Liquor licenses a hot commodity in Philadelphia

You need a liquor license for your bar or restaurant? You are not alone, it seems, as Philadelphia is in the throes of a restaurant boom.

This helps to explain a sharp rise in the price of restaurant liquor licenses in the city recently, after a steady rise over the last decade.

Licenses that last fall sold for $60,000 to $65,000 are now fetching $85,000 and perhaps more, according to lawyers who specialize in the transactions. That is more the double the asking price for a license in 2002, when they sold for $35,000.

Liquor licenses are governed by the state Liquor Control Board but are sold by restaurateurs on the open market through lawyers or brokers, and that's where basic economics comes in.

Although Philadelphia is known for its BYOBs, which do not require licensing, a liquor license is considered important for the bottom line of a restaurant and, of course, is necessary for a bar.

Mark Bucher, whose company is opening a steak house called Medium Rare at the new Sansom apartment complex this summer, said the developer paid $80,000 for a license, which will be assigned to the restaurant. Medium Rare's license was last owned by Good Burger on Chestnut Street, which closed last year.

In Washington, D.C., where his company is based, liquor licenses go for a fraction of that price - between $9,000 to $11,000, including legal fees, Bucher said.

In Philadelphia, prices for a license hovered between $15,000 and $18,000 in the 1970s and early 1980s. They rose, to $28,000, in the early 1990s, and reached $35,000 in 2002 before making a steady climb over the last decade.

The number of licenses for each municipality was set after Prohibition by the legislature, which based it on population.

The LCB counts about 1,440 active restaurant/bar licenses in Philadelphia County, down from 1,543 in 2011 and 2,112 in 1997. Some of these so-called R licenses are in safekeeping - perhaps awaiting a sale - but others have been withdrawn permanently because of liens and violations incurred by their owners.

"There always seems to be something - taxes, liens, secured creditors confessing judgment," said Edward McHugh, a lawyer who specializes in liquor law. "It makes it more difficult to make the deal."

Most of the R licenses are in use but there are usually a few available for purchase, said Edward Taraskus, whose practice also specializes in liquor law. The price rise is not as troubling to Taraskus as the licenses' scarcity, but there are licenses available, he said.

Taraskus surmises that there was limited activity during the recent recession, but "with the economy and business confidence becoming slowly stronger, the demand for the restaurant licenses has increased."

Prices in Pennsylvania's suburban counties are dramatically higher, with most at $200,000 or higher. Their prices have not risen dramatically recently, observers said.

Jon Myerow, who has three licenses at his Tria wine bars and is planning a fourth location at 20th and Walnut Streets, said the additional cost would not dissuade anyone from getting into the business or force anyone to change his concept. "I like to think of it as an asset that does not decrease," he said.

That is not always the case. In Cherry Hill Township in 2007, the owners of the now-defunct Swanky Bubbles paid $1.6 million for a license. It sold for $500,000 at a 2011 bankruptcy auction.