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How to Acquire an On-Premises Liquor License

Written by Zana Tomich on June 25, 2017 Category: Restaurants, Small Businesses

In Michigan, restaurants, bars, and other establishment that sell liquor are regulated by state and local agencies. Like most states, Michigan created its liquor control commission after prohibition ended in 1933. The Michigan Liquor Control Commission (“MLCC”) regulates liquor licenses in the state, distributes new licenses, and establishes limits (or “quotas,” in MLCC parlance) for the number of licenses in each city based on population. For example, in the city of Detroit, the 2017 quota for Class-C “on-premises” licenses (the type of license that a restaurant or bar would need in order to serve liquor) is 476. As of this writing, each of these 476 licenses is owned and in use or being held in escrow.

Once the quota of licenses has been distributed, the licenses in that community become a hot commodity. So how does one acquire a liquor license?

  • Determine if available: Determine if a Class-C “on-premises” license is available in the city in which the business is located. This is an unlikely scenario in cities that are booming, but if a license is available, then the business owner can apply directly with the MLCC.
  • Ask about special licenses: If the city does not have any standard licenses available, determine if a redevelopment license or, if appropriate, a bistro license is available. These are special licenses granted by some municipalities.
  • Purchase from a license owner: If neither of the above options are available, those seeking a license will have to buy one from an existing license owner. Doing so is not as straightforward as buying a used sofa or car; the purchaser must apply with, and obtain approval for the purchase from, the MLCC. The MLCC publishes a spreadsheet of existing license owners, which can be a helpful starting point in identifying a license holder who may be willing to sell.
    • Once a prospective seller is identified, negotiate the purchase price with the existing owner.
    • With the help of an attorney, draft a purchase agreement. Smart buyers will want to include protective contingencies in their purchase agreements.
    • Complete and submit an application for transfer of the license with the MLCC.
  • Comply with zoning and other ordinances: Consult and comply with state and local rules and ordinances, including those relating to building, zoning, plumbing, and outdoor seating.
  • Obtain city approval: Having a liquor license in hand is a huge step, but not the final one. Businesses must still get the blessing of the city in which they operate. In some instances, this will include reaching an agreement with the city and securing approval of that agreement by the city commission.

For assistance in navigating the MLCC and local governments in complying with all the regulatory requirements, please contact me to discuss.

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