Buying a Bar or Restaurant? Better Know these 5 Essential Tips for Serving Alcohol

Posted by Robin Gagnon on Jun 6, 2024 8:00:00 AM


If you're beginning your search for buying a restaurant, you may be focused on a diamond in the rough that offers a great opportunity for growth. Many people buying a restaurant focus their search exclusively on turnaround opportunities.

One way to add to potential of any restaurant is the service of alcohol, ranging from simply beer and wine to complicated mixed drinks and a full bar. If you are considering enhancing the menu offering of a restaurant —perhaps by adding a Sunday brunch complete with mimosas, it is crucial to understand the implications of incorporating alcohol into your business model when buying a restaurant. Adding alcoholic beverages can significantly boost your revenue, but it also comes with a set of challenges and legal considerations that you must carefully navigate.

Why Add Alcohol?

Incorporating alcohol into your menu can transform the economics of your restaurant. Typically, alcoholic beverages offer much higher profit margins compared to food. For instance, even the addition of beer and wine alone can substantially increase the profitability on every ticket. It’s not just profit that’s added through alcohol service, it also increases sales. The average cost of a single beer or glass of wine can elevate a customer's total bill by 30% or more, which translates into higher sales without the need to increase table turnover. Additionally, with higher bill totals come larger tips for your staff, since tips are often a percentage of the total bill. Clearly, there are significant financial incentives to adding alcohol to the menu of the restaurant you are planning to buy. Not only can you anticipate more sales and higher profits, but also happier staff due to increased earnings from tips.

Navigating the Transfer of Liquor Licenses

One common misconception is that liquor licenses will automatically transfer with the sale of a business. However, this is rarely the case. Most local licensing authorities require new owners to apply for their own liquor licenses. In some situations, you might be allowed to operate under the seller’s existing license temporarily via a management agreement until your own license is approved. This interim solution allows you to use the existing license while protecting the seller from liability.

Although obtaining a new liquor license can be more straightforward if the restaurant already has one, this is not guaranteed. If you're purchasing a restaurant without a liquor license, you're starting from scratch, and it's essential to be aware of what this involves. Spend time connecting with city hall on the requirements. These vary widely from town to town and county to county. Understand where you are buying a restaurant. Is it within the city limits or in the unincorporated portion of the county? That changes which liquor license laws you are subject to.

→Read also - Does the Liquor License Transfer When I Buy a Restaurant?

Tip #1 - Consider the Location Carefully

When buying a restaurant, location is key for many factors and that includes the service of drinks. Local laws often dictate that establishments serving alcohol maintain a certain distance from schools, churches, or daycare centers. Additionally, there might be restrictions on the number of liquor licenses issued within a particular area. In some parts of the country, like Florida, there are limited “Quota” licenses auctioned off each year and available for resale based on population. Understanding local ordinances and requirements are crucial elements to understand before buying a restaurant be sure that your business model is feasible at the chosen location.

Tip #2 – The Personal Element of Licensing

Unlike other aspects of buying a restaurant, obtaining a liquor license is a very personal matter. While buying a restaurant is generally all about your LLC or legal entity that does not hold true when it comes to getting an alcohol license. The process will likely involve a background check and fingerprinting. If you have a criminal record, particularly if it includes felonies, you could be ineligible to hold a liquor license. One workaround is to have the license issued in the name of a trusted partner, but this makes you reliant on someone else for compliance and operational continuity. It also places that other person at risk for all the items

Tip #3 – Local Residency Requirements

Many localities require that the applicant for a liquor license be a resident of the county where the restaurant is located. Non-residents, even if they own the business, often face hurdles in obtaining a license. For international buyers or those from different states, this can be a significant barrier. Some states, like Georgia, have stringent requirements regarding the legal status and residency of license holders.

Tip #4 - Seek Professional Help If Needed

The process of obtaining a liquor license can be complex and confusing. If you find yourself overwhelmed, consider hiring a liquor license facilitator. These professionals, who are not necessarily attorneys, specialize in navigating the bureaucratic landscape of liquor licensing. They can provide valuable guidance on application procedures and help expedite the approval of your license.

Tip #5 – Maintain Compliance to Protect Your License

Once you have secured a liquor license, it is critical to operate strictly within the law. This means undergoing appropriate training with your staff, ensuring all alcohol sales are legal (e.g., not selling to underage customers), and purchasing from approved vendors. Any violation can result in severe penalties, including the possible revocation of your liquor license. Be sure you are fully insured with dram shop policies. This is the term for liability insurance that protects those buying a restaurant and operating the location from the potential risk of serving alcohol. Just as you have general liability insurance and worker’s compensation, dram shop insurance is a must.

→Read also - Bars for Sale: 5 Important Tips for Buyers

Final Thoughts on Buying a Bar

Adding alcohol to your restaurant's offerings can significantly enhance your revenue and customer satisfaction. However, the process involves careful planning, adherence to legal requirements, and an understanding of the local market dynamics. Educate yourself at the local and state level. Invest in training for yourself and your entire staff and never overserve anyone.

By following these tips and remaining compliant with all regulations, you can successfully integrate alcohol sales into your new restaurant and pave the way for a prosperous business venture.

This comprehensive approach will not only prepare you for the complexities of owning and operating a restaurant that serves alcohol but also position your establishment for long-term success in a competitive industry.

If you are buying a restaurant and looking for opportunities, browse these locations and ask a Certified Restaurant Broker® for assistance with local resources for obtaining a liquor license.

Download the Free Guide to Buying a Restaurant

Robin slug photoRobin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE, is the co-founder of We Sell Restaurants, a brand that has carved an unparalleled niche in the industry as the nation's leading and only business broker franchise focused on restaurants. Under Robin’s leadership, We Sell Restaurants has grown to 45 states where it dominates the restaurant for sale marketplace, including franchise resales, delivering on the founder’s vision to Sell More Restaurants Than Anyone Else. We Sell Restaurants was named one of the most influential suppliers and vendors in the country by Nation’s Restaurant News and has earned a position on INC 5000’s list of fastest growing privately held companies. Franchisees of We Sell Restaurants surveyed by Franchise Business Review placed it 25th in the nation in franchisee satisfaction.

Robin is the Chair of the Women’s Franchise Committee of IFA and is a member of the IFA Board of Directors. She is also an MBA and Certified Franchise Executive (CFE) and has her CBI (Certified Business Intermediary) designation from the International Business Brokers Association. She co-authored Appetite for Acquisition, a small business book award winner in 2012 and contributes frequently to industry press appearing in Forbes, QSR, Modern Restaurant Management, Franchise Update, and others. She has appeared on The TODAY Show as a restaurant expert and Entrepreneur Magazine has named her to their list of the “Top Influential Women in Franchising.”


Topics: Buying a Restaurant

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