Management Companies for Liquor Licensed Premises

A Pennsylvania liquor license may only be used by the owner of that license, the “licensee.”  The licensee may not lease the license or allow an individual that is not recognized by the Liquor Control Board (LCB) as the owner to use that license.  However, the LCB does allow “management companies” to manage licensed facilities.  Essentially, the licensee hires the management company as an agent to operate a licensed business.  Licensees seeking to utilize a management company must submit a completed application to the LCB, along with the proper fee, and a copy of the management contract for the LCB’s review, within thirty (30) days of entering into the management agreement.   The LCB then will notify the licensee, in writing, whether the management agreement application has been accepted or refused.  The management company must be registered to do business in Pennsylvania and must receive tax clearance from the Pennsylvania Department of Revenue and Labor and Industry before the LCB will approve any management agreement. The license and the management company must keep a copy of the management agreement between the licensee and the management company on the premises at all times.

Historically management companies were primarily used when a liquor license was transferred to a new owner in a “person-to-person” transaction, but the location remained the same, and the buyer desired to operate the business during the transfer process while the transfer application was pending. Often the new owner sought to try out the business before actually spending money on the transfer.

A management company can begin operating under the license immediately after LCB approval, and there is no orange poster posting requirement. Prior to 2016, management companies were prohibited from having a pecuniary interest in the licensed establishment, however that restriction was removed with Act 39, which allows licensees and management companies much more flexibility in how management agreements are structured.

A management agreement does not permit the licensee to simply turn the business over to the management company. The LCB permits management companies to operate licensed premises only on behalf of licensees. A management company may make day-to-day decisions about the operation of the business, and final authority to decide how the licensed business is conducted, but the licensee remains ultimately responsible for any liability or violations.

The management agreement is a good instrument for shifting many of the responsibilities of operating a licensed establishment without relinquishing ownership of the liquor license. Obviously, any licensee desiring to enter into a management agreement should consult an attorney to navigate the complexities of the Liquor Code and regulations relating to management agreements.

– J. Ken Butera

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