By a named editor
Fredrik Filipsson — Co-founder & Editor in Chief · LinkedIn ↗Last reviewed 2026-04-17 · How we pick bars
Tom Callahan, Contributing Editor
Bars have a peculiar relationship with economic downturns. While most industries suffer during recessions, bars often experience unexpected resilience. The reason is deceptively simple: drinking is countercyclical. When people feel stressed, uncertain, or depressed, they tend to increase alcohol consumption rather than decrease it. This pattern held true through the 2008 recession, the 2020 pandemic shutdown, and several recessions before that.
But resilience is not universal. During the 2008 financial crisis, approximately 7,000 bars closed across the United States. The same number reopened elsewhere, suggesting that while the industry adapted, individual establishments faced real vulnerability. Location, concept, debt levels, and management quality determined which bars survived and which disappeared. The industry's overall resilience masked significant individual failures.
Historical data shows that upscale cocktail bars saw slower recovery than neighborhood dive bars during downturns. Expensive establishments with high overhead struggled when affluent customers reduced discretionary spending. Meanwhile, neighborhood bars with lower margins and loyal local communities often thrived. This pattern has held remarkably consistent across multiple recessions, suggesting that community connection and affordability matter more than prestige during tough times.
Bar operators face a strategic choice during downturns: move upmarket or move downmarket. Attempting to split the difference typically fails. Instead, successful bars during recessions lean hard into one direction or the other, and each strategy works if executed properly.
The premiumization strategy targets affluent customers who continue spending even during slowdowns. These bars invest heavily in rare spirits, premium ingredients, and expert service. They position themselves as luxury experiences and premium value destinations. A craft cocktail that costs 22 dollars is easier to sell as a premium experience than as a bargain. Customers spending that much expect and value quality, so these bars can maintain excellence through downturns. The risk is that this strategy requires a sufficient base of affluent customers willing to maintain spending. In some markets or during severe recessions, this customer base evaporates.
The value strategy does the opposite. These bars focus on affordability, high volume, and community. A 7-dollar beer and a 5-dollar shot becomes the focus, not premium spirits or complicated techniques. Neighborhood bars, dive bars, and casual establishments thrive with this approach. The margins are tighter, so volume is essential. But these bars often have lower fixed costs, less debt, and loyal communities who actively want to support local establishments. During tough times, people choose to drink somewhere familiar and affordable rather than spend money at restaurants and premium venues they can no longer afford.
The bars that struggle most are those in the middle trying to be both premium and affordable. When money tightens, customers choose: either splurge on a truly special experience or save money with affordable drinks. Confused positioning fails in both directions.
One consistent pattern across multiple downturns: independent, community-focused bars survive at significantly higher rates than chain establishments or investor-backed venues. During the 2008 recession, independent bars failed at roughly 6 percent annual rates while chain locations failed at 12 to 14 percent rates.
The reason is fundamentally social. Community bars have relationships. The bartender knows your name, your drink preference, your job situation, and your life. You're not a transaction, you're part of a social ecosystem. During tough times, people maintain these relationships and protect their favorite community spaces. Customers actively choose to support these establishments because they care about the people who work there and the space itself.
Chain establishments lack this connection. They're standardized, predictable, professionally managed, and interchangeable. They're not places people feel emotional attachment to. When money gets tight, customers drop chains immediately. Independent bars see their most loyal customers actually visit more frequently, drinking less per visit but coming more often to maintain the community connection.
This dynamic is why independent bars should emphasize their community role during downturns. Host community events, create regular traditions like trivia or live music, remember customer names, and make the space feel like it belongs to local people rather than a corporate entity. The businesses that thrive hardest are those where customers feel genuine ownership and belonging.
During downturns, successful bars don't cut costs by cutting quality. Instead, they implement sophisticated menu engineering that maintains experience while reducing complexity and waste. The strategy involves analyzing which drinks actually sell and which don't, then ruthlessly eliminating the bottom performers.
Many bars during recessions reduce their cocktail menu from 30 or 40 drinks to 15 or 20 carefully chosen options. This seems counterintuitive, but it works because it improves execution. With fewer drinks to master, bartenders become faster and more consistent. The bar stocks fewer ingredients, reducing waste and spoilage. Customers find it easier to choose, which paradoxically increases drink sales. Top cocktail bars often rely on smaller, expertly executed menus rather than overwhelming selection.
The drinks that survive menu cuts are typically (1) high margin drinks, (2) drinks using overlapping ingredients that stack efficiencies, and (3) drinks customers genuinely love. Eliminating a complicated drink that uses seven expensive ingredients and sells three times per month immediately improves profitability. That bar space and ingredient investment can become a more popular drink using core ingredients.
Successful bars also increase their focus on beer, wine, and spirits sales rather than complex cocktails. These categories have better margins and require less labor. A customer who buys a 7-dollar beer generates more profit per minute of bartender labor than a customer ordering a 12-dollar cocktail that requires three minutes to prepare. During downturns, bars shift their mix toward higher-margin simple drinks while maintaining premium cocktails for customers who specifically want them.
During downturns, staff become more valuable, not less. The instinct for many owners is to cut labor costs immediately. But the bars that survive best actually invest more in staff retention and development. This seems expensive, but it's genuinely strategic.
Stable staff with deep product knowledge sells more drinks. Bartenders who stay 2 to 3 years sell significantly more than bartenders who turn over every 6 months. Knowledgeable bartenders upsell customers to higher margin drinks, remember customer preferences, and create the social experience that keeps people coming back. During downturns, when customers are more price conscious, skilled bartenders can position premium drinks in ways that justify price.
Additionally, stable staff reduce training costs and operational chaos. New bartender training costs roughly 2,000 to 4,000 dollars per person when accounting for lost productivity, mistakes, and lost customers. A bar that loses 3 bartenders per year and replaces them burns 6,000 to 12,000 dollars in hidden training costs annually. Retaining staff through modest pay increases costs less than the replacement cycle.
Successful bar owners during recessions pay better than they otherwise would, offer benefits, and create development opportunities. They treat staff as long-term investments rather than interchangeable labor. The bars that maintain their best people through downturns emerge stronger because they kept their most valuable asset intact.
The 2020 pandemic provided an unusual natural experiment in bar survival. Bars closed simultaneously, reopened simultaneously, and faced identical external constraints. This allowed analysis of which bars truly survived and thrived versus which struggled.
Three patterns emerged clearly. First, bars with strong outdoor or patio space reopened more profitably. When indoor capacity restrictions existed, outdoor space meant survival. Bars that previously considered patios as secondary spaces suddenly found them more valuable than their entire indoor operation.
Second, bars with established delivery and takeout operations recovered faster. Some bars had built online ordering infrastructure before the pandemic. These bars created "cocktails to go" programs immediately. Other bars built these systems from scratch during closures. The bars that survived best were those that launched online ordering, cocktail kits, and delivery programs within days of closures, not weeks.
Third, bars with engaged communities and communication systems survived better. Bars that immediately started newsletter updates, Instagram posts, and direct customer communication maintained engagement. When they reopened, customers came back enthusiastically because the bar had stayed connected with them. Bars that disappeared from communication during lockdowns found customers had moved on to new establishments.
The pandemic also revealed the importance of diversified revenue. Bars that sold bottles, ran food programs, offered private events, or had secondary revenue streams survived better than pure drink-focused establishments. A bar that makes 30 percent of revenue from food is more resilient than one dependent entirely on beverages.
Looking across multiple downturns and examining which bars thrive versus which fail, several consistent differentiators emerge. Strong bars maintain lower debt levels and avoid over-leveraging. During downturns, the first bars to close are those with significant debt obligations. They can't afford to carry the fixed costs. Bars built with owner capital or modest debt can sustain lower revenue for extended periods.
Strong bars also maintain cash reserves. Most bars operate on thin margins, but successful operators keep 3 to 6 months of operating expenses in reserve. During downturns, these reserves enable patience. The bar can adjust slowly, optimize rather than panic, and survive until recovery comes. Bars without reserves face immediate desperation, make poor decisions, and spiral into closure.
Strong bars obsess over their numbers. They know their cost of goods percentage, their labor cost percentage, their covers per shift, and their average check size. They can identify when something is off and adjust immediately. Bars that operate by feel rather than data can't react quickly enough to downturns. By the time they realize profitability is crashing, they're already in crisis.
Strong bars also stay agile. Menus change. Pricing adjusts. Concepts shift. During downturns, successful operators experiment rapidly. If cocktails aren't selling as well, they shift to beer and wine. If their hidden gem bar positioning requires premium pricing that doesn't work, they adjust their concept. Bars that insist on doing things the way they've always done them tend to fail.
Finally, strong bars focus on customer acquisition and retention during downturns rather than pulling back on marketing. This seems counterintuitive when money is tight. But the bars that maintain or increase marketing during downturns gain market share from competitors who cut spending. When recovery comes, these bars are positioned to grow while competitors are struggling to reestablish relevance.
If you're considering submitting a bar to our directory or want to learn more about what makes bars sustainable and strong, understanding these principles helps. The best bars in any city are those run by people who understand business fundamentals, maintain community connection, and stay adaptable when conditions change. These principles matter whether times are good or genuinely tough.
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