Food and drinks naturally go together, so obtaining a restaurant liquor license is worth considering.
However, it’s not always a slam dunk.
You may find that the potential for increased profit is outweighed by the ongoing costs and inconveniences involved in serving alcohol.
When determining whether to get a license, here’s what you should know.
Know the Positives
Acquiring a restaurant liquor license has the potential to do a number of good things.
First of all, alcohol is profitable.
Restaurants survive on razor-thin margins, and although each market is different, you can usually mark up alcohol more than your food.
Even better, alcohol can be a nice addition to your menu that can keep diners in their seats and ordering food for much longer than they otherwise would.
If you form partnerships with local wineries or craft brewers, your beverage list could even become a key competitive advantage.
On a pragmatic level, having just a beer and wine license can prevent you from losing customers to rival licensed establishments nearby.
Before you take the plunge and start your application, research local laws that cover the sale of alcohol.
You’ll have to comply with state and county legislation, and many municipalities attach additional conditions or restrictions.
For example, you may not be able to get a license if you’re too close to a church or school. Or if you’re in an area that’s already rich in licensed establishments.
Be sure you understand the application process itself and have all the necessary documentation at your fingertips.
You may find it helpful to work with a professional liquor license consultant, who can handle the details in exchange for a fee.
Pick the Right Restaurant Liquor License
The terminology varies between states, but your choices usually come down to a basic beer and wine license or a full license that also permits the sale of hard liquor.
A beer and wine license is the easier option.
It usually costs less, and if you’re a small operator, you might only need to allocate a single cooler to hold your inventory.
A full license is a bigger deal because you’ll need to commit to a much larger inventory. At a minimum, you’ll not only need just the staples—spirits. Vodka, gin, rum, tequila, and whiskey should do the job.
In addition to wine and beer—you’ll also need to invest in appropriate mixes and garnishes.
If your clientele tends to order cocktails, those can be a substantial additional expense.
Know the Fees
I know you might be wondering “how much does it cost to get your liquor license?”
The restaurant liquor license cost is also wildly variable, depending on where you live.
It can range from a few hundred dollars in some states to thousands, in others.
Over time, you’ll most likely make that back through sales, but it’s a factor to consider if you’re working with a limited budget. A larger issue is that some areas have a moratorium on new licenses, meaning you’ll have to buy an existing license on the open market.
For example, a full liquor license in California sells for $12,000 (at the time of writing), but few are issued—only 25 for all of Los Angeles County in 2015. And buying one on the open market can cost hundreds of thousands of dollars.
If you live in a moratorium area, you will almost always need a mortgage-style loan to purchase your license.
It’s not all bad, though.
Similar to a house, you’ll be building equity in an appreciating asset, and eventually you can sell it to recoup that investment.