A toast to the free market; Liquor license transfers offer opportunity for profit.
In 2000, when Marilyn E. Green bought a building in Marlboro to relocate her real estate business, she said she had no idea that a $150,000 bonus came with it.
She paid $550,000 for the 5,158-square-foot, two-story building in the center of the city, and the seller transferred the liquor license that was being used at the upstairs pizza parlor to Ms. Green. Ms. Green paid the city the $1,000 annual license renewal fee until 2003, when she transferred the all-alcoholic pouring liquor license to a new Olive Garden being built near Solomon Pond Mall - for $150,000. She received $135,000, and a business broker who negotiated the deal got $15,000.
"I thought it was a great investment. I would have paid the same amount for the building with or without the license. I bought the building for the location," said Ms. Green, who had turned down an earlier offer for the license from a company that wanted to open a Hooters restaurant across the street.
"Having a liquor license that, soon thereafter, turned into an asset was a great bonus for me," Ms. Green said. "I wish I had five more."
In the 1990s, especially in well-located communities that attracted chain hotels and large restaurants, liquor license holders of small restaurants and bars were selling their licenses for hundreds of thousands of dollars. Today, however, those costly transactions are less likely to occur because of restrictions placed on transferability and because more liquor licenses are available. A weakened economy has also been a factor.
According to the Alcoholic Beverages Control Commission, liquor licenses are not actually sold, but the law allows a license holder to negotiate a fee to transfer the license, subject to the approval of the local licensing authority. State law also allows licenses to be used as collateral for loans, and the Internal Revenue Service and state Department of Revenue can seize a license from a debtor and auction it off to apply toward a tax debt.
Leominster Mayor Dean J. Mazzarella said he objects to transfers between businesses, particularly when it affects the city's ability to develop in a positive way. A few years ago, for example, a small restaurant trying to open in Leominster ended up in another community because the owner could not afford the $50,000 to $100,000 asking price for a liquor license in the city.
Licenses not being used should be turned back to the city to reissue, Mr. Mazzarella said. "We have had people holding onto them, waiting for the highest price. When a hotel or chain restaurant comes in and they can't get a license from the city, it almost becomes like a black market for liquor licenses."
Worcester lawyer Marshall A. Gould, who brokered several big-bucks license transfers in Westboro during the 1990s, said the demand for licenses has changed. He said a lot of restaurants are suffering, but there are still some interested in locating in Westboro.
"I've had many that feel there could be a market, but when you put the economics together for buying a license for that kind of money, it's such an increase in cost, in my opinion, the consumer suffers through higher prices," he said.
Over the last few years, the Legislature has restricted the transferability of some licenses when a municipality was allowed to issue a license above its quota. A community is restricted by law, in general, to one pouring license per 1,000 residents, but additional licenses can be granted by the Legislature at a municipality's request. And 24 municipalities, including four in Central Massachusetts - Franklin, Marlboro, Sturbridge and Worcester - accepted a 1984 provision that allows them to have an unlimited number of all-alcoholic pouring licenses that go to hotels, restaurants and clubs.
Licenses recently granted in Westboro to Sapporo restaurant and Ted's Montana Grill cannot be transferred to any other location. Recent over-quota licenses in Webster and Southbridge are also restricted from any type of transfer.
State Rep. Karyn E. Polito, R-Shrewsbury, said she doesn't think licenses granted by municipalities are intended to be assets for private entities.
"I feel it's appropriate for these restrictions to be put in place for the business owner to have the license for their own productivity, but for them not to take it to another level, which is to claim it as an asset to make profit from," she said. "(That) is not in the general public's best interest."
Westboro Town Manager Henry L. Danis Jr. said the restrictions help prevent licensees from turning their licenses into "cash cows." When the provision to remove the license quota became available in 1984, he said, not many communities bothered to adopt it because no one expected the explosive growth in the 1990s in communities west of Boston.
"They should get rid of this stupid law and let towns decide how many licenses they want," he said.
Because Marlboro does not have a quota on all-pouring licenses, the License Commission could have gotten a new license from the state in 2003 for the Olive Garden near Solomon Pond Mall, instead of the chain having to buy Ms. Green's for $150,000. The city of roughly 37,000 has 39 all-pouring licenses, for which it charges a $1,000 annual renewal fee. The Olive Garden did not come before the commission to request a license.Walter T. Bonin, chairman of the License Commission, said the board tries to stay within what would have been the city's quota unless it is for an exceptional business that brings economic development into the city.
"If there's a license on the market, so to speak, we would not issue a new license that would put us over our quota. If one is not available, we would have no choice but to issue a new license," he said. "The problem with increasing the quota is, where do you stop? Are you going to give a license to every 20-seat restaurant, every pizza parlor in the city?"
In general, restrictions on licenses are unwise, Mr. Bonin said. Business owners are not going to invest thousands of dollars in their businesses if they are not able to profit from a license.
But Marlboro City Council President Arthur G. Vigeant and Councilor-at-Large Steven L. Levy, chairman of the council's Legislative and Legal Committee, said any future licenses should have restrictions. "I don't think we should be creating licenses for someone just to go out and sell. I wouldn't support (getting more licenses) unless there are restrictions," said Mr. Vigeant.
Contact Elaine Thompson by e-mail at email@example.com.
ART: PHOTOS; CHART
CUTLINE: (1) Marilyn E. Green transferred the liquor license that came with the Marlboro building she bought to Olive Garden for a fee of $150,000. (2) Media mogul Ted Turner, co-founder of Ted's Montana Grill, stands in the dining room in Westboro of the restaurant chain's first Massachusetts location. The liquor license granted to the restaurant, which opened in 2007, cannot be transferred to any other location. (CHART) Liquid gold
PHOTOG: (1) T&G Staff/MARK C. IDE (2) T&G Staff/PAUL KAPTEYN (CHART) T&G Staff/DON LANDGREN JR.
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|Publication:||Telegram & Gazette (Worcester, MA)|
|Date:||Mar 1, 2009|
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