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Drying up the liquor trade.

Drying Up The Liquor Trade

ABC Restrictions And Declining Numbers of Customers Are The Sober Reality For Stores Selling Alcohol

What started out as an exciting business venture six years ago turned into a nightmare for Jessica Hutchinson when she tried to open a liquor store in Maumelle. Her American dream was held hostage by a moratorium on the issuing of new liquor licenses.

Hutchinson persisted, however, and shelled out a small fortune to buy an existing liquor store, transfer the license and relocate. A year later, she was in business, but her story illustrates that mixing liquor and free enterprise can yield a strange concoction in the Land of Opportunity.

Since 1983, Hutchinson and other entrepreneurs who have wanted to open liquor stores have gone through a complex series of maneuvers to do it. The first, and most expensive, step is to locate and buy an existing liquor store and then apply to get its liquor license. New owners also incur the added expense of relocating the business.

The cost of buying a liquor store, according to some in the liquor business, may include a charge of up to $25,000 just for the license. State law specifically prohibits the sale of the license itself and buying an existing store currently is the only way to get one. The state legislature set a moratorium on the issuing of new liquor licenses in 1983 although beer and wine permits still are available.

In a state like Arkansas, which is more "dry" than "wet," a liquor license suddenly turned into a good, long-term investment when the moratorium was imposed. This likely won't change, even when the state temporarily lifts the moratorium to issue some new licenses in 1991.

While no one can buy a retail liquor license outright, one can be obtained providing that money is no object. Here's how it works according to Robert S. Moore, director of Alcohol Beverage Control.

"A business that ceases to exist can apply to become inactive for six months and, in the meantime, can strike a deal," Moore says, "but the purchase is for goodwill."

Even though the business changes hands, "goodwill" is understood primarily to mean the license itself. While you may see a new liquor store pop up in your part of town, it will be operating under a previously owned liquor license. AFTER THE NEW CENSUS figures are published in 1991, the moratorium will be lifted temporarily and some new licenses will be issued to accommodate population increases. According to Moore, one permit may be issued in a "wet" county for every 2,500 increase in population.

Although access to the new licenses will provide temporary relief from high start-up costs for prospective liquor store owners, those owners who had bought their way into the business since 1983 had varied reactions to the news.

"This is really going to make me mad," Hutchinson says, after she is informed that new licenses soon would be available. "I was told that the moratorium was good for 25 years. I had to buy an existing store, get it re-permitted, then apply to transfer it. It took a whole year to do that."

The owner of a new liquor store in southwest Little Rock, however, shrugged off the expensive price tag of his business. "I knew about that going into it," he says. "But if you want to get into the business, you've got to pay what it's worth."

Bruce Cochran, manager of Heights Fine Wine and Spirits at 5012 Kavanaugh Blvd., says his store was one of the last to get a permit before the moratorium took effect. Cochran notes that, while his store is doing well, some liquor retailers probably would like to see the moratorium continued so it would hold down competition.

"There are about as many stores going out as coming in, like the little mom-and-pop stores," he says. Prospective buyers, in fact, generally can find liquor stores for sale by looking through the classified ad sections of the Little Rock dailies.

In order to convert an existing liquor license, an application must be on file with the ABC for thirty days before it is reviewed. If there are no paperwork foul-ups or legal challenges, Moore says the earliest a replacement license can be granted is about forty days. The new owner can continue to run the store while the application is pending.

Moore says the issuance of new retail liquor permits will be conducted on a lottery basis. Applicants in areas which have not experienced the necessary population growth will be weeded out first.

"We'll put the numbers in a hat or something like that after everybody puts in an application," Moore explains.

While the ABC has not projected how many new licenses will be issued, several people connected to the liquor business in Arkansas think the amount will be negligible. Some counties already are over their limit because of stores which existed before the population ceiling went into effect.

Areas of the state which have experienced rapid growth, such as parts of Pulaski County, may offer the best chance for new licenses, although some "conversions" have opened in those areas in recent years.

Moore says that legislation for the moratorium initially was sponsored through "various interest by persons in the business who wanted to see permits limited and groups concerned about the proliferation of alcohol."

Some liquor distributors, Moore says, were concerned that too many retail outlets would "dilute" their business and hamper service. But there were other opinions.

"They just want to make the big stores bigger," says Hutchinson, who owns Maumelle Wine and Spirits. "They're trying to wipe little stores out." As an example, Hutchinson says that her store did not get the volume discounts on liquor which she says are made available to bigger accounts.

Jerry Harrod, a spokesman for Strauss Distributors in Little Rock, says he thought the moratorium had resulted from those in the retail liquor trade. "The retailers pushed it through," he says, "to protect from a lot of permits being issued."

Anti-liquor groups also backed the moratorium, which helped strenghten the regulatory role of the ABC. Though the agency tries to balance the interests of private enterprise and the public, Hutchinson says that new liquor outlets are unduly restrained.

Grocery stores, she says, can sell both alcohol and groceries, but new liquor stores can't sell grocery items. Theoretically, Arkansas can't buy alcohol using a charge card either. However, checkers at grocery stores which accept charge cards sometimes fail to separate a beer purchase from grocery items.

"We're so discriminated against," Hutchinson says. "Customers can't put anything here on a charge card. That's just not fair. I can't sell a loaf of bread or a carton of milk. There's a (liquor) store near us that was grandfathered in and they can sell T-shirts and generally anything they want. One law should apply to all."

WHILE SIDELINES GENERALLY are an excellent way to help boost the bottom line of small retail businesses, liquor stores that were established after 1983 have been limited to specific items.

"It's an agency interpretation," Moore explains, "and includes liquor and related items -- minimal food products like soft drinks, mixes and snack foods."

With liquor sales down nationally by an estimated 20 percent according to some accounts, Hutchinson has been able to keep her doors open by specializing in wine sales. Still, she says, small businesses like hers are struggling to stay focused on the American dream. She thinks that a trade organization of liquor retailers might help.

"As far as the (retail) liquor industry goes, we aren't represented at all," Hutchinson points out. She says she recently received a letter from someone who wanted to organize a retail liquor association for Arkansas.

Meanwhile, a liquor license is a handy liquid asset to have around if you can afford it. Asked what he thought a liquor license might be worth in ten years, Moore says he didn't know.

"I don't even know what they're going to be worth next year."

PHOTO : Jessica Hutchison thought she was on her way to success in the liquor business in the

PHOTO : early 1980s. Faced with a barrage of ABC regulations, she says the dream went sour.
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Author:Lorenzen, Rod
Publication:Arkansas Business
Date:Feb 12, 1990
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