All About Restaurant Liquor Licenses

Know the types and how to apply

Closeup of bartender's hand pouring cocktails
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The sale of alcohol can boost restaurant profits substantially, thanks to great profit margins with most wines, hard liquors, and beer. Likewise, preparation incurs comparatively lower hourly labor costs—it’s a lot easier and faster to prepare a martini than a hamburger with fries. However, selling alcohol comes with responsibilities. States don’t want just anyone selling liquor. Therefore they require restaurants and businesses to apply for a liquor license.

Liquor Laws

Specific liquor laws vary from state to state and even from town to town. General areas these laws cover include:

  • When liquor can be served
  • Where liquor can be served
  • Containers in which liquor can be served
  • How much liquor can be served at a time
  • To whom liquor can be served
  • How much liquor costs

Liquor laws directly affecting restaurants, pubs, and taverns also vary. A few laws you may find throughout the United States include:

  • No discounts on liquor like happy hour or two-for-one specials
  • Limit of one drink per customer at a time
  • Unfinished bottles of wine may not be taken home
  • Wholesale beer, wine, and liquor vendors cannot sell to a restaurant that does not possess a valid liquor license
  • Insurance companies' refusal to cover claims related to alcohol against venues not in possession of a valid liquor license

Types of Licenses

There are many different types of liquor licenses across the hospitality industry. Some allow only beer and wine, while others allow all hard liquor. Here are the most common types of licenses for new restaurants:

  • Beer and Wine Liquor License: No hard liquor or spirits
  • Restaurant Liquor License: The most general of liquor licenses, also called an "all liquor license"
  • Tavern Liquor License: For an establishment that offers food, but whose sales are more than 50% liquor
  • Brewpub Liquor License: May be needed if you plan to make your own beer or wine

Definitions and fees associated with each type of liquor license vary from state to state. You should incorporate the restaurant liquor license fee into your restaurant business plan as part of the startup and annual costs. If you are buying an existing restaurant, you may be able to transfer the liquor license and pay a pro-rated fee, or you might have to buy a whole new license and pay the entire fee. Liquor licenses have to be renewed every year, so keep the price in mind when you are selecting a license.

Applying for a Liquor License

Before you open a new restaurant you need to apply for a liquor license. This process can take up to a year, so be sure to apply early. Depending on where you live, a restaurant liquor license can cost a little as $500 or as much as $70,000. Many towns have a liquor license quota, so you may not be able to get a new license at all if the quota has been filled.

The application process to apply for a liquor license can be extensive. If you have any previous criminal record you may be required to submit a letter explaining the situation. Towns or states can refuse a liquor license because of past conduct. Typically a license application must first be approved by a town council. The public is allowed to attend meetings to discuss the application, and their opinions are recorded and considered in decisions to approve restaurant liquor licenses. Upon approval, the application moves on to the state for approval (and another big fat processing fee).

Keeping Your License

Once you have your restaurant liquor license and are ready to open, it's a good idea to send your waitstaff to a TIPS training course, which will teach them how to serve alcohol responsibly and how to deal with drunk customers. Any violations or mishaps could result in a license suspension, which could significantly hurt your sales and require you to go through the cumbersome process of applying all over again. With liquor licenses, it pays off to be thorough, careful, and well-informed.