22 MONTEREY COUNTY WEEKLY april 13-19, 2023 www.montereycountyweekly.com It has been a wild ride of late on the secondary market. Before the pandemic, Bloom notes that full licenses in Los Angeles were trading at around $75,000. Now—as in Monterey County—the rate has topped $150,000. “It will hit $200,000 by summer,” he predicts. “That’s crazy to me.” If there’s any solace for restaurateurs, it is that prices in California are affordable by comparison to some states. Recent listings on Bloom’s auction site, the only one of its kind, showed bids on a license in Cumberland, Pennsylvania reaching $650,000. Interest in a St. John’s, Florida license pushed the price to $935,000. One in Bergen County, New Jersey was at the whopping asking price of $1.15 million. Across the country, there are two processes at work. Some states do not place hard caps on the number of licenses. In these “non-quota” states, there is no need for a secondary market. When a bar or restaurant closes, the license is essentially torn up. A new one is then issued by the state’s equivalent of ABC to a qualified applicant. California is one of 17 “quota” states, along with Pennsylvania, Florida and New Jersey. Here supply and demand determine pricing. Harris has been in the industry for more than two decades, starting as an ABC agent before becoming a broker and then launching Liquor License Network. He says the market fluctuates, and there have been four times in his career where demand has sent prices soaring. But, he adds, “this is the highest I’ve seen. For us, this is sticker shock.” According to Harris, the secondary market is influenced both by the general economy and forces specific to public demand for alcohol. During Covid-related shutdowns, for instance, more providers sought off-premises licenses. Now, people are flooding back to bars and restaurants. Since the last release of a new full license to Monterey County in 2019 (when ABC issued one Type 47 and one Type 48), Chez Noir opened in Carmel, with a bar that emphasizes craft cocktails. Promesa, also in Carmel, set up a full bar, as did Monterey destinations Cella and Stokes Adobe. Indeed, there has been a flurry of new and anticipated openings, from Amapola Kitchen & Wine Merchant in Salinas to Nicolás Cocina de Herencia in Carmel. Though not all require a full license, it gives an indication of the amount of pressure on the market. Yet annual estimated census data sets the boundaries, thus creating an uneven pricing landscape across the state. At the same time a Type 47 license was up for grabs at $240,000 in El Dorado County and $200,000 in San Francisco, one could be had in Kern County at $60,000 or Yuba County for a mere $40,000. “Some counties grow, some don’t,” Harris observes. “Some counties get new licenses every year. Monterey doesn’t have the population to support new licenses.” So under the circumstances, those in need of a new license must pay up. A year before the pandemic, as Klaus Georis planned the build out of what would become Maligne in Seaside, a license might be had for $40,000. By the time the restaurant opened, he had to settle for beer and wine only. “They’re creating demand,” Georis says. “Unless you have someone with a bunch of money behind you, you can’t do it.” When Lee first began his search for approval to sell spirits at Kona, he scoured diners that he thought could easily sell their full license and downgrade to beer and wine. “All those had been snapped up,” he says. He ended up paying $140,000 through a service. “When Bill paid $140, I knew I’d pay at least $150,” Montgomery says, observing that many owners are looking to unload their establishment along with its license. It’s therefore easy to lose out to another buyer interested in the entire package. Montgomery started inquiring about a full liquor license in 2019, as plans were underway for Links Club. She located one in July of that year for $60,000, but there were a couple of issues. First, Montgomery had not taken possession of the facility yet. More importantly, there were debts associated with the lease that would need to be cleared. Next she approached an anxious owner as uncertainty spread through the industry when Covid hit. That license, however, was already in escrow and eventually sold. So Montgomery called brokers, eventually being tempted by a $120,000 price tag for a license also riddled with problems. Finally, working with L.A.-based Liquor License Agents, Montgomery paid $160,000 for the license once held by Giant Artichoke on Cannery Row. Montgomery went into escrow on the license in December of 2022. Links Club had already opened, but with a beer and wine license. The bartenders prepared cocktails using low-alcohol soju (a Korean rice-based spirit) as the base. “[The process] is similar to buying a house,” Harris says of obtaining a license through a service. In that comparison, license brokers are like real estate agents—except that sellers are not bound to a single listing agent. And before agreeing to terms on a license, a buyer is subject to city regulations for a new business, change in ownership or zoning restrictions. Also, ABC requires that certain conditions be met. Applicants can be disqualified by a police record or repeated occurrences of public drunkenness. For all of this to happen can take up to a year, if things go well. “You can close a house in 30 days,” Harris notes with a hint of sarcasm. Montgomery compares brokers to salespeople. But she explains that there are benefits to using a full service firm. Like companies involved in the real estate market, she says, “they’ll go through and see if the title is clean.” Bloom points out that most brokers operate ethically. He admits, however, that there are those who will dangle a non-existent license on the market. Others have been known to badger “This is the highest I’ve seen. For us, this is sticker shock.” Bill and Teresa Lee in their recently opened Monterey restaurant, Kona Steak & Seafood. The veteran restaurateur shelled out $140,000 for his license—the most he had ever paid. April Montgomery arranges bottles on the shelves at Links Club. She began looking for a license in 2019.
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