How to Run a Bar: Basics of the Liquor License Application - dummies

How to Run a Bar: Basics of the Liquor License Application

By Ray Foley, Heather Dismore

When you start to run a bar, don’t forget about the liquor license. Every bar that serves liquor must have a license to do so. Different agencies regulate the process in different states. Make sure you start the process of getting your license early in the timeline of starting up your bar. Depending on the system in your area, getting this license could take a year or more.

The cost of a liquor license varies greatly. The application fee and taxes involved may be only a few hundred dollars. But because many communities limit the number of liquor licenses, you may need to buy one from an existing bar (like the one you’re taking over, perhaps) or even a license broker, which can wind up costing thousands of dollars.

When buying and transferring a liquor license, make sure you have a lawyer who has gone through the process, and ask questions until you understand everything.

Sometimes a town will issue a new license when the population increases. Go to the town government to find out whether you can acquire a license this way and, if so, find out the bidding process. These licenses are usually awarded on a blind bidding scale, sold to the highest bidder. Again, consult with an attorney to walk you through the process.

Most licenses are valid for a year and require an initial license fee. If you maintain good standing with your local agency, you can probably get an automatic renewal for a smaller annual renewal fee. If, however, someone has filed complaints against you for overserving patrons alcoholic beverages, serving minors, or violating other terms of the license, your license may be revoked.

Make sure you allow plenty of time to go through this process. The timeline and process vary depending on where your bar is located, so check with your local office. Without a liquor license, you can’t serve liquor. And if you can’t serve liquor, you can’t run a bar.

Here are the general steps to follow when you’re getting your liquor license:

  1. Figure out which government agency issues licenses in your area.

    To find the agency that issues licenses in your area, conduct an Internet search using the name of your state combined with terms such as “liquor control commission,” “liquor control board,” or “alcoholic beverage commission.” You’ll likely make your way to your city government’s website.

  2. Research the classes of licenses in your area.

    Request a list from your local agency. Most agencies post descriptions on their websites.

    At some point, you’ll need to talk to a real live person about this. Many agency websites are woefully out-of-date, so don’t rely on them for the ultimate answer.

  3. Figure out which class works for your business.

    Based on what you find out, look at your business, your projected food-to-beverage sales, and so forth to determine which license you’ll likely need. Work with your attorney to make sure that you understand the details.

    You don’t get a choice of which class of license you need, per se. Rather, you put together all the information with the appropriate application forms, and the agency hands down a decision. Nuances and seemingly minor details can sometimes make the difference in how much you pay for your license.

  4. Contact the local agency to find out the availability of licenses, costs, the application process, and a timeline for getting the whole process completed.

    Your attorney may be able to handle this step for you, but make sure it gets done.

  5. Update your business plan with the information on the cost and timeline.

    Make sure that you’ve budgeted both the time and money to get your license before you open your bar. This step is essential, whether you’re using your own money or have partners, because if you don’t get it done, you can’t sell liquor. Revise your plan any time you run into a new schedule or budget factor.

  6. Apply for the new license or for the transfer of the soon-to-be purchased license.

    Again, this process varies from state to state, so make sure you complete Step 4 thoroughly so you know what to do.

In addition to your attorney, you may consider using a consulting company that specializes in obtaining liquor licenses. These companies can help you streamline your applications. They file your paperwork and the like — for a fee, of course.

Before you agree to work with any third party to secure a license, check with the state agency that issues licenses and your own attorney. You may be able to avoid additional fees and charges just by making a couple of phone calls. Your local agency may have a list of recommended brokers who handle the buying or selling of existing licenses.