The latest episode of the AZ Big Podcast with Michael & Amy has officially dropped. Episode 252 features Ryan Anderson, partner at Burch & Cracchiolo, who talks liquor licenses.
Listen to more of the AZ Big Podcast here.
Transcript:
Michael Gossie
Welcome to the AZ Big Podcast sponsored by Burch & Cracchiolo. I'm Michael Gossie, editor-in-chief at AZ Big Media. I'm joined by my co-host, our vice president and publisher, Amy Lindsey.Amy, what are we talking about drinking today?
Amy Lindsey
Liquor license, one of my favorite subjects.Michael Gossie
Ryan Anderson, partner at Burch & Cracchiolo, one of the leading experts in liquor licensing.Ryan, great to have you here today. Thank you for having me.
Amy Lindsey
Thank you for joining us. So Ryan, let's start off. Tell us a little bit about the kind of the trends that are emerging with Arizona liquor license.It seems there's been quite a bit of shift to that lately.
Ryan Anderson
Right. I think the main trend that we're seeing is that we're moving away from the very inflexible three-tiered system to a more flexible environment here, especially in Arizona. And you'll notice that we have lots of sort of opportunities for things like cocktails to go and a lot more direct delivery things that are happening within the liquor space that just weren't something that people were thinking about 10, 15 years ago.Amy Lindsey
What do you think are some of the benefits of being a little bit more flexible in that area?Ryan Anderson
Well, I think we're much more attuned to what consumers want and demand. And so that's, I think, the real reason we're having the flexibility. A lot of the industry stakeholders have recognized that moving towards some of this flexibility is what's going to be important for the viability of the liquor industry going forward.Michael Gossie
When you say three-tiered, what are you referring to?Ryan Anderson
Well, the three-tiered system is this construct that we all live under in liquor licensing. You have your top tier, which is the folks that produce the alcohol. You have your middle tier, which is the folks that distribute the alcohol.And then your bottom tier, which is the folks that are retailers that serve the alcohol. And so under, I mean, the general concept is all three of these tiers need to remain independent of each other and separate. And so you don't want to have a producer who also owns a share of a retailer because there's an unfair competitive element there.
So the same would hold true for all three of the tiers.
Michael Gossie
When I've talked with you before, there's multiple different types of liquor licenses, right? How many different types of liquor licenses are there in Arizona?Ryan Anderson
That's a hard, I mean, honestly, I think there's like 17 or more. Oh my gosh. Yeah.And so most people don't understand that we truly have two different types of liquor licenses. We have a, what I call a quota, most people call a quota license, which can be confusing to understand, but a quota license is a license in which the government issues those licenses based on the population census. And so, and those licenses are property that you can own and control, even if you're not using those licenses.
And so those are the licenses that people sort of know generally as a bar license, which is a Series 6, a liquor store license, which is a Series 9, or a beer and wine, which is a Series 7. And so those liquor licenses are the ones you can own. Then you shift over to the licenses folks also know a lot about, but to have no ownership in.
Those are like the restaurant licenses and the hotel licenses. The restaurant license is the Series 12, and it can be awarded to a restaurant, but they don't own it. It's only a privilege license.
You have the privilege to serve alcohol if you're running the restaurant. We're sort of in a weird space right now, because we have, as someone who works in this space, I would say that our quota model is, because remember, it's based on population. We're always sort of lagging behind, right?
So you're, I don't know we can always meet demand candidly, because we can only issue so many certain licenses in these quota areas until we have population numbers to match.
Amy Lindsey
So how has the demand for liquor license changed as Arizona's continuing to grow?Ryan Anderson
Well, I think if you want to focus on one, I would focus on the Series 9 liquor license. That is the liquor store license, but to call it the liquor store license is sort of a misnomer, because it's needed for every grocery store and every major large retailers that want to sell alcohol, beer, wine, and spirits to go for off-premise consumption. And so, you know, every grocery store needs a 9.And so, you know, that's why they're so in need, right? We have a huge growing population here. And so those licenses are exceedingly valuable.
The market value on a 9 right now is about a million dollars.
Michael Gossie
Wow.Ryan Anderson
Yeah. And so those licenses, there's just not enough of them, candidly, for all the demand that's there in that space. Now, if you turn to the Series 6, the bar license, the license that you would use at a restaurant or a bar to sell alcohol with no requirement that there be any food sales, we probably have an excess amount of those right now.And so those licenses are, the market value of those fluctuate between, you know, you've seen them as high as three to four hundred thousand, and sometimes you see them as low as 185,000. We're definitely at the lower end right now of the value of the bar license. But that's such a dichotomy between the liquor store license being so valuable and so hard to get, and then the Series 6 being sort of readily available right now.
And those trends shift and turn, you know, through the years. During COVID, it was almost impossible to find a Series 6 license. And now you can find them pretty easily.
Michael Gossie
So what are some of the challenges that like bars and restaurants are facing right now in terms of getting a liquor license? Because we're having we're seeing new restaurants pop open every single day. Are they facing any challenges?Ryan Anderson
They are. I think the biggest challenge is that many restauranteurs think of a liquor license as an afterthought, and to their substantial detriment. You know, the liquor license, especially if your business is going to be based partially on the sale of alcohol, it needs to be one of the first things you're doing, and one of the first things you're looking at even before you sign the lease for the location.Because if you don't get ahead of it, you get caught into a number of things that you can't truly control. People have no idea how long it takes to get a liquor license application put together and submitted and then through the system. It can take between 105 to 135 days to get a no-contested easy liquor license approved.
And so for a business owner where they think the liquor license should come last, well, it's a harsh reality that they aren't going to have liquor sales for five, six months.
Amy Lindsey
It's not the way they want their grand opening. It is not the way they want the grand opening.Ryan Anderson
And there's only so many things people like me can do to cut those times down. The other major thing is that underestimating how complicated it can be. I think some people sort of view like, it's just paperwork.Unfortunately, the way our system works is if the paperwork's not absolutely perfect and you don't have somebody watching to make sure it's done right, you aren't going to get your license approved. And so that can be a significant problem.
Amy Lindsey
Are there any big recent legal or regulatory changes that have affected it in Arizona?Ryan Anderson
You know, I think we're seeing a little bit more movement towards easing up restrictions on things like delivery. And I think the other main development that I see is the expansion of shared spaces and having alcohol being consumed in shared spaces. You know, I think that our developer community is starting to realize that that amenity of having alcohol being able to be consumed in open spaces is an amenity people like.Amy Lindsey
Are you referring kind of like the Biltmore where you can now walk around the areas?Ryan Anderson
Right. Yeah, that's one of the types of amenities I'm talking about. There are others as well.So the type of license you're talking about is what's called the regional patio permit. And it's sort of it's the ability for a shopping center, a mixed use development to license the entirety of a secured interior corridor for the ability then for all of the licensed retailers who are touching that interior space to sell alcohol beyond the four corners of their restaurant or their bar. And so that's the paradigm shift that we're seeing in those spaces.
Because usually when you're buying a drink and you're drinking it in your restaurant, you can't walk out the door with it at those establishments. There's a program set up so that you can walk out the door with it. And so that's a huge change.
You're also seeing a number of developers putting places together where they're not a mall. So it's not, you know, but you can use a shared patio concept, meaning you have a green space. You may have two or three retailers surrounding it.
How do we use that concept of a shared space to be able to serve alcohol into the patio or into the green belt? And there are licensing options now to do that. But it's not easy.
And so it takes some effort to put those programs together.
Michael Gossie
Ryan, we have so many questions for you. But before we get to them, I have to say at Burch & Cracchiolo there's nothing artificial about our intelligence. While we wholeheartedly embrace technology and all the ways that can increase productivity, nothing will replace the sound judgment, wise counsel and the humanity of an attorney who is vested in you, your business and your family.Burch & Cracchiolo attorneys will be there for you no matter what your need. We are your partner for life. Learn more at bcattorneys.com.
That's bcattorneys.com. So Ryan, you're kind of the trailblazer in making this open shared spaces happen in Arizona. How tough was it to get that across the finish line?
Because that is a major change for retailers.
Ryan Anderson
It was a big hurdle the first time. The first one was up at Desert Ridge. It was a pilot program set up by the legislature.I partnered with Vestar, who manages that property. And we went through a lot of struggles to get it done. If you can go back in time and recognize what was happening up at Desert Ridge, we had an enormous security presence when we started opening it.
And then we began to understand how the public was going to use that space. And so now we have a much more measured security approach. If you go up to Desert Ridge or you go to Tempe Marketplace or even go to the Biltmore, you'll see that there's striping that says no alcohol beyond this point.
You'll see some signage that says you can't leave this premise with the alcohol. That is what we've, over the last 10 years, that's what we've gotten to, to be able to utilize those spaces that way.
Michael Gossie
That's got to be incredibly gratifying, though, to be such a game changer in that space.Ryan Anderson
It is. It's nice to work with clients that are creative, that want to do things like this, and then we need to make it work. And so that's the fun part on the liquor side, is to be faced with a challenge and work it through the administrative, the Department of Liquor folks, and to then see it in practice is pretty neat.Amy Lindsey
So what should a business owner know before pursuing a liquor license?Ryan Anderson
Well, the first thing is that the cost, the time, and the efficiency are the three things you need to be focused on. First is cost. If you're going to be buying a liquor license, you need to get that done.You don't want to be buying a liquor license in the middle of when you're trying to get yourself open and operating. The second part is that I think people underestimate how complicated it can be, even for a normal restaurant, to just get their licensing put together. The people behind the restaurant will need to provide the fingerprints, their personal questionnaires, and their backgrounds have to be cleared to have the privilege of selling alcohol in Arizona.
And so that takes time. The manager of the location, again, has to have their fingerprints and their background checked. That takes time.
And so, you know, all of that time isn't even baked into the time in which the application needs to get approved by the city and then by the state. And so I think the biggest mistake that owners of retail establishments make is they underestimate how long it takes. And they also underestimate how complicated it can be.
You know, I, self-servingly, I don't know how I would do this without some professional assistance. You, you know, if you're using a professional, you can now use the electronic portal that the Liquor Department has, which is much easier and much quicker and much faster. And so, you know, handing in paperwork now at the front door of the Liquor Department is really just sort of not the way to go anymore if you want to get it done efficiently.
Michael Gossie
So, Ryan, with Arizona's incredible growth, how has that impacted the demand for liquor licenses?Ryan Anderson
Well, you see a consistent demand now for the larger Series 9 license. You know, retailers, grocery stores, they want to come into this space and they want to be able to sell all types of alcohol, beer, wine, and spirits. And so, you know, the demand has driven the value and maintained the value of that license to where I was talking about before, about a million dollars.You know, Arizona's growing and we're always seeing new businesses come here. And so, and people expect to get alcohol and be served alcohol at most of these types of locations now. And so, I think it's a competitive disadvantage if you have a retail store and you're not able to sell alcohol anymore or here.
Michael Gossie
Yeah. Well, great, great, great stuff. Amy, you ready to go out and have a drink?Amy Lindsey
You act like I'm just starting.Michael Gossie
No, I'm just kidding. Well, thank you for listening to the AZ Big Podcast with Michael and Amy. For the latest and greatest business, real estate, and lifestyle news, check out the all-new azbigmedia.com.Once again, thank you to our sponsors, Burch & Cracchiolo, and thank you to Ryan Anderson, partner of Burch & Cracchiolo. Ryan, great stuff. Thank you so much.
Thank you, Ryan.
Ryan Anderson
Thanks for having me.