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Dear Valued Clients,
As the second quarter of 2024 draws to a close, we want to update you on critical trends impacting California's liquor license values. The industry faces significant challenges. Rising costs across the board, from ingredients, staff wages, and transportation are straining California's vibrant dining scene and restaurant margins. A new surcharge law, SB 478, will take effect on July 1st. This legislation eliminates the ability for restaurants to add surcharges to their menus. Previously levied service fees and government mandates must be incorporated directly into advertised prices, potentially leading to menu price increases for California diners. Also, AB 1228 significantly increases the minimum wage for large fast-food chains, further impacting labor costs.
While these developments pose challenges, they also present potential opportunities in the liquor license market in California. Restaurants struggling financially under these pressures may be forced to close and sell their licenses, potentially increasing the supply of available licenses. On the other hand, the growing importance of liquor revenue for restaurant profitability could drive up demand for licenses. The current decrease in on-sale license prices is providing an opportunity for license upgrades.
The off-sale market is also experiencing a significant shake-up. Retail data shows a concerning 24% increase in store closures over last year as the retail industry adjusts to a shift in consumer shopping to online outlets, inflation, and bankruptcies. The sector faces challenges with retail giant 99 Cents Only closing all stores across California and continued closures of Rite Aid, Walmart, and Walgreens stores, amongst other big names. After all these closures, inventory of off-sale general and off-sale beer and wine licenses will continue to climb. Of course, in some counties, the scarcity of licenses will support high prices. While Convenience stores, particularly smaller operators, are experiencing continued growth, I still anticipate a marked decrease in the pricing of most off-sale licenses in the coming months.
You will find attached our second quarter report on California alcohol beverage license valuation estimates by county, including On-Sale General (Type 47, 48, 57), Off-Sale General (Type 21), and Off-Sale Beer and Wine (Type 20).
If you are considering selling or purchasing a license in light of these market changes, we are here to assist you. Please call me at 951-699-6868 or reply to this email to discuss your options. Thank you!
California Alcoholic Beverage License
Quarterly Valuation Report
2nd Quarter 2024
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