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