How to Get a Restaurant Liquor License....And Keep It

In the Spider-Man movie, Spider-Man's alter ego, Peter Parker, is speaking with his Uncle Ben Parker about the burdens of his unique powers. In one of the more poignant moments in the film, Ben looks Peter squarely in the eyes and, in a gentle voice, says, "with great power comes great responsibility."

Ben Parker, of course, was speaking to a superhero. However, he could just as easily have been talking to a restaurant owner selling liquor (defined herein as beer, wine, fortified wine and spirits) to his customers. Indeed, when it comes to selling liquor in a restaurant, "power" is in fact coupled with responsibility.

There is no question that alcohol sales are an easy way to increase profitability. The costs are lower and the gross margin is far greater for beverage than for food. But there are issues a restaurant owner needs to consider before deciding to serve liquor in his restaurant:

• First, obtaining a liquor license is not always an easy task for a new restaurant.
• Second, once a restaurant obtains a liquor license and begins serving alcohol, that restaurant must remain cognizant of a new set of potential legal liabilities.

Set forth below is an overview of the legal framework governing the sale of alcohol by restaurants in the United States, a guide to obtaining a liquor license, and a summary of the steps that should be taken by a restaurant to protect itself -- inasmuch as possible -- from potential liability once it has obtained its liquor license.

A Brief Background of State Liquor Law

In the United States, the distribution and use of alcoholic beverages is regulated by individual states because the 21st Amendment to the U.S. Constitution grants the individual states broad regulatory powers over the importation and sale of alcoholic beverages. States, in turn, may and often do delegate their broad authority to regulate many areas of alcohol sales and consumption to local communities. The level of regulatory control delegated to local communities varies, however, by state. In some states, cities and towns have the option to place a wide range of controls on the sale and distribution of alcohol. In other states, however, the state laws govern completely and therefore local communities cannot place on liquor licenses controls stricter than the state statutes.

. . . It is always a good idea to inquire about the availability of liquor licenses upfront, as the area where your restaurant is going may already have reached its permit quota or have extremely restrictive rules governing the service of alcohol. If you want to start up a restaurant in a location where the existing liquor license quota has been met, check with your local licensing authority to see if you can buy a liquor license from an existing establishment.

In states that grant high levels of authority to local communities, regulation of alcohol generally can be accomplished through one of two regulatory mechanisms. First, a local community can use "licensing ordinances" to regulate the sale of liquor. The stated purpose of licensing liquor establishments is to protect and promote public health, safety, morals and welfare. To sell or serve alcohol, a merchant must obtain a license from the local governing body. Without a license, all sale of alcohol is illegal.

Most local communities may place any reasonable restrictions on the liquor licenses it issues. For example, communities may restrict the hours of sale, establish licensing fees, limit the number and type of licenses, restrict the use of the premises on which the sale is licensed, and require training of the alcohol sellers/servers through the licensing process.

Alternatively, a local community can use a "zoning ordinance" to regulate the sale and distribution of liquor. Zoning essentially imposes restrictions on a landowner's use of the land. Through zoning, the city may regulate the size, construction, location, density and use of structures and land. Because alcohol is related to public health, cities may enact zoning ordinances regulating property used for the sale of alcohol.

Ultimately, if you plan to open a new restaurant that serves liquor, it is absolutely critical that you research thoroughly your state and community rules and laws regarding the sale of liquor (whether it be through license ordinances or zoning ordinances) before you finalize plans for your restaurant's location.

Obtaining a Liquor License Often is the First Step to Serving Alcohol in Your Establishment

The requirements for obtaining liquor licenses vary greatly from state to state and even from community to community. In this regard, as noted earlier, each state/community can put in place its own restriction on obtaining liquor licenses, making it very difficult for owner/operators in multiple states to create a streamline process for obtaining the licenses. In some cases, a liquor license cannot be acquired for any number of reasons. In other situations, they are fairly easy to obtain.

Of course, there are qualifications, often set by law, for obtaining a liquor license. The type and number of qualifications for a liquor license depend on the party applying for the liquor license (i.e., whether the party is an individual, a partnership or a corporation), the type of liquor license being sought, and, of course, the state you apply in.

Generally speaking, there are five steps to obtaining a liquor license.