Royal Square looking to resurrect York Blue Moon, preserve city liquor license

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Royal Square Development & Construction is hoping to revive the former York Blue Moon restaurant, which abruptly closed in December.

But Royal Square’s plan isn’t to run a restaurant in the now-vacant space, which is at 361 W. Market St., according to Dylan Bauer, president of development for Royal Square.

The company’s goal is find a restaurateur to buy or lease the 4,000-square-foot restaurant.

The previous owners spent $400,000 on renovations that included a new bar and extra seating. Those changes, along with the property’s onsite parking, could appeal to new operators.

But the chief draw, Bauer said, is the liquor license.

“You can’t do it without the liquor license,” Bauer said.

Liquor licenses can be vital to a restaurant’s survival because liquor sales are where owners make their money, given tighter margins on food sales and other operational costs.

But they also are generating interest beyond restaurateurs in the wake of changes to state liquor laws.

It is possible a deep-pocketed convenience-store chain could swoop in to buy the license in order to sell wine and beer in a store outside of the city, Bauer acknowledged. In that case, the restaurant space may continue to sit empty, dampening the city’s revitalization efforts.

“We need more feet on the streets,” Bauer said. “There is already momentum and a restaurant would push it over the top.”

His company already has invested millions of dollars in redevelopment projects in the WeCo neighborhood, including a transformation of the historic Doll Building next to the Blue Moon. WeCo refers to an area west of the Codorus Creek.

Fearful of the potential impact if the Blue Moon license is sold, Royal Square has a contract to buy the property from PeoplesBank, which took it over from the former owner after the Blue Moon closed.

In demand

Bauer already knows the value of a liquor license.

He has been receiving unsolicited emails and texts from people looking to pay Royal Square up to $400,000 for a liquor license the company has in safekeeping for the former Cobblestone’s building on South George Street.

He admits the price is enticing. But he doesn’t want to sell because he sees restaurant licenses as an economic development tool for the city. They can help bring new businesses into the downtown, which can draw in people. He said the loss of a licenses can make the underlying real estate less attractive.

When a license does become available, large retailers often are at the front of the line to make offers, getting in the way of smaller restaurant operators, especially following 2016 reforms that allowed beer and wine sales at convenience stores and supermarkets in Pennsylvania.

“The reforms in the liquor law made everything unfair,” Bauer said.

Ben Chiaro, senior brokerage adviser for True Commercial Real Estate, the listing agent on the Blue Moon, said grocers and convenience-store operators aren’t doing anything wrong. They have simply adapted to the rules in Pennsylvania and are willing to pay top dollar to control licenses.

And many small restaurant owners also have been able to cash in by selling licenses for much more than they paid.

However, Pennsylvania caps the number of liquor licenses per county. So for every new supermarket or convenience store that buys a license to sell six-packs, one less restaurant can open. If a new restaurant can find a rare license, it has to pay a lot for it.

In fast-growing counties like Cumberland County, a scarcity of licenses has pushed prices well above $500,000.

Royal Square sees the Blue Moon as presenting a lower risk for small restaurateurs looking for a place to open or expand.

Bauer said the plan is for Royal Square to own the property and liquor license and then lease the facility to a new operator for $5,500 per month under a triple-net lease.

Under a triple-net lease, a tenant is responsible for all operating costs in addition to rent, including net property taxes, insurance and maintenance for the duration of the lease.

Chiaro said leasing the space could free up working capital for a new restaurant, plus its owners would have full use of the existing liquor license. Royal Square and True are hoping to lure new restaurateurs focused on sushi, Caribbean or Latin American food, or even possibly a Korean barbecue.

“Leasing it will get someone in,” Bauer said, adding that he would love to eventually sell the property to that operator.

But he also stressed that Royal Square has a short window in which to get a deal done. He said the company would need to get an operator in place by July 31, as its contract to buy the property from the bank is set to expire on Aug. 15.

If it doesn’t, the lender could look at other options, including selling off the license and real estate separately.