Rising Liquor License Prices

rising liquor license pricesWith Independence Day looming, images of Philadelphia, home of Independence Hall and the Liberty Bell abound. The city associated with American independence is also associated with rising liquor license prices.

Pennsylvania is one of 17 states that use a liquor license quota system. Philadelphia has seen liquor licenses steadily increasing in value. Licenses that sold for approximately $60,000 in late 2012 saw a 30 percent jump in about six months, according to Philly.com’sLiquor license a hot commodity in Philadelphia.”

Even price of $85,000, a liquor license in Philadelphia may seem like a steal compared to another city steeped in American history: Boston, where licenses most recently were valued at four times that amount. Once again, like the real estate market, the key is location, location, location.

A Million Bucks for a Liquor License?

As we shared in last week’s “Liquor License Quotas: Supply, Demand, and Value,” not far from Philadelphia in Cherry Hill Township, NJ, restaurateurs paid $1.6 million for a license of a now-defunct restaurant. However, a million bucks for a liquor license isn’t limited to high-population, big cities and surrounding areas.

Across the country, in New Mexico, liquor licenses sold for nearly a million dollars. New Mexico Regulation and Licensing Department records show that two retail licenses (allowing the sale of beer, wine, and spirits for package sales), sold for $975,000 each in Rio Rancho in February 2013.

CapitolReportNewMexico.com notes in “A million bucks to sell booze? Liquor license in New Mexico definitely top shelf” that there are just over 1,400 full liquor licenses available statewide. Licenses to sell beer and wine are less expensive and more readily available. The quota system in New Mexico isn’t extraordinarily strict. It limits licenses to one per 2,000 in population. The math skews in limiting the number of licenses because of fewer people.

With the quota system in place, owning a full liquor license is like sitting on a gold mine… maybe. On one hand, one restaurateur, Marci Dickerson, owns four liquor licenses in Las Cruces, NM and is on a waiting list to buy a fifth. (Fronteras’The High Cost of a Liquor License in New Mexico.”) She expects to pay $400,000 for the license to open her fifth restaurant and notes that she could open three restaurants for that investment 45 miles away in Texas.

On the other hand, owner of The Brown Derby Nightclub, Gilbert Gomez, in Santa Clara, NM would like to retire, but he can’t sell his license and transfer it out of the municipality because it is the last remaining license there. He’d need to find a buyer to purchase it and continue operations in Santa Clara.

In Gomez’s case as in many others, a broker makes all the sense in the world. With rising liquor license prices in quota states, a good liquor license broker is the key to matching the right seller with the right buyer.