For example, let's assume the average person spends $20 at the bar. If your bar guarantee is $5,000, then you will need about 250 people at your event to reach that $5,000 mark. These estimates are never predictable, and you can never really know for sure that the bar is being honest when they tell you how much they made at the end of the night. If you only had 200 people show up, that means the bar only made $4,000 and you have to pay them $1,000 out of your pocket. They usually make you pay a 50% bar guarantee deposit ahead of time, so you'd probably get your $1,500 check in about 3 weeks.
If they have your tax info on file, you may actually get taxed on that check which was money that was already yours to begin with. I don't know that to be pure fact, just speculation, but I am always pissed when I get a check back from a club, that was my money to begin with.
If that isn't bad enough, there is a domino effect at play here. If your party was dead, that means you didn't make much money at the door, which means you are probably going to lose major major money because you still have at least a half dozen other expenses. Let's say your budget was $6,000 and your party was $20 per ticket. That means you need at least 300 guests to hit your personal budget, and to hit that bar guarantee. If you only had 200 guests, you just lost $2,000 plus the $1,000 from the bar guarantee. Not to mention the club possibly not wanting to work with you again, people not wanting to go to your next party, or DJs not wanting to spin for you again. These are extreme cases, but I've seen it happen plenty of times.
Like I said last post, try to avoid any club that asks for a bar guarantee. The same goes for any agency that asks for a back end deal, which I will break down in the next post