A Comprehensive Guide to Transferring Liquor Licenses When Selling a Restaurant

The liquor license is frequently one of the most valuable assets included in the business sale transaction. A liquor license not only enhances the allure of your business but also holds the potential to augment the selling price. However, the process of transferring a liquor license is highly regulated and necessitates meticulous planning and execution. As a seller, comprehending your role in this process is paramount for ensuring a seamless transaction and averting delays that could jeopardize the deal. We have assisted numerous sellers in successfully navigating liquor license transfers, and this guide will guide you through the essential steps required to handle this process with confidence.

ONE: Familiarize Yourself with Local Liquor License Regulations

Liquor license regulations vary substantially depending on your state, county, and city. Some jurisdictions operate under a quota system, which restricts the number of available licenses, making them highly sought-after and valuable. Others may have specific eligibility requirements for buyers, such as a minimum number of parking spaces or seating capacity. Many jurisdictions have restrictions on the proximity of a liquor license operator to a daycare center or school. License transfers are mandatory in certain states and prohibited in others (requiring the issuance of a new license). As a restaurant seller, it is imperative to have a reliable source of guidance to comprehend these regulations and their implications for your business sales.

For the majority of states, a liquor license is contingent upon the establishment’s location, rendering it immovable to another address. In limited circumstances, a license may be issued to an individual or legal entity. In almost all instances, there is an individual identified with the license who must be a resident of the county or city where the license is utilized. This individual must consent to fingerprinting and a background check, and individuals with felony convictions are typically ineligible.

For California: https://www.abc.ca.gov/licensing/transfer-or-change-a-license/

Although these requirements do not imply that obtaining a liquor license is impossible, it is essential to be aware of the process. A liquor license can be held in the name of a trusted employee or family member, but buyers must be informed of the applicable requirements. Additionally, sellers should be aware of any regulations regarding temporary licenses, which are issued while awaiting a permanent license. Furthermore, some counties have mechanisms known as “management agreements” that allow buyers to operate under the existing license during the transfer process.

If the complexities of the process seem overwhelming, it is crucial to recognize the role of professionals who can assist. OC Restaurant Realty Agent provides recommendations for liquor license attorneys, facilitators, and is typically familiar with local laws. Utilizing the services of an experienced Restaurant Broker can enhance the comfort level of both the buyer and seller throughout the process.

TWO: Verify the Status of Your Liquor License

Prior to listing your restaurant for sale, it is imperative to confirm the status of your liquor license. Any unresolved issues, such as unpaid fees, violations, or penalties, can significantly delay or even derail the sale process. Contact your local liquor authority to ascertain that your license is active and compliant with all applicable regulations. For California, verify at: https://www.abc.ca.gov/licensing/license-lookup/

Buyers will conduct thorough due diligence on your business, and any red flags related to the liquor license can diminish their confidence or prompt renegotiations. Addressing these issues proactively demonstrates professionalism and fosters trust throughout the process. Furthermore, a clean record simplifies the transfer process for both parties.

THREE: Collaborate with a OC Restaurant Realty Listing Agent

Selling a restaurant is a multifaceted process, and incorporating a liquor license transfer further complicates matters. This is where the expertise of OC Restaurant Realty becomes invaluable. Listing agents possess a comprehensive understanding of liquor license transfers and can guide you through the process while ensuring compliance with local regulations.

We collaborate closely with sellers to meticulously prepare all requisite documentation, resolve potential obstacles, and coordinate with the buyer’s team. From offering guidance on temporary operating agreements to liaising with landlords and liquor boards, streamlining the process, thereby minimizing the likelihood of delays.

FOUR: Prepare for Buyer Inquiries and Documentation Requests

Buyers may pose inquiries regarding your liquor license, necessitating the provision of detailed information. Common inquiries include:

• The type of license - CA full list available at: https://www.abc.ca.gov/licensing/license-types/

• Whether the license is tethered to the specific location or transferable to another address.

• Any stipulations or conditions attached to the license, such as hours of operation.

• The current status of the license - active, suspended, or pending renewal.

Organized records can significantly enhance this phase. Sellers should diligently prepare a comprehensive package that encompasses the license details, proof of compliance, and any correspondence with local liquor authorities. By promptly providing this information, sellers can reassure buyers and expedite the due diligence process.

FIVE: Address Lease Agreements and Landlord Approvals

If your restaurant occupies a leased premises and lacks a liquor license, the addition of one to the location may necessitate landlord approval. Certain landlords incorporate clauses in their leases that grant them control over whether alcohol is offered in their space. Buyers should diligently review the lease agreement and engage in communication with the landlord regarding the menu and any potential for incorporating alcohol.

SIX: Assist with the License Transfer Application

The actual transfer of the liquor license entails submitting an application to the local liquor authority. While this responsibility ultimately falls upon the buyer, sellers assume a crucial role in ensuring the process progresses without impediments. OC Restaurant Realty agent will ensure license transfer prior close of escrow of business sale.

SEVEN: Understand Temporary Licensing Options

Depending on the regulations of your state, buyers may be eligible to operate the restaurant under a temporary license while the transfer application is pending. Temporary licenses permit the buyer to continue serving alcohol without disrupting the business, particularly beneficial for restaurants heavily reliant on beverage sales.

As the seller, you may be required to supervise the buyer’s use of the temporary license or assume certain responsibilities until the transfer is finalized. For instance, some states mandate that the seller remain listed as the license holder until the buyer’s application is fully approved. By comprehending these requirements and collaborating with your broker to establish a clear agreement, you can mitigate potential confusion and ensure compliance with local laws.

EIGHT: Resolve Any Final Obligations

Prior to closing the sale, sellers must address any outstanding obligations associated with the liquor license. This encompasses paying outstanding fees, resolving tax liabilities, and adhering to all renewal requirements. Neglecting these obligations can lead to delays in the transfer process and may even result in legal complications after the sale.

Furthermore, sellers should provide buyers with a comprehensive record of the license’s history, including any inspections, violations, or renewals. Transparency during this phase fosters trust and reduces the likelihood of disputes.

NINE: Closing the Deal

The final stage of the liquor license transfer process coincides with the conclusion of the restaurant sale. Upon the liquor authority’s approval of the transfer, the license officially transfers to the buyer’s name, relieving the seller of their obligations. At this juncture, all conditions outlined in the purchase agreement must be met, including the transfer of equipment, inventory, and any other assets.

For sellers, this milestone marks the culmination of a substantial professional chapter. Successfully navigating the liquor license transfer process ensures a smooth closure, allowing both parties to proceed with confidence.

Selling a restaurant with a liquor license entails its own set of challenges. Delays in processing applications, unresolved compliance issues, and unexpected landlord requirements are just a few examples. Additionally, buyers may encounter difficulties meeting eligibility requirements, such as passing background checks or demonstrating financial stability.

To overcome these obstacles, sellers should remain proactive, collaborate closely with their listing broker, and maintain open communication with all stakeholders. Anticipating potential roadblocks and addressing them promptly can mitigate disruptions and maintain the transaction’s progress.

TEN: Conclusion:

Transferring a liquor license is a pivotal aspect of selling a restaurant, necessitating meticulous planning, collaborative efforts, and adherence to local regulations. As a seller, your role in this process is paramount to ensuring a seamless transaction and maintaining the buyer’s trust. By comprehending the intricacies involved, meticulously preparing, and collaborating with experienced professionals, you can successfully navigate this process and achieve your objectives.

At OC Restaurant Realty our team specializes in managing liquor license transfers and guiding sellers through the complexities of restaurant transactions. Whether you are selling a long-standing establishment or a franchise location, we are committed to facilitating the process from listing to closure, ensuring a seamless and efficient outcome.