Starting a Business in Thailand (3):Bar Business

February 1 2010 Categories: Doing Business In Thailand, Thailand Business No comments yet

Our American cousins have what they call the American Dream” “first expressed by James Truslow Adams in 1931, citizens of every rank feel that they can achieve a “better, richer, and happier life” (Source Wikipedia) meaning that anyone has a chance to become one day another Bill Gate. In Thailand we have another dream, far more modest; it is called the “Bar Owner” dream or the Bar Owner illusion to be more accurate.

Bar Business (whether Pub and Karaoke for Thais or A Gogo and Pool Bars for foreigners) is maybe one of the business activity in Thailand that generates the biggest turnover. I mean the amounts spent in bars every night in Thailand are huge and it is understandable that this activity attracts a lot of new comers. After all, there is so much money made every day that one may believe that it is an easy business.

Unfortunately while it may be true for a few for the majority of investors Aunty on Thai Visa forum said it all “I don’t think the issue is how much money you need to open a bar, camperboy, that’s the easy part, it’s how much money you need to keep it open. Now that’s the issue.”

You may refer to yesterday post about Restaurant as a lot of the preliminary legal issues are common to both business activities.

May foreign investors run bars?

In a nutshell, Bar Business is also a business activity which is subject to restriction under the Foreign Business Act list 3. Therefore only Thai and Us Citizens may legally go into the business. For the rest of the world the only alternative is either to find a real Thai partner that will own 51% of the business while you will own only 49% or not to get involved at all.

You will then ask me why if said business are restricted to foreign investors how come then than so many of them are involved in it and I will answer to you as I did in my Restaurant post, it is because most foreign investors involved in this business activity have requested the help of “You Know Who, He/She who cannot be named” the Thai shareholder that may be deemed a nominee.

Issues common to Bar/ Restaurant business

As I was saying in yesterday post in the same way than for a restaurant you will need to incorporate a company to own and run the business. You will need an alcohol license, cigarettes licenses if you sale cigarettes and a food license if you also serve food and of course the proper licenses to play music (I mean the copyrights license). The parallel with restaurant business stop here.

Issues specifics to Bar Business

Where the bar business is more complicated to manage is that depending of the type of bar that you open you may need a whole lot more licenses some of which may not be given anymore.

But for the case where you purchase an existing bar which had all licenses the fact are that you will be exercising your business activity illegally. You should also know that regular closing hours for bars, pubs and so on is midnight or 01.00 AM depending where you are located. Of course no one close at midnight or 01.00 anymore (that is to say for the time being) but the current tolerance may disappear from one day to another.

Overall most bars are operated illegally one way or another

Be careful with the lease

Another problem with bar business is that it is certainly the type of business where the “lease situation” is the most complex and obscure. I mean any investor who lease a premises to run a business should be careful and study his lease. But because bars are a business where businesses often changes hands you will have to review this matter carefully.

Especially if you are leasing a premises in area such as for example in Bangkok Patpong, Nana where so many sub-lease have been granted that you would have difficulty to know whom you are actually leasing from. Being reminded that in Thailand the law that regulates the lease agreement expressly prohibits sub leasing and the fact that a lease agreement does not prohibit sub-leasing does not therefore means that it is allowed. Sub leasing is allowed only when expressly authorized by the owner of the property. This being said bar business is one of the type of activity were you most encounter owners that request key money.

If you purchase an existing bar don’t forget to ask your seller or better the owner of the premises whether there is a key money. Reading the lease is of no help as the key money is in general not mentioned there. The fact that a key money is not mentioned into the lease does not mean you will not have to pay one at the time of renewal. If you don’t check you will have the same problem than two English gentlemen that purchased a bar in Nana Plaza a few years ago.

They purchased the bar 5,000,000 THB invested another 3,000,000 THB in the fitting. Of course, all busy they were to chase the “Bar Owner” illusion they did not bother to hire a lawyer to check the lease documents. Thing was that one month after the opening the current lease period was already finished and they had the surprise to see the owner knocking at their door and requesting a 6,000,000 THB Key Money to renew their lease. Of course they did not have the 6,000,000 THB and had to find a partner who took advantage of the situation to take control of their bar.

By the way if the rumor is true Bangkok Nana Plaza has been sold to Landmark group. So don’t purchase a bar there now because the chance is that all of them will soon (one or two years from now) be closed.

Overall the situation with Bars is the same than with restaurants. It is an activity who attracts a lot of investors but few only will be successful. Even investors who have a successful track record in the sector will from time to time fail. At the end of the day, it is your decision whether to engage in this type of business but if you want to go ahead be aware that success is not always a given.

If you want to Do Business in Thailand Safely Contact us: contact@renephilippe.com

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact

Originally posted 2009-11-06 05:07:54.

Doing Business in Thailand