After you’ve come up with an idea for your bar and have decided that you want to take it from a dream to a reality, this is the next crucial step that you need to start working on. (Click here to get started!) Every bar or business that serves or sells liquor in anyway must have a license in order to operate and getting one can be a long and challenging process. I can’t stress enough how important this is to make sure you start the process of getting your license as early as possible when starting up your bar.
Each state (town or country) has its own governing agency responsible for licensing businesses to sell liquor and depending on the system in your area, getting this license could take a year or more. Don’t be discouraged by the amount of time it may take to get the license; like any other business, you will have to be working on multiple things at the same time; and the time is going to pass no matter what you do, so begin the process as soon as possible and use the time to work on other aspects such as market research, securing funding, menu planning, etc.
Also, many counties and towns within a single state can have additional rules about requirements and licensing procedures. It is impossible to go through every state or even country’s laws, but this will give you a general idea on how to get a liquor license.
The cost of a liquor license varies greatly; which is another reason to start the process early and figure out exactly how much money you need to start your bar (your overall “project cost”). Keep in mind also that many communities limit the number of liquor licenses they issue, so you may need to buy one from an existing bar (for example in the case of taking over an existing bar) or even a license broker, which can wind up costing thousands of dollars. Given the fact that this will be the cornerstone of your business and basically your “license to print money” make sure you have a lawyer who has gone through the process before, ask as many questions as you need to feel comfortable, and make sure you understand the whole process.
Sometimes a town will issue a new license when the population increases. Go to the governing body 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 will require an initial license fee and will be valid for a year. If you keep your license in good standing, you can probably get an automatic renewal for a smaller annual renewal fee.
Local governing agencies offer different classes of liquor licenses, depending completely on what you will be serving, the proposed location of your business, how you plan on serving it, and of course who you will be serving it to. All these factors will ultimately affect how much you will have to pay for your license.
A few examples of the types of classes you may find are:
- Tavern:Some areas may require that offer a food menu. If you serve food but half of your sales are alcohol, your governing agency may require you to apply for a tavern license, however this may not be the case in your area.
- Beer and wine:This as the name suggests will only allow you to serve beer and wine. In some cases, small restaurants (roughly businesses with 40 to 100 seats) can get only this type of license; and of course you cannot sell liquor or distilled spirits.
- Restaurant: This particular license usually requires that only a certain percentage of your sales come from alcohol. Percentages vary by area; however you may find that most requirements fall somewhere around 40% mark. Like in the case of the “Beer and Wine” license, some areas may have a minimum seat requirement to qualify for this license. A restaurant license usually allows you to serve beer, wine, and liquor. Some people call it an all-liquor license for that reason.
- Club:Clubs that have private membership such as country clubs, golf clubs, etc, are eligible for a separate license allowing them to serve alcohol to their members. This again may vary by your particular geographic area so again be sure to check your local governing agency’s requirements and ensure whether or not you are allowed only to serve beer and wine in clubs, or if you are licensed to serve all liquor.
In certain counties, local governments mandate that alcohol may not be sold within its borders. These counties are known as dry counties. If you find yourself in such a county, look to see if there is an exemption for private clubs.
In this case some bar owners will look into getting a club licenses and then create a policy, selling membership cards to their patrons (for example $1 for a lifetime membership), and can then sell them cocktails and operate successfully.
- Brewpub:For microbreweries and places of this nature that brew their own beer, you may need a separate license to serve it to the public. Check your local governing agency for details.
Some states issue an alternating premises, or AP, liquor license for places like wineries and breweries that allows these establishments to brew and ferment alcohol at certain times and serve patrons at other times.
Important things to remember when applying for your liquor license
- You’ve got to write a clear description of your business during the application process. This should include everything from the type of business you will be running, stating your intent to sell alcohol for consumption on the premises, what percentage of total income you expect to get from alcohol sales. Make sure you also include the type alcohol you will be serving (beer, wine, hard liquor or all of the above). This is important because some types of alcohol (e.g. hard liquor) require a specific license as we mentioned above.
- You can get the necessary forms for the license application from your local agency.
- The application require details such as your age, personal record, and your business experience which the governing body will use to make the decision to grant you your license. Other necessary documents may include proposed food menu, partnership agreement, certificate of incorporation, photos or building drawings, etc.
- Be prepared to defend your proposal. After you submit your application, a notice is posted at the proposed location of your business including your name, type of license and what your license entitles you to sell. The notice is displayed publically and allows anyone in the community to come forward and contest the application. Depending on the laws where you are, you may also be required to post an announcement in your local paper. If there are no objections your application will be reviewed and a final decision can be made.
- Once you’ve gotten approved for a liquor license, all you have to do is follow the rules to maintain it! This usually involves paying your annual renewal fees for the license and staying in “good standing” with the local governing agency. This includes not violating any terms of your license such as over serving alcoholic beverages to patrons or serving alcohol to minors, or allowing an intoxicated employee on the premises. Any of these violations can result in your license being revoked.
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