But it costs too much to get an alcohol license…
This is something we hear often from restaurant and business owners and is usually what makes them hit the “pause button” when deciding to get a liquor license. But focusing on the cost alone without considering the benefits skews the overall decision to move forward. A more effective method is to weigh the overall license costs against new revenue; then evaluate how long it takes to recover all of your costs. As a general rule, if you are looking to recoup your costs and stand a better chance at making profit off a restaurant, an alcohol license is a must. The margins on food for the average restaurant are in the single digits, however margins on alcohol can be between 20 and 40 percent!
There are some more intangible financial benefits of having a liquor license. For example, if a party of 10 people are considering your restaurant for dinner, and one person wants a margarita with his tacos, if you don’t offer that, you run the risk of the entire group eating elsewhere. Additionally, we’ve seen restaurant critics give fewer stars because of the lack of beverage choices. This observation will often be included in the write-ups or reviews, and many see a restaurant without drinks as an incomplete dining experience. Generally, if there is a sit-down component to your restaurant, guests will want a glass of wine, beer, or cocktail with their meal.
To help ease you past the initial sticker shock of a liquor license, we have created a calculator to help you figure out the ROI of a license. In the table below, using the calculator, Example #3 shows the potential monthly increased revenue (with a new beer & wine license) being recovered in approximately 3 months. As you can see, the average cost is approximately $18,500, but this investment can be recovered quickly – in approximately 3 months’ time.