Thinking about starting up a bar or possibly adding one to your existing business model? If so, it’s important to consider what you’ll need to do before customers can belly up for happy hour. First, you’ll need to get familiar with your local liquor laws. Next, you’ll need to get a liquor license before you can sell a single drink. Let’s take a look at how to get started.
Each state has an Alcohol Beverage Control (ABC) agency dedicated to liquor laws. The ABC controls everything from wholesale distribution to retail sale of alcoholic beverages.
These agencies determine:
- The types of liquor that can be sold
- What hours your business can be open to sell liquor
- Any other regional limitations, on when or where liquor can be sold
- Qualification for obtaining a liquor licence
- Liquor license fees and quotas
Liquor laws often vary between cities, counties and states. It’s important to inform yourself on exactly what your state and city require, and how to comply with all requisite laws.
Liquor Licenses and Permits
Your bar cannot legally operate without a liquor license. Serving alcohol comes with many responsibilities and inherent risks. Because of this, there are special requirements a business owner must meet before receiving the right to serve and sell alcohol. And receiving a liquor license is no piece of cake, so you’ll need to get started early. The smartest option is to make the liquor license part of your business plan and to do the research well in advance. This way you will be able to anticipate the length of time it will take to get the license and any initial or yearly costs associated with it.
Liquor License Quota: Some states have what is known as a liquor license quota in place. Based on the local population and the number of licenses already in effect in the community, some agencies will only allow a certain number of establishments in the area to actually obtain liquor licenses.
Types of Liquor Licenses
There are different types, or classes, of alcohol licenses and permits. Each state lays out its own individual types of licenses and permits. These are often categorized by the type of alcohol that is being served. Licenses and permits are also typically dependent on the type of establishment. For example, in the state of Colorado there are 19 types of licenses and permits to sell alcoholic beverages. A few of these include:
- Arts License: for the sale of alcohol by non-profit corporations and municipalities to patrons of cultural and artistic performances
- Art Gallery Permits: for alcohol service at an art gallery – no more than 15 days per year
- 3.2% Beer License: Permission to sell fermented malt beverages (3.2% beer) to the public for consumption
- Beer and Wine License: Permission to sell beer and win only for public consumption
- Bed and Breakfast Permit: Permission to provide complimentary alcoholic beverages for overnight guests during limited hours
- Brew Pub License: Permission to manufacture and sell beer, wine and liquor to the public for consumption
- Club License: Permission for non-profits to sell beer, wine or liquor to members and their guests for on-site consumption
- Delivery Permit: Permission to deliver sealed containers of alcohol
- Hotel and Restaurant: Permission for restaurant and hotels with restaurants to sell beer, wine and liquor to the public for consumption
In some states it is easier for a bar to obtain a beer and wine license than a license for spirits. And in other cases, you can get an existing liquor license transferred to your ownership when you purchase an existing restaurant or bar, but this all depends on the local authority. There is no one-size-fits-all method of getting a liquor license. That’s why it is often recommended to hire a lawyer to help sort through the logistics and filings.
Qualifications to Obtain a License
The basic qualifications to receive a liquor license will vary between cities and states. However, a good chunk have the same general requirements:
- Legal drinking age. In order to reserve the right to sell alcohol, you need to be of legal age to consume it.
- Residence. You may be required to live in the same locale as your business for at least 90 days before applying.
- Clean personal history. A tarnished criminal record could impede your ability to obtain a liquor license.
- Seller’s permit. The state Department of Revenue will need to give you a seller’s permit before you begin selling anything.
- Training course completion. Completion of a responsible beverage server’s training course may be required before a license can be issued. Look here for information about TIPS (Training for Intervention Procedures), a global leader in alcohol training programs.
Submitting the Application
The process begins when you submit your application to the proper governing body of your city or state. This can take anywhere from a month to a year, depending on the location and any issues that arise. Typically, the application is posted in a local newspaper, on your store front or in another designated public space for a set amount of a time, during which the community can review the application. Anyone from the community can contest the application for just about any reason. If there is an issue, the application is brought before a local licensing authority, or even a town board, depending on the situation. There may be conditions assigned to the application, too, to cover potential noise violations or traffic issues. After examination, the board can decide whether or not to grant the license, or it might be put to a vote.
Important Questions to Ask
When considering opening a business that serves or allows liquor on the premises, it’s wise to start the process of applying for a liquor license right away. Here are some important things to think about before moving on:
How much will it cost?
The cost of a liquor license varies from location to location. In fact, this an important step to outline in your initial business plan. The fees associated with getting a liquor license usually have to do with the type of establishment and the population of the city. For example, in California, the fee for a typical restaurant in a city with a population over 40,000 can reach $12,000 with an annual renewal rate of over $800.
When should I start?
The sooner you start the process of applying for a liquor license, the better. The process can take anywhere from a few months to a year. If this is something you are thinking of adding on to your current establishment, err on the side of caution and allow for at least a year to get the final license in hand, assuming everything proceeds accordingly.
Is insurance important?
If you are planning to sell or serve liquor for the first time, insurance is very important. Because alcohol sales is a risky business, liability insurance is a must. Liquor liability insurance will not cover sales that contradict the law, such as sales to a minor, yet it will cover things like assault charges if fights break out, or medical charges if someone gets hurt as a result of drinking in your establishment. You will find that your lawyer—and possibly a professional accountant—will be very useful in this area.
Learn More About Managing Operational Risks
Where do I apply?
Search online, go to your library or look in the list below for information on your state’s Alcoholic Beverage Control agency. There is usually a good deal of information available online to guide you, especially if you are applying for the first time.
Running a bar is a big undertaking, and abiding by the law is part of it. Be sure that you have all your ducks in a row when it comes to obtaining the appropriate license for your establishment.