Alcohol licensing rules Paralyzed restaurants recovering from pandemic

Customers show proof of their COVID vaccinations before entering the Martha Restaurant in Philadelphia, Pa. On August 7, 2021. (Hannah Beier / Reuters)

Now is not the time to hammer home food establishments trying to come out of the pandemic.

The the pandemic and related closures have hit the restaurant industry hard, with around 90,000 restaurants closing permanently. When the pandemic finally subsides, America will need entrepreneurs to launch new restaurants and fill the void.

But restaurateurs face government barriers. Before opening in New York, for example, a “restaurant may need to obtain up to 30 permits, registrations, licenses and certificates and could face up to 23 separate inspections.”

In many states, alcohol licensing can be the biggest hurdle. By my calculations, there are 18 states that, using per capita formulas, cap the number of licenses in cities and counties. Caps can make restaurant launches very expensive or block them altogether, especially when businesses want to serve alcohol in addition to beer and wine.

In states with caps, entrepreneurs can buy a liquor license at a restaurant that is closing, but it can cost a fortune. Licenses cost up to $ 300,000 in Alaska and California, $ 445,000 in Florida, $ 250,000 in Idaho, $ 400,000 in Indiana and Massachusetts, $ 370,000 in Montana, $ 350,000 in New Jersey and Pennsylvania and $ 300,000 in South Dakota.

These high costs favor business chains with deep pockets over independent entrepreneurs. License restrictions also increase risk, as contractors typically need to sign leases and start paying rent before they know if a license will be available and approved by authorities months later. Obtaining a license can be crucial, as restaurants derive a large portion of their profits from alcohol.

States and cities with tight liquor license caps are stifling economic development and neighborhood revitalization. The poorest neighborhoods suffer the most, as entrepreneurs cannot afford the high licensing costs. Reports across the country highlight the injustice and unnecessary damage caused by license restrictions.

In Boston, it costs about $ 400,000 for a liquor license and $ 150,000 for a beer and wine license. As a result, the The Boston Globe reported, some “poorer neighborhoods largely missed Boston’s restaurant boom, as developers and restaurateurs in wealthier parts of the city are paying top dollar to get the licenses available.” A study found that the wealthiest quarter of the city’s census tracts held more than half of the available licenses.

In Pennsylvania, Hamir Patel, chef and owner of a downtown restaurant, opened Hamir’s Indian Fusion in 2018. York Daily Record. “He said the cheapest license he found costs between $ 350,000 and $ 400,000, a price he can’t afford. Without a license, he believes he suffers a loss of at least 25% of his potential income.

In South Dakota, Rudy Navarrete, an entrepreneur from Sioux Falls, closed his restaurant because, according to the Chief of ArgusThe city’s “liquor laws also make it difficult for any local person to run a restaurant unless they are a franchisee of a national chain.” With the cost of a full-sale liquor license often exceeding $ 300,000, Navarrete has never been able to afford the option of having a full bar and serving high-end margaritas to its customers, a- he declared. “It’s just kind of a setup for franchises to be successful. “

The Chief of Argus also introduced Ted Thoms, who “still sees potential in the grassy grounds of West 12th Street and Sertoma Avenue where he once hoped to open a steakhouse. . ,, He applied for a liquor license at the town hall. Ten years later, his request was approved. By then he had sold the land, abandoned the project and considered the investment in the restaurant “one of the worst investments I have ever made”.

In New Jersey, liquor licenses costing $ 350,000 are “crippling the state’s culinary scene,” NorthJersey.com reported. The high cost is “often beyond the reach of independent chefs and restaurateurs. And without the ability to serve alcohol, “You can’t make any money,” said Drew Nieporent, a famous New York restaurateur and former New Jersey resident. Nieporent has owned more than 40 restaurants. . . but refuses to open a restaurant in the Garden State.

Meanwhile, chef Peter Loria “still remembers with disappointment the time he tried to open a restaurant in Ridgewood. He poured some of his retirement savings into what he believed would be a destination for New Jersey foodies, but he ran into a common hurdle. “I couldn’t get a liquor license. . . . So it never opened. It was heartbreaking.

NorthJersey.com says liquor license caps “are seen by local authorities as hampering efforts to revitalize downtown areas and attract new, often younger residents.” The caps frustrate “local officials and developers who have embarked on ambitious projects across the state to revitalize city centers with new housing, entertainment and – most importantly – restaurants.”

In San Francisco, “with the cost of a full liquor license. . . Now up to $ 300,000, restaurant and bar owners in low-income outskirts of the city have been virtually emptied of the ability to serve alcohol and cocktails – and the profits that flow from it. The pandemic has reduced licensing costs somewhat, and California has pursued reforms to provide cheaper licenses to some low-income areas.

But why don’t California and other states completely repeal these caps as bottlenecks for inclusive economic growth? This is in part because of the old-fashioned views of vice control with top-down regulations. And in part because existing restaurateurs are pushing against reforms that would devalue their expensive licenses. In Sioux City, as shown in the Chief of Argus, “Attempts to change the law have either failed or have been watered down as reformers battle the business groups that benefit from the current system, entrenched in South Dakota for decades. “

It’s true that reform would undermine existing licensees, but caps in 18 states do real damage, and the other 32 states are doing well without them. A compromise is therefore necessary – perhaps by loosening the caps over time, leading to a complete repeal in the long run.

Restaurant entrepreneurs face many challenges, including finding workers and managing pandemic mandates from governments. An additional challenge in 18 states is that government caps create an artificial shortage for alcohol licenses. Repealing the caps would benefit entrepreneurs and economic growth, especially in low-income neighborhoods, and so it should be a reform that both Liberals and Conservatives can support.

About Walter Bartholomew

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