Liquor Laws and Licensing for Your Bar or Restaurant
People decide to run restaurants and bars for many reasons. Some love the idea of working with people, while others are driven by a passion for their craft. Still, the food and beverage industry is inherently high-risk. One of the most over-looked and difficult things about opening a bar or selling alcohol in your restaurant is the need to follow stringent laws and obtain the appropriate licenses. Before you open a bar or begin to consider offering alcohol in your restaurant, you must understand the laws in your area and how you can get the right permits or licenses to serve alcohol.
First and foremost, you need to familiarize yourself with your state’s liquor laws, also known as Alcoholic Beverage Control (ABC). Every state has its own ABC agency which controls everything from wholesale distribution to retail sale of alcoholic beverages. These agencies determine what types of liquor can be sold, what selling hours can be, and other limitations such as whether liquor can be sold on Sundays. They also determine qualifications required for obtaining liquor licenses, the applicable fees, and liquor license quotas. These requirements may vary between cities or counties, and just about always varies by state. You need to inform yourself so you know exactly what your state and city require, and how to comply with all requisite laws.
Liquor Licenses and Permits
No matter how you look at it, the most important license for the bar owner is the liquor license. This is the license that will allow you to sell or serve beer, wine or spirits from your establishment. Because serving alcohol comes with so many responsibilities and inherent risks, there are special requirements and a special license. However, actually obtaining a liquor license is no piece of cake, and you need to get started early. The smartest option is to make this part of your business plan and to do the research well in advance so you can anticipate the length of time to obtain the license, the initial fee and any additional yearly costs.
Liquor License QuotaSome 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.
Obtaining a liquor license or permit is essential for bars, restaurants and retailers that plan to sell, serve or otherwise distribute alcoholic beverages to guests on the premises. Liquor permits are usually required for alcohol wholesalers and production facilities. There are different types or classes of alcohol licenses and permits that are required, depending on the establishment and the type of alcohol being sold. The license types may be laid out by your state’s individual Department of Alcoholic Beverage Control, but for the most part the type of liquor license required depends on the type of establishment. For example, a convenience store selling beer will require a different license than the neighborhood tavern selling beer, wine and liquor. Depending on the type of establishment you run, you may even be required to sell a certain percentage of food alongside your alcohol. It just depends on the requirements laid out by your state’s ABC.
In some states it is easier for a bar to obtain a beer and wine license than a license for spirits. Sometimes you can even get an existing liquor license transferred to your ownership when you take over an existing restaurant or bar, but it depends on the local authority. There is no cookie-cutter method of getting a liquor license. This is where a lawyer can really come in handy. With someone else helping you sort through all the logistics, you have a better chance of making sure you have all the details covered.
Qualifications to Obtain a License
Basic qualifications to receive a liquor license vary between cities and states. However, many of these qualifications have the same general requirements:
- Legal drinking age. The person applying for the liquor license must be of legal drinking age.
- Residence. Some places require you to live in a certain location for at least 90 days before applying.
- Clean personal history. Personal and business background-check must be free from criminal activity.
- Seller’s permit. You must be permitted by the state Department of Revenue first before you begin selling anything.
- Training course completion. Some locations require the completion of a responsible beverage server’s training course before a license can be issued. Look here for information about TIPS (Training for Intervention Procedures), a global leader in alcohol training programs.
Once you submit your application to the proper governing body of your city or state, the process begins. 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 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 bar, liquor store, or establishment that serves or allows liquor on the premises, consider starting the process of applying for a liquor license. 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 is one of the first things to think about so you can fit this cost into 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 $800.1
When should I start?
Hire ProfessionalsStarting a new bar is a big undertaking. Although you are no doubt looking for every opportunity to save money, do not overlook the importance of hiring some people who know what they are doing. In short, give serious consideration to hiring an accountant and a lawyer. An accountant will use his or her expertise to help you set up your financial system, review your restaurant’s numbers and take care of all tax returns. A lawyer will make sure you cover all your bases as an emerging business, and that you adhere to all applicable laws.
The sooner you start the process of obtaining a liquor license, the better. The time it takes to actually post the license application request in local newspapers can take anywhere from a month to a year, and so this is really one of the very first things you should do when opening a restaurant or bar. If this is something you are thinking of adding on to your current establishment, 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.
List of Departments of Alcoholic Beverage Control by State
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