While running a bar might not make you rich, being the owner of a state liquor license could be worth some cash.
Beginning July 1, a new state law will allow the holder of a state alcohol license to sell it to a qualified buyer, something that has previously been prohibited.
Buying and selling alcohol licenses
Beginning July 1, a new state law allows those who hold a state alcohol license to sell it to a qualified buyer. Here are some of the restrictions:
» Alcohol licenses can be sold to another person whether it is for the same location or a different premise. However, the license must remain in the same county as issued.
» The buyer must meet a list of qualifying factors to hold the license and must have satisfied all tax debts.
» The buyer must begin operations within 30 days or forfeit the license.
» There is a transfer application fee of $300.
» The seller must notify all creditors that the license is being transferred; unpaid creditors can file claims.
» All transfers are subject to approval of the state liquor commission.
It’s "free enterprise," said Sen. John Valentine, R-Orem, who helped sponsor the alcohol license "transfer" law in 2012.
While Utah liquor licenses have technically had no monetary value, "there’s always been these sort of underground transfers," he said. Business owners worked behind the scenes to purchase bars, taverns or restaurants to get the alcohol license, skirting the state application process and, in some cases, leaving unpaid creditors in the balance.
"My whole thesis was to bring it above ground so it’s out in the open," Valentine said. "It will allow for public hearings and will make sure all those things are aboveboard."
There was significant opposition to the transfer law when it was proposed, namely from the restaurant and hospitality industry. Those groups worried about companies with large pocketbooks buying licenses and holding on to them to drive up the value.
Valentine said provisions were added to the law to help ease those concerns, including a requirement to begin business within 30 days. But with emotions high, lawmakers postponed the effective date to July 1, 2013. As that date neared, lawmakers moved the effective date back another 12 months.
In 2014, a year when the Legislature left Utah’s liquor laws relatively untouched, Valentine — who more than any other lawmaker has shaped Utah alcohol policy in recent years — said he saw no reason to postpone the issue again, setting the sale of liquor licenses into motion.
Buying and selling » So what is a state alcohol license worth?
It all depends on supply and demand, said Melva Sine, leader of the Utah Restaurant Association, which was one of the groups that opposed passage of the transfer law. Alcohol licenses for restaurants and beer-only taverns are relatively easy to get through the Utah Department of Alcoholic Beverage Control application process and probably won’t fetch a high price, she said.
But club licenses, which are limited in Utah, might garner a nice wad of cash for a bar owner.
"Where there is a market, those are going to be heavily valued," said Sine, who wouldn’t speculate on a price. "No one knows that because we’ve never done it. We’ll have to wait and see what this does to the marketplace."
There are more than 12 businesses waiting for a club license, which allows customers to drink wine, beer or spirits without also ordering food. And businesses with club licences are not required to have a bar enclosure dubbed a Zion Curtain to keep drinks out of view of minors.
Each month there is usually only one license — but sometimes zero — available, so most applicants wait at least a year to get approval.
Park City businessman Steve Demarest is currently ninth on the list and hopes to secure a club license by November so he can open Fletcher’s, an upscale lounge with dining at 562 Main St. If a club license isn’t available, he might have to settle for a full-service restaurant license, which would require a Zion Curtain.
"It would be worth it for me to pay a premium and have piece of mind that I wouldn’t have to go the restaurant license route," Demarest said. And his price for peace of mind?
"I’ve thought about it and I think $30,000 would be my threshold," he said. "Any more than that and it makes more sense to stick it out and wait."
But that would depend on finding someone in Summit County willing to sell a license — or not being outbid by a company with a bigger checkbook.
Next steps » The state liquor commission, which is charged with granting all alcohol license transfers, is expected to discuss the new law at its monthly meeting, on Tuesday, said spokeswoman Vickie Ashby.Next Page >
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