Buying a Liquor Store – Key Issues You Need to Know
A liquor store is generally considered a solid business, less prone to significant economic downturns, and can be absentee-owned. However, while it is true that liquor is generally a stable retail business, there is a lot that goes into a decision to buy a liquor store, and it is not, in most cases, a good “hands-off” business.
Like a general retail business, a liquor store’s profitability is also often driven by its location. While location is important, it is not the most significant issue to consider.
License Issues Are Crucial
Obtaining the necessary licenses to operate a retail liquor store in New Jersey is the most important consideration. It is a complicated process, and in fact, it is the number one cause of deals falling apart, forcing some liquor store purchasers to abandon their goal of buying a liquor store.
There are several issues related to obtaining the necessary license(s) to operate a liquor store.
Every municipality has a different set of ordinances and guidelines. In some towns, you can simply have a license transferred without any major effort on the part of the current owner to the new owner. In other areas, the new owner must apply for a new license and undergo background checks.
Before you get too deep, learn the specifics related to licensing for that particular location in your particular municipality. Investigate this yourself with the appropriate governmental agencies.
Inventory
Liquor stores are typically priced at a business value plus inventory. While you should make sure that the total price fits within your budget.
Location
Store location does matter and is very important. If the store competes solely on price, then location is everything. To this end, a long-term lease at favorable terms may become the most significant aspect of the deal.
Poor Books and Records
Many small liquor store owners are notorious for keeping poor books and skimming off cash. While this may sound like a plus, it is, in fact, a negative for several reasons:
- It will be difficult, and perhaps impossible, to determine the gross receipts and thus the real profits.
- Sellers will certainly factor in this unreported income to their asking price, but that can be completely unreasonable. My advice to you is simple: “If they can’t prove it, you can’t pay for it!”
- Rest assured that if the seller is stealing cash from the business, so too are his employees, especially when the owner is absent.
Fredrick P. Niemann Esq.
Interested in buying a liquor store in NJ? Then call Fred Niemann today at (732) 863-9900 or email him at fniemann@hnlawfirm.com to schedule a low-cost and convenient consultation.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, New Jersey Buying a Business Attorney