The Pennsylvania Liquor Control Board (“LCB”) issues, renews, or validates over 21,000 liquor licenses per year. A retail license (providing for sales directly to the public) can only be issued when there is both an owner (which can be either an individual or an entity) and a location for that license. There are several classes of retail licenses. Licenses associated with restaurants, bars and taverns are usually “R” (Restaurant) licenses; Pizza shop and deli establishments that only sell beer are usually “E” (Eating Place) licenses and hotels are “H” (Hotel) licenses.
There are four methods by which a person or a location can obtain a license: (1) the LCB issues a new license; (2) person-to-person transfer of the license to a new licensee; (3) a place-to-place transfer of the license; or (4) person and place to new person and a new location.
With regard to the issuance of a new license by the LCB, the number of available R and E liquor licenses in Pennsylvania is determined by a population quota system on a per county basis. A new retail license may be created as a result of an enlargement of the quota, or if the legislature grants an exception to the quota. Generally, the quota for retail licenses allows one license per each 3,000 inhabitants in any county. New H-licenses, have no quota and can be issued to locations that meet the LCB’s requirements. Those requirements include a minimum number of hotel rooms, which is based on the municipality’s population, having a fully functioning food service available to the public, and guests staying at that hotel. H-licenses issued prior to September 1, 1949 may be exempt from the current room requirements upon application to the LCB, but such licenses still cannot be transferred from their current location unless the new location meets current H-license requirements.
In circumstances where no new license will be available, a prospective owner must seek the transfer of an existing license. In a person-to-person transfer, the applicant buying the license seeks to have an existing license owned by another transferred to it for use at the same premises. A place-to-place transfer occurs when a licensee seeks to move the license to a new location. In such cases the licensee seeks to have an existing license which it already owns transferred to the new location without changing ownership. For a double transfer (person-to-person and place-to-place), an applicant seeks to have an existing license transferred to it for use at a different location (change of ownership and location of license).
In certain circumstances a license can be transferred to a different municipality within the same county provided the receiving municipality holds a hearing open to the public for comment and approves that request prior to the application to the LCB. This is called an “intermunicipal transfer.”
Liquor licenses are valuable assets, and when transferred from owner to owner, they are usually sold. The LCB does not monitor or regulate the price of licenses; the values of licenses are set by the marketplace and can vary widely from county to county and depending upon availability.
Any time a new owner is proposed in a transfer (i.e., a person-to-person transfer or a double transfer); the LCB does a background check on the proposed owner and the individuals who control the proposed owner. The LCB will also do a review of the buyer’s source of funds and the buyer’s financial wherewithal. The new owner, whether it is a natural person or an entity, will be investigated to make sure that it does not have ownership in a conflicting license. The LCB does not permit an E, R or H licensee to also hold an interest in a business licensed to distribute or manufacture alcohol. Likewise, no shareholder or member of an entity and no individual that owns an R or H license may own stock or have an ownership interest in an entity licensed to manufacture or distribute alcohol.
The LCB will also examine the ownership of real estate to be certain that no owner of real estate (on which an E, R or H license will be placed) also owns an interest in a manufacturer’s or a distributor’s license. A transfer involving a proposed new location for a license will require the LCB to vet the proposed location. The applicant is required to submit floor plans with dimensions of the licensed premises, including dining areas, kitchen and food preparation areas, and storage facilities. The LCB will then inspect the premises to confirm they match the plans submitted. If the premises is under construction during the application process, it can proceed on a “prior approval” basis, meaning that the final measurements are not taken until the new location is ready to open and become licensed.
Before any license can be transferred, it must validated and/or renewed with the LCB. Both the seller and the buyer must obtain tax clearance from the Pennsylvania Department of Revenue and the Pennsylvania Department of Labor and Industries.
Needless to say, the process of obtaining and transferring a license can be a complicated one. If you are considering buying or selling a liquor license the assistance of a firm with extensive liquor license experience will make the transaction more efficient and cost-effective. Our Firm has years of liquor license experience and is well versed in the nuances associated with practice before the Liquor Control Board.
– J. Ken Butera