Liquor License Auction Update

November 4, 2016
Aaron K. Zeamer

The Pennsylvania Liquor Control Board yesterday released the results of the restaurant liquor license auction which it conducted and where 40 restaurant licenses were available for sale statewide.  As many predicted, the price for liquor licenses was driven significantly higher than historical prices due in large part to grocery stores and convenience stores now being permitted to operate using a restaurant liquor license to sell alcohol.  As reported by LNP and Central Penn Business Journal, the auction generated significant interest, although the vast majority of the bids and nearly all of the successful bidders were large corporations such as grocery stores, convenience stores, or developers.  While the auction was seen as a way to fix the problem currently in the liquor license market in many counties where few licenses are available, the structure of the auction in large part prevents most independent restaurateurs from having a reasonable opportunity to compete for these licenses.  In creating this auction process, the legislature (knowingly or not) created a system where payment for the license has to be received from the high bidder within two weeks of the close of the auction.  In other words, the winning bidder has to be able to pay a significant amount of money to the PLCB immediately after being told they were the high bidder and before they have even received the license or are anywhere close to putting it to use.  This is contrary to the model that most liquor license transactions use, and has never been the practice of the PLCB prior to this auction.

This payment issue is one which the legislature should address as soon as possible to allow for more competition for these licenses and to allow for actual restaurateurs to be able to bid on and pay for these licenses.  If this issue is not addressed soon, there is only a limited number of licenses available in each county and many, if not all of them, will be gone before restauranteurs have a chance to compete for the purchase of these licenses.

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He practices in a variety of areas including Business Law and Liquor License matters. Aaron works frequently with commercial real estate agents, brokers, restaurant and bar owners, breweries, distilleries, and wineries to facilitate the sale and transfer of PA liquor licenses.