Pa. Liquor licenses up for bid

The Pennsylvania Liquor Control Board (PLCB) today issued an invitation for bids to award 21 expired restaurant licenses in the 11th license auction since Act 39 became effective in August 2016 – and the first such auction since the COVID-19 pandemic paused the practice in June 2020. 

This auction includes one license in each of the following 21 counties: Berks, Blair, Bradford, Bucks, Cambria, Carbon, Centre, Chester, Clinton, Dauphin, Delaware, Elk, Lebanon, Mifflin, Monroe, Montgomery, Montour, Northampton, Schuylkill, Wayne, and York.

Bids for this restaurant license auction are due by noon Monday, Oct. 31.  

The auction will again use a sealed bid process, which has so far resulted in winning bids on 292 licenses offered in previous auctions. Bids will be opened Wednesday, Nov. 2, and auction winners will be determined soon thereafter. 

The minimum bid for each license is $25,000, and each bid must be accompanied by a bid surety of $5,000 or 5% of the total bid amount – whichever is higher – to avoid frivolous and underfunded bids.

The highest responsive bidder for each license will win the right to submit an application for the license to the PLCB within six months of the auction award. If bid payment is not received within two weeks of auction award, the second-highest bidder will have the opportunity to apply for the license. Bids will be held in escrow by the PLCB, pending approval of the license application. 


State hospitality association leader talks COVID-19 and the future of the state’s industry

This has been a tough year for the hospitality industry and few organizations are more aware of that than the Pennsylvania Restaurant and Lodging Association (PRLA). The Central Penn Business Journal recently sat down with John Longstreet, president of the PRLA, to talk about how its members are coping with the pandemic and what the organization is doing to help. 

Q: As cases of Coronavirus rise, how can restaurants and bars protect their patrons and employees?

A: The Governor has guidelines that are very helpful at the Pennsylvania Department of Health website. We refer to those and guidelines created by the CDC and the National Restaurant Association. The ServSafe program developed by the National Restaurant Association has a COVID addendum added to it, which extends to all 52 states. We say that because we have a unified partnership agreement in Puerto Rico and DC.

The most important aspects of safety are sanitation of surfaces, masking and social distancing. There were many protocols already put in place prior to COVID due to regulations put out by the FDA, the Department of Agriculture and the Department of Health, so that the [hospitality industry] arguably has more safety regulations and protocols than any retail business

Q: How were business models tweaked to cope with this crisis?

A: The first thing our industry did was pivot to take out, delivery and curbside pickup. Historically, 50 percent of food purchased away from home is at restaurants. Some people don’t cook, others lack kitchen facilities, so restaurants became essential businesses. When restaurants reopened, they found ways to maximize their capacity, while making sure there was social distancing. For instance, Red Robin converted their waiting areas to seating areas to increase capacity and asked that customers wait in their cars.

Restaurant guidelines allowed for plexiglass barriers on the backs of booths and bar barriers, but bar seating is prohibited now, which makes it difficult to get to 50 percent capacity at some eateries

Q: Is ‘take out only’ going to carry restaurants through this difficult period?

A: No, it won’t. Restaurants operate on a 5, 7% margin. Before the pandemic, takeout was 10 percent, at best. Now some have gotten up to 30 percent, but that’s not enough to sustain businesses through the winter. They need two things: to open at a reasonable capacity and to receive a significant amount of financial help from the state—a tall order when we have 26,800 restaurants in Pennsylvania.

Q: Please talk about the July 15 mitigation order and some of the issues it created.

A: The mitigation order that went into effect on July 15 limited private parties to no more than 25 people. Most hotels ballrooms have the capacity to seat 2,000, so think about that.

In addition to that, restaurant capacity was reduced to 25 percent and bar seating was eliminated. This caused many restaurants to close to indoor dining. Imagine a 100-seat restaurant being cut down to 25 people and that includes the staff.

Q: What about self-certification—the optional program by which restaurants can assure employees and customers that they are adhering to COVID guidance?  

A: We heard time and again that some restaurateurs think that the Wolf administration is trying to entrap them. There’s no evidence of that, but because they feel targeted, they are understandably wary.

Q: Has the Wolf administration Worked with the PRLA?

A: Early on, we reached out to the Governor’s team and said we’d like to work with them in any way we could and it became a collaborative relationship, until a week prior to July 15, when we were on the phone with them again and at that time we talked about ideas to further stop the spread. Then, on July 15, we were scheduled to speak again and they said that they were thinking of doing some things which were different than those we had discussed a week prior.

They ended up reducing restaurant capacity to 25 percent and when we asked if there was evidence to justify the reduction they said, “We don’t want to become another California or Arizona.” CBS News later asked for data and never received any. 

At that time the Wolf administration also announced that private parties would be reduced from 250 inside to 25, so you can imagine all of the events that had to be canceled. This is when the restaurant industry began to lose faith in the administration. We heard stories about restaurants that had ordered thousands of dollars’ worth of food. You could also argue that pushing parties out of regulated places into unregulated places could also cause the spread.

Q: Has waiving liquor license fees helped?

A: It means almost nothing because the average fee is between $600 and $1,500. This year’s fees were deferred, but if they want next year’s deferred, they will have to pay this year’s fees. I’ve heard operators say that they could make that up in one evening at 50 percent capacity.

Q: Which types of restaurants have the best chance at weathering this storm

A: Quick serve, like McDonald’s, Wendy’s and Burger King since they are already set up for drive through. Some are eliminating overhead by keeping their dining rooms closed.

Q: How are mom and pop’s doing, compared to chains?

A: Both are in the same boat because they are all suffering and can’t spread money over their portfolio.

Q: How has the PLRA’s Advocacy Fund helped business owners through this crisis?

A: Initially, hotels were not included as essential businesses and we were influential in getting the administration to update that list. We learned quickly that information flow was very important. We became a news organization and published “The Daily Update.” We also created a weekly webinar to pass on information. We wanted to help furloughed employees, so we worked to expedite unemployment compensation and enhanced unemployment compensation. We also waived dues for non-members and have had 145 new restaurants join PRLA since the pandemic started because they recognize the value of what we’re doing and that’s been gratifying.

Q: How might another lockdown affect the hospitality industry?

A: The July 15 mitigation orders certainly hurt business. The administration thought they were doing the right thing, but I would be surprised if they go into further mitigation. Everyone knows that, for the most part, they are making it up as they go and so they keep trying new things but I’m not sure that a lockdown will happen again.

Q: What more would you like to have seen from the state and federal government?

A: There’s a billion dollars in federal money from the CARES Act that has yet to be distributed here in Pennsylvania and we’d like to see that expedited.

We are also watching HB2615 sponsored by Rep. Todd Stephens (R-Montgomery) which will provide community assistance grants for restaurants and will create a 250 million grant fund with up for 50 thousand dollars per location.

Q: How would you say the future of the industry has been affected and how will that affect other businesses?

A: Financing could be an issue for future restaurants. In the past, you saw a restaurant close and another new one would take its place, but that isn’t going to happen now. Cities could also be affected.  In Pennsylvania, 63 percent of the operators said that it’s unlikely that they would be in business six months from now if conditions do not change.

PLCB restaurant auction open to bidders

A cocktail sits on the bar of Lancaster’s Conway Social Club. (Photo: Submitted)

The Pennsylvania Liquor Control Board is currently conducting a license auction for 25 expired restaurant licenses across the state.

The auction, the 10th held since Act 39 became effective in August 2016, includes one license in each of the following 25 counties: Armstrong; Beaver; Berks; Blair; Bradford; Cameron; Carbon; Clearfield; Clinton; Crawford; Dauphin; Delaware; Erie; Greene; Indiana; Lebanon; Monroe; Montgomery; Northampton; Philadelphia; Schuylkill; Somerset; Washington; Wayne; and Westmoreland.

Bids for the restaurant licenses are due by noon on March 16. A sealed bid process is used in the auction, which has resulted in 277 winning license offers in previous auctions and $29.3 million in revenue.

The bids will be opened on March 19, and auction winners will then be determined. The minimum bid for each license is $25,000, and each bid must be accompanied by a bid surety of $5,000 or 5% of the total bid amount, whichever is higher. Winning bidders will then have the right to submit an application for the license within six months of the announcement.

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

York Blue Moon celebrated its renovations last spring. The well-known York restaurant abruptly closed in December. (Photo: File)

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.

State auctions off 22 liquor licenses, including one in Lebanon County

After failing to crack $200,000 in the last state liquor license auction, buyer interest and winning bid prices picked back up in the latest round.

The Pennsylvania Liquor Control Board on Friday said that 22 of the 25 expired liquor licenses available in the eighth auction were sold, including one in Lebanon County. The highest winning bid in the auction was $276,100 for a license in Bucks County, up from a high of $176,001 for a license in Philadelphia in November.

Tex-Mex restaurant Rey Azteca of Palmyra was the high bidder for the Lebanon County license, bidding $125,000. Altoona-based convenience store chain Sheetz, which has been actively buying up licenses at auction, picked up four licenses. Wawa landed two licenses, while big-box retailer Walmart and supermarket chain Weis Markets each secured one.

Since the state began the auction process in 2016, winning bid prices have mostly fallen. The first auction saw bids break $500,000, but most of the subsequent auctions failed to exceed $350,000 for a high.

As a result, average winning bids have also been dropping.

However, the average rose in the eighth auction to $95,255, jumping up from $73,915 in November. The first auction posted an average winning bid of $212,000.

Three licenses, including one available in Dauphin County, failed to garner any bids in the most recent auction.

The state auctions were authorized under the Act 39 liquor reform law in 2016. Top bidders have 14 days from the date of selection to remit full bid payment to the PLCB. The winning bidders then have six months to submit liquor license applications.