The cost of obtaining a liquor license and starting a restaurant business in Massachusetts could be significantly reduced under a proposal by Governor Charlie Baker that would grant municipalities autonomy over how many liquor licenses they can issue, which is great unless you already own one.
Many cities and towns have reached their limit as to how many licenses they can issue. Massachusetts authorizes most localities the authority to issue a certain number of licenses based upon the municipality’s population (except for Boston and a few others). Once that limit is reached, a license can only be acquired in certain circumstances.
One way a prospective restaurant business can obtain a liquor license is to purchase one from an existing business. This has created a secondary market with licenses fetching as much as $400,000 in some instances.
Another way a prospective licensee can acquire a liquor license is to petition the Massachusetts legislature to increase the municipality’s liquor license cap and authorize the town or city to issue a new license. This is a consuming process that is often unsuccessful.
Since taking office, Governor Charlie Baker has taken steps to make it easier for local businesses to open and operate. His recently filed legislation, House Bill 3906 An Act to Modernize Municipal Finance and Government, includes a provision that would grant cities and towns the autonomy to decide how many licenses they can issue rather than going through the painstaking process of petitioning the Massachusetts Legislature (Section 90) to increase the cap.
This is great news for new and/or small restaurateurs with limited resources and available capital to enter such a competitive market. It is also good news for municipalities looking to target certain neighborhoods for development that otherwise could not sustain the prohibitive financial cost of opening a new restaurant.
Unfortunately, those existing restaurant businesses that invested significant capital for a liquor license could see the value of that license diluted and experience an influx of competition as more restaurants open.
The Joint Committee on Municipalities and Regional Government is scheduled to hear House Bill 3906 this Tuesday, February 9th at 1:30pm in Room A-2 at the State House. The Legislature should carefully consider the ramifications of their actions by crafting balanced legislation that will refrain from damaging the existing restaurant industry while making it easier for new prospective restaurateurs to enter such a prohibitive market.
-Robert J. McGovern, Esq.