If you want to open a successful and thriving restaurant in the heart of California, you need to withstand the high-pressure industry and survive the high competition rates. This means that you have to spend more time and financial resources to see your establishment get ahead. Admittedly, adding alcohol to your menu is one of the most crucial facets of your business profitability. In fact, most restaurateurs agree in saying that a massive chunk of their overall profit comes from alcohol sales.
When you’re operating a restaurant in California, acquiring a liquor license and the cost of liquor license transfers are hefty. It’s also time-consuming and tedious. However, these challenges don't change the fact that it’s necessary. If you’re not sure how much it will cost you, read on as we discuss essential information to help new restaurant owners estimate the cost of their liquor license.
What agency regulates the issuance of liquor licenses?
The Department of Alcoholic Beverage Control (ABC) is the agency that regulates the whole liquor licensing process in California. They used to be a Commission before the 1950s; they became a leading alcohol permit-issuing agency in the state since then. However, issuing licenses is just one of their functions. Aside from this, they can also suspend, revoke, or deny any valid and subsisting alcohol permit. Each Californian county has a fixed number of liquor licenses that they can issue.
When all licenses have been exhausted, there’s no refilling. They can’t manufacture licenses or add more license numbers to accommodate more restaurants wanting to sell alcohol. So, if you’re a budding restaurateur, what will you do? This is where the transfer of license happens. You can purchase an existing liquor license from a holder of a valid pre-issues license. The issue here is since it’s in a seller’s market, the prices of the said licenses can skyrocket!
How do you choose the correct license?
The cost of the license is not only the part that’s challenging. Finding a permit is another hurdle budding restaurant owners need to face. The availability of these licenses depends mainly on the license type and business location. If your business is an eating establishment, you need to get a Type 41 or 47 license. The former permits the bearer to sell wine and beer with food, while the latter allows the business owner to sell spirits, wine, and beer. Between the two, the latter is more costly and harder to secure in restaurant-saturated areas.
How much does it cost to secure a liquor license?
California offers four different types of liquor licenses that need to be purchased from pre-issued licenses in the open market, and these licenses include the following:
- Type 20 - For convenience stores (allows off-sale of wine and beer only)
- Type 21 - For liquor stores and markets (allows off-sale of full liquor)
- Type 47 - For restaurants (allows on sale of full liquor)
- Type 48 - For nightclubs and bars (allows on sale of full liquor to 21 years old and above)
The rule that these licenses should be purchased within the open market exempts buyers of the type 20 license. In their case, they can still directly get the permit from the ABC. Then again, even if you need the type 20 license, but you’re bound to operate within the designated moratorium area, you still need to get it from a private seller.
When it comes to the cost, the identifier is the type of license you want and your business location. For example, a type 41 liquor license is less pricey than other license types since it only allows the holder to sell wine and beer. This is the reason why some restaurateurs choose this path and instead offer cocktails from rice wine.
Restaurant owners who want to get a type 47 license should be prepared to pay exorbitant fees. In some counties, these licenses are sold for thousands of dollars. In metropolitan areas, business owners are often forced to pay millions to get their hand on these in-demand licenses. Determining which license you want to get will help you better prepare your budget and options.
Also, within the counties, the most expensive liquor license are those for the full liquor category. These licenses can cost you somewhere between $12,000 to $400,000. If you only want to sell wine and beer, you can get your license for as low as $3,000 to $5,000.
You see, the current market value of these licenses is based on the law of supply and demand. Suppose you can contact a seller directly, the better. However, if this is difficult for you, it’s best to work with a liquor licensing attorney or a reliable license broker. You also need to know that to proceed with the license transfer legally, you need to establish an escrow. It’s not good practice to buy your license from a website auction since you won’t be able to review the financial holds and conditions bestowed on the permit. Lastly, ensure that the people you commission to help you secure the license are insured and bonded. These simple precautions can help you avoid minor and major headaches along the way.