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How to Open a Liquor Store
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Owning a liquor store can be a rewarding, customer-facing business that allows you to connect with your community. But it is also one of the more time-consuming and difficult types of businesses to start and maintain in part because of the regulations, licensing costs and ongoing expenses.
Two of the most important parts of how to open a liquor store are obtaining your liquor license and identifying the target market in your store location. Depending on what state or city your liquor store is located in, your license application, costs and renewal process will vary. We’ll cover everything you should know about how to open a liquor store in this article.
How to open a liquor store
The process of how to open a liquor store starts similarly to opening any type of retail store. You’ll want to write a business plan, with market research showing how there’s enough customer base in the area to make your liquor store profitable. You’ll also need to choose a business structure, secure a storefront and find supply vendors.
In addition to the standard steps that retail businesses need to follow, there are even more steps for owning a liquor store. You’ll have to get a liquor license for your business, a process that varies by state, and sometimes even by city or county.
Getting a liquor license
When it comes to getting a liquor license, the process will be different in each state and can sometimes even vary by county or town within each state. Learn more about how to get a liquor license in your state. Keep in mind that you’ll likely be looking for an off-premises liquor license, as you’ll be selling alcohol for people to drink elsewhere. You’ll also need to get a permit from the Alcohol and Tobacco Tax and Trade Bureau.
In 17 states and jurisdictions, alcohol sales are controlled by state government agencies, sometimes referred to as alcohol beverage control, or ABC. In addition, 13 of ABC states regulate the sale of off-premises liquor, which means you’ll have to apply to the state ABC agency for a license to open a liquor store.
In non-ABC states, also called licensing states, the government doesn’t control wholesale alcohol sales. License states allow individuals to operate and sell liquor independent of the government, but you’ll still need to apply to a state agency for a liquor license.
When owning a liquor store, it’s important to understand your target market. This should be clearly researched and explained in your business plan. You should know the type of alcohol people in the area frequently drink, how it varies by season and where you’ll be sourcing your supply from in order to meet those needs. This is a practice you would need to go through with any business, but should take great care with when opening your liquor store.
What does it cost to own a liquor store?
Owning a liquor store can be costly. From upfront costs like licensing fees to ongoing expenses like maintaining inventory and monthly rental or mortgage payments, you will consistently need capital to stay in operation.
- License fees: The cost of your liquor license can range dramatically depending on where you’re opening a liquor store. For example, Colorado charges just $75 for a license to sell beer and wine, while Montana licenses sell for between $122,679 and $371,250. License fees may also increase if you sell hard liquor or distilled spirits in addition to beer and wine.
- Inventory: As with most businesses, you’ll want to buy in bulk to keep costs down and turnover your inventory frequently.
- Payroll: Like other retail stores, payroll for employees is another ongoing expense when owning a liquor store.
- Location costs: Factor in monthly rent or mortgage payments as part of your ongoing expenses. Depending on the location you select for your liquor store, you may also have upfront renovation costs for the store.
Regular monthly expenses like inventory, payroll and storefront costs can make it hard to turn a profit initially. Your profit margin is the amount of money you’re making after you take away all the costs of actually running the business. By knowing your profit margin you can identify just where you can make improvements to help increase your revenue, and increase your profit.
Financing options to open a liquor store
When looking for financing for your open liquor store you’ve got a few options. Be sure to have your business plan ready when you apply or talk to investors to show how you plan to make back the money you invest. Some of your funding options for starting up or keeping your liquor store open are:
- SBA 7(a) loan: Offering loans of up to $5 million, 7(a) loans can be for nearly any business. Common loan uses include commercial real estate or equipment, so this could be useful for purchasing a retail storefront to open a liquor store, or even purchasing distillery equipment.
- Merchant Cash Advance: As we discussed, liquor stores require substantial amounts of working capital, so a merchant cash advance (MCA) might be an option to consider. A MCA offers a lump sum of money upfront that is then paid back with each credit card sale. They can end up costing quite a bit more than you borrowed though.
- Line of Credit: When owning a liquor store, a line of credit could be useful for helping with working capital. A line of credit offers businesses funds to draw on when needed, and you only have to pay interest on what you actually use. The full line typically becomes available again once the amount borrowed is paid back.
- Startup business loans: If you’re starting a new liquor store business, you might opt for an alternative online lender for a startup loan. They sometimes require a few months in business but might be an option for you.
- Business credit card: A business credit card is likely the easiest form of funding for new businesses to get, but will offer you the least amount of capital probably. They also come with high fees if you can’t pay your balance off each month.
Pros and cons of owning a liquor store
Owning a liquor store offers the opportunity to work in a customer-facing business where you can interact with people in your community daily.
License states allow owners to move more quickly, control states assure you a customer base.
Money in control states can go to benefiting the community and can lower your tax rate.
With tight profit margins, liquor stores may be some of the least profitable businesses.
Keeping up with the licenses, rules and regulations may be difficult if they change frequently in your state.
Obtaining a license may be highly competitive and costly in states where they’re limited.
Owning a liquor store FAQs
Is owning a liquor store profitable?
Owning a liquor store can be profitable if it’s in the right location and has consistent business. But with expenses like obtaining a liquor license, paying rent and maintaining inventory, profit margins may be tight with a liquor store.
How do I get a liquor license?
Getting a liquor license is a key part of how to open a liquor store because it allows you to sell alcohol. The process and costs will vary depending on the state you’re operating in, but you’ll likely have to submit an application and pay a fee to a state regulatory agency. Liquor stores would likely want to apply for an off-premises permit.
What are the challenges with owning a liquor store?
The challenges of owning a liquor store include managing the inventory along with demand, keeping up with the changing regulations and laws, and the cost of buying alcohol upfront in bulk.
Can I get a startup loan for opening a liquor store?
You might be able to get a startup loan if you’re opening a liquor store. You will need good credit, and ideally a few months in business before applying.