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Pennsylvania liquor licenses are considered 'better than gold'

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Sunday, July 20, 2014, 11:00 p.m.
 

In some parts of Pennsylvania, a state liquor license could be the key to living the good life during your golden years — if you can afford to buy one.

Restaurant liquor licenses can sell for $250,000 or more in Butler County, the top price in Western Pennsylvania.

In Pittsburgh, a license might set you back $75,000 to $80,000, compared with about $65,000 elsewhere in Allegheny County, according to attorneys who handle the purchases.

Liquor licenses have steadily increased in value and rarely decline in price, said Ned Sokoloff, founder of Ross-based Specialty Group. That's a big selling point for buyers, he said.

“You could buy (a Butler County license) today, pay to keep it in safekeeping, and it could gain $45,000 in three years,” said Sokoloff. “It's better than gold.”

The licenses can be vital to restaurants' survival.

“If they can afford a license, it's a necessity to make the whole profit-and-loss thing work,” said Ron Sofranko, a principal with Sofranko Advisory Group, which brokers license sales and consults with restaurants.

“Most of the money made in this industry is in alcohol sales, especially with the cost of food rising,” said Melissa Bova, director of government affairs for the Pennsylvania Restaurant and Lodging Association.

“For a liquor license, you're spending a lot of money up front that a lot of people don't have, but you also have that license for life,” Bova said. “It gains value over time. For many members, their retirement is in that license.”

Location, location, location

Eric Jones and his wife, Julie, of North Huntingdon recently purchased a liquor license from a restaurant owner as part of a deal that included equipment and furnishings. Jones said they hope to open Tapped Brick Oven & Pour House, offering craft beers and wood-fired pizzas, in early October in Greengate Commons plaza in Hempfield.

“For somebody like myself — new to the restaurant industry — doing something like this is very helpful,” he said of buying the license with the restaurant's other assets. “This was the easier path for us.”

He would not say how much the couple paid for the license. Its approval is pending before the state Liquor Control Board.

The value of liquor licenses depends greatly on location. Licenses in Westmoreland County typically sell for $30,000 to $40,000; one in Beaver County can cost $15,000 to $20,000, industry experts said.

Washington County licenses jumped from about $40,000 to $60,000 in the past few years because of the growth of the shale gas industry and development around the Meadows Racetrack & Casino, Sofranko said.

State's slice of the pie

Liquor licenses, which are considered property, sell for “fair market value,” or the price that a buyer and seller negotiate. The LCB doesn't set or track prices, spokeswoman Stacy Kriedeman said. The state gets its cut through fees.

The LCB receives $550 to $700 each time a license is transferred, and $900 to $1,400 for issuing new retail liquor licenses. Renewal fees range from $250 to $700 annually, depending on a municipality's size.

Mark Flaherty, a partner at the Downtown firm Flaherty & O'Hara, said Allegheny County license prices typically jump in increments of a few thousand dollars, then hold steady for several years. A Pittsburgh license sold for about $12,000 in the mid-1980s, he said, meaning prices have risen more than 500 percent in about 30 years.

He estimates that Pennsylvania ranks in the top 10 percent for license prices nationally but noted that every state handles it differently. Some states sell licenses for a set fee.

Supply and demand

Before 2000, liquor licenses were allocated statewide by municipality based on population and could not be transferred across municipal boundaries, Kriedeman said.

As certain municipalities grew, the demand for liquor licenses outstripped supply, raising prices.

Flaherty said a license sold for $450,000 — the highest price he can remember — in Cumberland County when transfers were limited. The price there has dropped to $275,000 to $300,000, observers say.

Cranberry commanded sky-high prices during that time — $350,000, Flaherty said, “if you could find one. You couldn't; it was hard.”

In 2000, state lawmakers changed the liquor code to allocate licenses by county based on population and to allow transfers anywhere within that county if the receiving municipality approves, Kriedeman said.

After that change, license prices in Butler County dropped to about $150,000 to $165,000, then increased to $250,000 to $275,000, Flaherty said.

Butler County's low unemployment — and in Cranberry, high per-capita income — makes it a desirable area to open restaurants, said Stan Kosciuszko, president of the Butler County Chamber of Commerce.

The area once was dominated by Pullman Standard manufacturing railroad cars and steel but now hosts Alcoa and Westinghouse. A $70 million sports medicine and Pittsburgh Penguins practice space will open next year, jointly owned by UPMC and the Penguins.

Lesser licenses?

State Rep. Dan Moul, R-Gettysburg, wants to develop an option for restaurants that want to serve just wine and can't afford full liquor licenses.

“I've got tons of restaurants in my district ... that have no desire to sell Jack Daniels, but they would like to offer a glass of wine,” Moul said. “There's no way they could even come close to spending $150,000 to $200,000 for a liquor license that gives you the privilege to sell all three. They'll never make that money up selling wine only.”

Moul introduced a bill to establish a wine-only license in 2012. Tavern owners balked, saying that would cut the value of their licenses, he said.

Amy Christie, executive director of the Pennsylvania Tavern Association, said liquor license prices don't typically squeeze out would-be restaurant owners.

“If they're going up in an area,” she said, “it's simply because that area is booming, and it's a great place to get into the business.”

Kari Andren is a Trib Total Media staff writer. Reach her at 724-850-2856 or kandren@tribweb.com.

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