Monday, July 18, 2011

The Business Model

It must generate enough revenue and hold down costs sufficiently to return a reasonable profit to its owner or its investors. Otherwise, there is no jazz club. That is the bottom line to be met before other opportunities can begin.

Our friend Cb contributes smart insights on the jazz scene which I read eagerly and admire greatly. Some intriguing recent ones were on the Live Jazz Economy, here. He deems the four hour jazz set, so common in clubs, archaic, best replaced with several groups a night, creating more jobs for our abundance of fabulous jazz musicians. Don't cater to the older crowd, he suggests, but play the jazz of today. Recognize people want to be home earlier. Let go of a jazz club model some seventy years old.

Fact is, I examined many of these issues a couple years back. In 2009, I tried to establish a new jazz club in Kansas City. I identified what I'm convinced was an ideal location in downtown KC (it's no longer available; the building owner has since converted the space to another use). I engaged consultants experienced in the service industry. I wrote a 32 page business plan and prepared a five year financial projection.

I even had the perfect name: The Riff. I still own the URL,

But a key investor took a hit with the recession, and the money to pull it off was no longer there. Probably just as well. My interest was in promoting jazz. But the restaurant and bar which generate the income drive the operation. Any successful jazz club must consider the business model first.

So let's consider it.

Some internationally known jazz venues, such as the Village Vanguard in New York and Jazz Alley in Seattle, stage two shows every night, each with a cover charge. They generate sufficient income by turning the crowd, same way KC's Jardine's books weekends. But that model doesn't work in KC seven nights a week. There aren't enough of us jazz fans to support it. Even Cb argues many of us want to be home by 8:30, and if he’s right, when’s the weeknight late show?

An alternative is to be open and selling during the day. A friend was part of the group which purchased the iconic Milton's following Milton's death. He tells me the club was essentially a break even operation, but critical to that were the 50 or so bar flies who flowed through during the day. Even Milton's could not break even on nighttime jazz alone. And Milton’s was by then known for its vast record collection. It was not paying musicians.

I budgeted $150,000 per year for local musicians to play my club. But I saw cover charges covering just 60 per cent of that outlay. Chalk up the rest to the cost of operating a jazz club. The club couldn't afford more.

Now divide that cash out to a six day business week. Assume some trios and quartets and weekend sextets. Assume every musician pockets at least a hundred dollars a night (not much in 2011, but better than some clubs pay). Now tell me how far $150,000 a year gets you.

Answer: One four hour performance Monday through Thursday and two groups on Friday and Saturday.

Even open all day, selling food to build income, and music just at night, the only way I could see to stage, say, three groups per weekday night would be to pay each musician a third of a hundred dollars. Now everybody's working but nobody's making a living. And, I suspect, nobody's happy with that.

Cb also notes that the same names play over and over. But that’s because that's who the customers who will buy a drink and a meal want to hear. I'd certainly have worked in new jazz musicians at my club. But I still remember an outstanding quartet at Jardine's one Tuesday night which only thirty of us were there to enjoy. The club made no money that night, and a business can’t afford many evenings like that and survive.

Marketing was a chunk of my business plan. But it's incumbent on the musicians to market themselves, too. Because if their name holds no public equity and few show up for their show, no matter how good the music, by necessity their bookings will be few.

This isn’t a not-for-profit operation. I’ve run a few of those. With a jazz club, investors provide the upfront money for tables and chairs, silverware and plates, kitchen equipment, a stage, a sound system and lights, to paint the space, maybe replace the flooring, and have sufficient cash to carry you through the first couple months as you build awareness. And they invest on the promise that they’ll get their money back, and more.

So music needs to cater to whoever will spend money. That varies with the day part. Most nights in a Kansas City jazz spot, though, it tends not to be too young a crowd. One youthful musician told me how his group filled a club, but the owner declined to book them again. He was befuddled. But he filled the house with college students who spent little. I'd give the group another chance, backed by marketing aimed at an older audience (they’d like this group if they heard it). Yet, I understand the stance of an owner paying the bills.

Cb is right on this: Jazz clubs run on a business model some seventy years old which doesn't benefit all the tremendous talent out there today.

But that’s the business model because nobody has come up with anything better. I sure wasn’t smart enough to uncover a superior solution.

To build a better jazz club, something which treats the talent right, start at the end. First determine how to generate the revenue to pay more musicians a credible amount while showing a return to whoever risks their cash to open the doors.

Then look me up. I have a good start on the rest of a fine business plan.


  1. I tried for years to figure this out. This is what I came up with:

    How do non-jazz bars/clubs make money?

    Bands are not paid a premium just to show up. The musicians are generally paid a base pay and/or they get a portion of the door. Here's the huge difference: their promotional effort determines their pay.

    I could not understand why band Jazz band A that brings 8 people gets the same pay that Jazz band B who brings in 80 people.

    The liquor/food should pay the bills and create the profit. The band is there to boost the sales. With Jazz clubs you run into a unique problem. I'll attempt to illustrate.

    Jazz customers

    A. The golden oldie- 2 ice teas (they are on medication and can’t drink), splits and appetizer, sits at the table for 4 hours
    B. The groupie- 1 drink .50 tip sits at the bar for 4 hours (jazz groupies are reallllll creepy)
    C. The grumbler- Soda water, sits at the bar for 4 hours and bitches about the $3 cover charge
    D. The let down- 2 bottles of wine, appetizer, dinner dessert and some kind of coupon/discount that cuts their bill in half
    E. The student- a coke with 20 free refills no tip, sits at the table all night then wants to hang out with the musicians after
    F. The musicians- lots of drinks, basically giving back the money you pay them
    G. The regulars- 4+ drinks great tips
    H. The money- Young, lots of drinks, shots, big tips. They are loud, the band and patrons get pissed and you have to ask them to quite down and they of course leave. And then your stuck with the pissed off grumbler and golden oldie. It’s always real awesome when the band yells at the loud people from the stage. That paying customer is never coming back, but hey you still got the grumbler.

    A lot of nights, that’s it, that’s your customers for the entire evening. So that’s somewhere around 25 people. You’ve got $75 in cover and $500 in sales. Your band expects a number in the 3 figures, your bartender gets $50 your busser gets $50 your cook gets $75 your servers get $30. Your cost on the food and drinks you did sell may get covered by that last bit of money but that doesn’t even touch the rent, utilities, taxes blah blah blah. If the big nights make up for 4 days a week of this crap you can stay open.

    So when musicians say “ The room was full, why are they saying they didn’t make any money.” This is it, this is why.

    A musician's reputation and ability mean nothing to a business if people won't come to see them.
    Pay the band $50 for their gas money and give them 2 drink tickets each. Give them some input on what they want to charge at the door. Let them keep the door money after paying for a door person.

    End Rant.

  2. Good comment, Anon. As much as I may berate The Phoenix for morphing into more of a blues bar than a jazz club, I'm told they've done that because blues fans spend more money.


Comments are welcome. If you prefer, you can reach me directly at kcjazzlark(at)gmail(dot)com.