needed to cover this defintely fixed cost.
- Ensure sales cover rent quickly.
- Avoid long pre-opening rent periods.
- Benchmark against similar venue costs.
Fixed Cost Threshold
To reach break-even, you must generate enough contribution margin to absorb this $12,000 rent, plus $2,500 utilities, $2,200 maintenance, and $1,100 in fixed fees. That’s $17,800 in essential non-payroll fixed costs you must beat monthly.
Running Cost 3 : Inventory Costs
Inventory Cost Crisis
Your projected Cost of Goods Sold (COGS) at 145% of sales means you lose money on every drink or plate sold. With projected 2026 revenue of $174,066, inventory alone hits $25,240 monthly, which is unsustainable. You defintely need to fix this ratio first.
Inputting Food Cost
This 145% calculation covers all Food, Meat, and Beverages used to generate revenue. You apply this percentage directly to your projected sales figure, $174,066, to find the monthly cost of $25,240. This is your variable cost baseline.
- COGS = Sales Revenue × 145%
- Input: Projected monthly sales volume
- Covers 100% of ingredients used
Fixing Ingredient Spend
A healthy bar/restaurant COGS runs closer to 30%, not 145%. To manage this, you must aggressively engineer your menu. Focus on high-margin craft cocktails and shareable plates where ingredient cost is low relative to the selling price. Don't over-order perishables.
- Target COGS below 35%
- Negotiate bulk pricing now
- Audit portion control daily
Validate COGS Ratio
If your COGS is truly 145% of sales, the entire financial projection is invalid. You must get supplier quotes for food, meat, and beverages to confirm if this ratio reflects reality or a modeling error. This is priority zero.
Running Cost 4 : Utilities
Fixed Utility Load
Utilities hit a fixed $2,500 per month, driven by the high energy demands of grilling and ventilation needed for a full-service bar. Since this cost doesn't scale with revenue, it directly pressures your contribution margin every single month.
Cost Drivers
This $2,500 estimate covers electricity, gas, and water necessary for running the kitchen equipment, especially the grill, plus the HVAC systems required for customer comfort and code compliance. This is a non-negotiable fixed cost that anchors your operating budget; defintely budget for spikes during peak service times.
- Grilling equipment power draw
- Mandatory ventilation systems
- General bar operations load
Optimization Tactics
You can't eliminate this cost, but you can control usage spikes. Focus on energy-efficient appliances during the build-out phase to lower the baseline. Monitor peak usage hours, especially around the grill, to see if time-of-use rates apply in your area.
- Audit ventilation fan runtimes
- Negotiate fixed rate contracts
- Upgrade to Energy Star appliances
Break-Even Impact
Since this cost is fixed at $2,500, managing it provides a direct boost to profitability that variable cost reductions can't match. If your initial estimate is low, you'll need about 14 additional covers per day just to cover the difference if your average check size is $40.
Running Cost 5 : Marketing
Variable Marketing Spend
Marketing and promotions are set to start at 25% of revenue in 2026, equating to roughly $4,350 monthly based on current sales targets. This is a significant variable drain you must manage actively. If revenue projections slip, this cost scales down, but you risk losing market visibility.
Cost Inputs
This $4,350 estimate covers customer acquisition and promotional activity tied directly to sales volume. It uses 25% of the projected 2026 revenue base of $174,066 monthly. You need accurate daily cover counts to forecast this expense precisely. Don’t confuse this with fixed overhead like rent.
- Input: Revenue Projections.
- Calculation: Revenue x 25%.
- Initial Spend: ~$4,350/month.
Managing Promotions
You defintely want to shift spending toward repeat business fast, as high acquisition costs eat margins. Track the Cost Per Acquisition (CPA) against your Average Check Size, especially on slower midweek nights. Focus on driving higher check averages to absorb this percentage cost.
- Track Cost Per Acquisition (CPA).
- Prioritize high-margin beverage sales.
- Shift budget post-launch.
Variable vs. Fixed
This $4,350 variable marketing spend sits alongside high fixed costs like $12,000 rent and $40,084 in payroll. If revenue misses targets, the fixed costs remain, making this high percentage marketing spend an immediate threat to cash flow.
Running Cost 6 : Maintenance and Cleaning
Facility Upkeep Budget
Your facility upkeep costs total $2,200 per month, split between General Maintenance ($700) and professional Cleaning Services ($1,500). This spend is non-negotiable for supporting the upscale, modern atmosphere promised to your target market of young professionals. This cost directly impacts perceived quality.
Upkeep Breakdown
This $2,200 monthly expense ensures the state-of-the-art sound system and premium dining areas remain functional and appealing. The $1,500 cleaning fee covers deep cleaning for the kitchen and bar areas, while maintenance handles minor repairs. This is a fixed operational cost, unlike variable COGS.
- $700 for general maintenance needs.
- $1,500 for contracted cleaning services.
- Compare quotes for cleaning contracts.
Managing Facility Costs
To manage this, don't cut the cleaning budget too deeply; poor hygiene kills ambiance fast. Focus on preventative maintenance schedules to avoid expensive emergency repairs on the sound system or HVAC, which can easily exceed the $700 allocation. A defintely good strategy is bundling services.
- Negotiate annual cleaning contracts.
- Implement daily staff cleaning checklists.
- Schedule quarterly system checks.
Fixed Cost Check
At $2,200 monthly, maintenance and cleaning represent about 1.03% of projected 2026 monthly revenue ($174,066). If revenue dips, this fixed cost becomes a larger percentage of gross profit, demanding strict control over non-essential upkeep spending until volume stabilizes.
Running Cost 7 : Licensing and Fees
Fixed Fees Set
Your mandatory fixed licensing and fees total $1,100 per month. This covers essential compliance and operational software needed before you serve the first customer. These costs anchor your baseline operating expense structure. That’s a clean starting point.
Cost Breakdown
These fixed monthly charges are non-negotiable overhead for legal operation. The $600 for Accounting/Legal is substantial, covering necessary compliance for a restaurant/bar. Music Licensing is $150 monthly to legally play copyrighted songs for patrons. The $350 POS software fee ensures accurate sales tracking.
- Accounting/Legal: $600
- POS Software: $350
- Music Licensing: $150
Fee Optimization
Managing these fees means scrutinizing the largest line item: Accounting/Legal at $600. See if you can move compliance work in-house or switch to a lower-tier service until revenue hits the $174,066 projection. Don't skimp on music licensing; fines are costly, defintely avoid that.
- Audit the $600 legal retainer.
- Negotiate POS software annually, not monthly.
- Ensure music licensing covers public performance rights.
Overhead Context
At $1,100, these fees represent only about 0.63% of your projected $174,066 monthly revenue. This is lean for hospitality, but you must ensure the $600 legal budget scales appropriately as payroll climbs toward $40,084 monthly.
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Frequently Asked Questions
Total running costs are projected around $90,000 to $100,000 monthly in 2026, driven primarily by $40,084 in payroll and $18,600 in fixed overhead;