The Lowdown on Liquor License
Once you have your vision for the new bar or nightclub you want to open (the fun part), the next steps are the not-so-fun financing and paperwork. No drinking establishment has any life without a liquor license, but beware: the costs and rules are many, and they vary vastly from state to state.
Welcome to Liquor Licenses 101.
When should you start the process of procuring a liquor license? Well, NOW is probably a good time. If you’re sure you want to open a bar and you’ve honed in on your location, concept, and clientele, you’re ready to start looking for a liquor license. After all, what’s a bar without the license to sell alcohol?
Yes, your To-Do List is longer than your leg, but without a liquor license, your dream bar doesn’t stand a chance. Go get acquainted with the local laws and grab yourself an application. You may find out the approval process takes up to a year. Or worse yet, a cap on drinking establishments might be in place for the neighborhood you’ve pinpointed. If the ceiling’s been reached, you’re going to have to find your bar another home or put your dream on hold until someplace else shuts down.
- Figure out what kind of license you need by answering the following questions:
- What types of alcohol (beer, wine, cordials, liquor) will you serve?
- Will you serve food?
- What % of your sales will come from alcohol vs. food?
- Will you serve alcohol on-premise, to-go, or both?
- Will there be an outdoor space?
- How many people will the place accommodate?
- What time will closing time be?
Every state has its own liquor license application, and some are more confusing than others. Colorado, for example, offers a daunting 19 different types of licenses and permits so you best know what you’re going for before you grab the app. Each state also has its own Alcoholic Beverages Control Commission. Go to your state’s ABCC website. It’s a very good place to start.
SHOW ME THE MONEY
Timing is key to liquor license obtainment, but it’s not everything. Money also matters. The sooner you get the ball rolling on your application, the sooner you’ll discover how much moolah it’s going to cost you.
The range is wider than the biggest beer belly you ever did see. In Colorado and Texas, for instance, you might spend a measly one hundred to a few thousand dollars max. In states where caps create cut-throat competition for available liquor licenses, on the other hand, you may have to mortgage your house to buy one. In Montana, an all-beverage liquor license sold for a staggering $585,000 in April 2014.
Keep in mind, you won’t pay all costs upfront. You may have to pay a private individual for a liquor license, an application fee to the state agency where you’re applying, PLUS pay fees annually to keep from defaulting on your license.
LET’S SAY YOU WANT TO OPEN A BAR IN BOSTON
Let’s just say you’re a dreamer and you dream of opening a bar in Boston, Massachusetts. What do you have to do to get a liquor license? How much will it cost you? How long will it take? Christine Pulgini and Russ DeMariano guide us down the long and winding Liquor License Lane.
Christine Pulgini serves as Chair of the Licensing Board for the City of Boston. She was appointed to this position by Mayor Marty Walsh in December 2014. She is the first Licensing Board Chair appointed by a mayor in Boston in over a century. From 1906-2014, the power to appoint the city’s licensing board was possessed by the Governor of the Commonwealth of Massachusetts. Pulgini says just last year, the appointing authority was put into the hands of the mayor “where it belongs.”
Russ DeMariano, Owner of Good Cheer Enterprises and Speakeasy Concepts, currently runs The Brahmin in Boston’s Back Bay and Stage Nightclub in the Downtown Crossing area. He is also the former owner of Red Sky in Faneuil Hall. He’s been in the Boston Nightlife business for twenty-five years.
DeMariano says there are two ways to go about getting a liquor license in Boston. In hotspots like Boston’s Back Bay, the cap on liquor licenses was reached 30 years ago. The city won’t issue any new licenses for this neighborhood so if you have your heart set on opening a new joint there, you can either:
- Buy a liquor license privately on the open market from a place that’s closing their doors
- Apply through the city and wait for a bar in your chosen neighborhood to have their license revoked due to violations, defaulting on payment, or sitting on an unused license for a year
One of Christine Puglini’s jobs as Chair of the Licensing Board is to review the police reports that come in when bars or other places with liquor licenses receive violations. The licensing board determines whether or not to have a hearing to revoke a license. You better have a lot of patience if you choose Option 2. DeMariano says the city doesn’t often take licenses back, and owners tend to play by the rules because they know they are sitting on very valuable assets in their liquor licenses.
How valuable? DeMariano says a 2 a.m. all-alcohol license designated for Boston’s happening Back Bay and South End neighborhoods are worth $390-$450 thousand dollars. Every time he’s opened a new place, he’s purchased the license along with the lease, furnishings, and equipment, which is often the way to go. The licenses he owns are valued at $350,000 and $400,000.
DeMariano and his partner are now in talks about opening a new place so what do they do? They hired a Liquor License Broker to get the feelers out and let them know when an unrestricted, 2 a.m. license becomes available. That’s right. There are liquor license brokers here in Boston, whose job it is to keep a finger on the pulse and notify their clients when liquor licenses are about to become available.
Even if you hire a broker and buy your liquor license on the open market, you still need to apply for a license transfer through the City of Boston’s Licensing Board.
On September 1st, 2014, they granted 20 new liquor licenses (15 all-alcohol, 5 beer and wine) and will continue to release 20 more every September 1st.
While this does mean more bars and restaurants in Boston, it is not exactly an extension of the 650 all-alcohol licenses cap. There’s a catch. The licenses are designated for specific neighborhoods (i.e. Dorchester, East Boston, Hyde Park) to promote economic growth. They’re also restricted licenses, meaning they can’t be sold privately. The bar owners won’t actually own the licenses and be able to count them as an asset like DeMariano does with his. If a place on a restricted license closes down, the license goes back to the city to be earmarked for the same neighborhood.
Pulgini takes us through the actual application process. She says it’s the same whether you’ve purchased an unrestricted license privately that you need to transfer, you’re applying for a transfer from a bar that has its license revoked, or if you’re applying for one of the new restricted licenses available in certain targeted neighborhoods.
Step 1: Applicant submits:
- A lease agreement proving you have the space
- 3 checks ($100 processing fee to the city of Boston, $170 to the Boston Herald for required Public Notice Ad, $200 for the state Alcoholic Beverages Control Commission)
- 3 months of personal or corporate bank statements
Step 2: The City Councilor in the area is notified and Mayor’s office Neighborhood Services set up a community meeting. Applicant must flyer all abutters and those within 300 feet of the premise, attend community meetings, and do community outreach.
Step 3: A hearing occurs 3-4 weeks after the application is submitted.
Step 4: If approved at the hearing, the license application heads to the state Alcoholic Beverage Control Commission for financial and background checks.
Step 5: 8-10 weeks after the hearing it comes back from the ABBC. If approved, owner pays $1800 annual fee for a beer and wine license or $2800 for an all-alcohol license plus, if a restaurant, $1 per seat in the dining room.
Step 6: The bar owner can pick up their liquor license to be posted visibly on the wall in their new establishment.
Of the liquor license caps in the city of Boston, Demariano says “There are rumblings of the caps being lifted, but I can’t imagine it ever happening because the current owners spent a lot of money on their licenses. It would devalue our asset, which we can leverage as it is. My business partner and I mortgaged our first homes to buy our first place. There would be a huge legal battle if they just released a whole bunch of licenses. It is what it is. For the most part, if you operate correctly and have the right concept, you can make your money back. Like anything else it’s a risk that you take, and if you want to do it, you take those risks.”
Pulgini says if it’s less expensive to buy liquor licenses in other states, it’s because those states don’t have any caps. When it comes to the future of liquor license caps in the city of Boston, she says “who knows? Things could change, especially if the Olympics come here. Boston is a very friendly city when it comes to applying for liquor licenses. We’re encouraging growth, especially under the current administration.”
DeMariano advises all those looking to open a bar in Boston: “there’s a lot more that goes into it than people think. It’s affordable and achievable depending on what you want to accomplish. People need to do their homework on their location, and make sure the licenses they have are the ones they want. If money is a concern, look in other neighborhoods, other areas. Anything is achievable if you believe in it. Just be prepared for a lengthy, costly process if you don’t get your license from the city.”