Everything you ever wanted to know about: LIQUOR LICENSE (continued)

As I was saying…

The two major liquor licenses for a restaurant in California are the TYPE 41 and TYPE 47.  These require that you serve real meals as a substantial portion of your gross sales.  The important difference (in terms of use of the license) between the two is that a TYPE 47 allows you to serve hard alcohol, whereas a TYPE 41 only allows beer, wine, and a few notable exceptions as loopholes to the rule.  

However, there is an incredibly important difference in the process of obtaining the two license types, which is why obtaining a license in a given location can be a deal breaker for some projects getting off the ground, and should always be a contingency in a RESTAURANT LEASE (more on this topic later).

A TYPE 47 license is readily available if you can complete a hefty amount of paperwork, shell out $300, and wait for 6 months (at the most).  This is referred to as an “original” license as it is sold by the ABC and they are effectively unlimited in the state of California.  You can also “transfer” a license from an existing business for a fee of $100.  This is a paltry sum when compared to the potential costs associated with a TYPE 47 license, but no hard alcohol for you or your customers!

In contrast, the total number of TYPE 47 licenses available in a given County in California is limited as a factor of the total population density of the county.  That is, there are only allowed a certain number of active TYPE 47 licenses in San Francisco, and no “original” licenses can be created unless we see a huge increase in population.  In fact, I heard from a rep at the ABC that by some clerical error, there are currently too many licenses for San Francisco County, meaning it is unlikely that any original licenses will be created in this county in our lifetime.  Rats. 

So, how do you get that coveted TYPE 47 license? 

Since all the existing licenses are already spoken for, a TYPE 47 must be purchased on the “open market” from an existing or closed business.  If you think back to Econ 101 days, this means that the pricing will fluctuate by the forces of supply and demand—if many new restaurants with cocktails bars are opening and there is a limited number of licenses, the sellers can up the prices and still sell in a timely way.  If wine and beer bars are hot right now, the prices will drop.  While this can be off putting for many would-be operators, remember that your business owns the license and it should be treated like an asset that could go up or down in value.  For example, when we opened AQ in 2011 we purchased our license from a closing Chinese restaurant for $85,000.  It seemed like a huge cost at the time.  Today in 2015, however, many licenses are being sold in the $250,000 to $325,000 range!  So in theory the asset of our liquor license has actually appreciated in value more than 200% in 4 years.  Not too shabby of an investment. 

Of course, we love our elaborate cocktails too much to ever consider selling!

Spring cocktails at AQ Restaurant & Bar

Spring cocktails at AQ Restaurant & Bar

Everything you ever wanted to know about: LIQUOR LICENSE

So you want to sell booze to your customers?  Read on. 

The Alcoholic Beverage Control (Pleasantly abbreviated as: "ABC") is the gatekeeper and enforcer of all things related to buying and selling liquor, wine and beer in California.  There are a huge number of licenses available to the would-be booze monger, distiller, wine bar, micro-brewery, bodega, supper club, theatre... etc.  Here's a list of the license types available according to the ABC website: https://www.abc.ca.gov/permits/licensetypes.html

However, this list doesn't tell you much about what each number represents.  In fact, that information is buried deep in the California Code.  Why? I'm not sure.... you'd think this information would be readily available! I'll track down the full list and post once I find it. 

The ABC does offer up this list of the "Most Common License Types and their Privileges" https://www.abc.ca.gov/forms/abc616.pdf which, to be fair, is probably what you want.  This covers bars, restaurants, clubs, bottle shops, breweries, caterers, B&Bs, tasting rooms.  Chances are you fit into one of these categories.  If you want to open a restaurant, you probably want a TYPE 41 or a TYPE 47.   

Liquor licenses are divided into two distinct categories: ON Sale and OFF Sale. This refers to the licensee's right to open a bottle of wine/booze/beer and serve it to a customer for consumption ON the premises vs. OFF the premises.  For example, the holder of a TYPE 21 ('Off Sale General") license, CANNOT open a bottle of wine and pour a glass for her customer.  The bottle must be sold for consumption OFF the premises.  Make sense?

The difference between a TYPE 41 and 47 is hard alcohol.  A TYPE 41 allows the sale of, "wine and beer" but also includes some notable exceptions, like Sake, that are higher in alcohol but not distilled, which is the important distinction.  Some items, like Sake, are also allowed as "cultural exceptions" which are petty arbitrary, in my opinion.  What if in my culture we have to drink gin??

There are some other loopholes to the rule that enable some great cocktails to be made with a TYPE 41 license:  Sherry, Vermouth, and Bitters are all allowed with a type 41 license, even though some of them have an ABV (alcohol by volume) percentage as high as bourbon or vodka.  More on Loopholes another day...

Another important caveat of both the TYPE 41 and TYPE 47 licenses is that the licensed establishment must be a "Bonafide Eating Place".  Although I love the use of the term "bonafide" it is not super specific.  Really the rule is that a certain percentage of total sales must be food (51% iI think). And don't try to sneak by selling lots and lots of chips, salsa... You must sell hot meals that the ABC considers actual food, not just snacks.  They'll ask to see your menu, just to make sure.  Generally the idea beyond this rule is to avoid your place become a BAR that primarily sells Alcohol.  The ABC works closely with the Zoning Department and the SFPD to ensure that neighborhoods don't become overrun with late night bars and clubs.  If there is a high concentration on your block, your license request may be denied. 

So, if you want to have a kick-ass craft cocktail bar within your restaurant, or simply be able to serve a great Martini as the first of 28 course on the tasting menu, you'll need a TYPE 47.  If all you need is a great wine list and a couple draft beers, stick with the TYPE 41.   So, if the TYPE 41 limits me to wine and beer only, you might ask, "why not get the 47"? No brainer, right?   

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$  <-- That's why!   To be continued.....  

Rules should be easy to find.

As before mentioned, there are lots of rules you'll need to follow to open your restaurant in a timely (and legal) fashion. Presumably the various agencies that define and enforce the rules want you to obey them for the sake of public health, fire safety, building code, adequate plumbing, etc. So why, I ask, are these rules so damn hard to find? 

Apparently many of these rules and regs are federal, while the enforcers of the rules are local (i.e. the SF Planning Dept enforces the federally-passed ADA (Americans with Disabilities Act). AND, the federal laws are, naturally, not restaurant specific, so you're going to have to dig through pages and pages of irrelevant regulations to get what you want. I am piecing together a concise checklist of relevant laws that I haven't been able to find yet online. Stay tuned.

So Many Rules

A major goal of this blog is to chronicle the myriad rules, regulations, requirements, codes and protocol you must follow to open a restaurant here in San Francisco, CA. There are LOTS.

I hope to translate what--at times--can be the seemingly foreign language of legislators, the health department, plumbers, planners, contractors, and the other characters you will encounter on the inglorious path to opening your own restaurant, into a concise check list of steps to opening day. Perhaps I'll keep a running list (over on the sidebar there) of all the agencies you will become intimately acquainted with once you've really decided to go for it.