Why is it So Hard to Get a Real Drink in This Town?
Obtaining a liquor license is exorbitantly expensive and painfully slow for restaurants in Los Angeles.
Jeremy Adler is a couple of months out from opening Beethoven Market, a breezy corner restaurant serving California cuisine just down the street from his family’s home in Mar Vista. The bronze-plated wordmark has been carved into the entryway, the wood is being sanded down, and soon, olive and citrus trees will be planted on the patio. Adler, a co-owner of the Southeast Asian restaurant Cobi’s in Santa Monica and an industry veteran, knew what he was signing up for when he set out to create the neighborhood restaurant Mar Vista was missing. Namely, enormous costs from construction to labor and massive amounts of red tape. He also knew that his decision to offer cocktails in addition to wine and beer would prove to be one of the biggest headaches of all.
It’s a common complaint amongst diners in Los Angeles that not enough restaurants have a full bar. Wine and beer are great and all, but sometimes you want a martini, and that desire swiftly dwindles your dining options. Let’s look at the Eastside. Quarter Sheets won’t work. Neither will Dunsmoor. Tsubaki, Queen St., Jitlada, All Time, Lasita—all out. “There are so few places where you can have both a great glass of wine and a great cocktail; it’s notable when you can,” says Sarah Dietz, the director of operations at Drumm Hospitality and a co-owner of Sogo Roll Bar and Bar Covell. “If you look at a place like Donna’s, Botanica, or L&E, part of the joy and treat of those places is that you can have either a cocktail or wine.”
What’s less commonly understood is why. The answer, as any restaurant operator in Los Angeles will tell you, is that the process to acquire a Type 47 license from the California Department of Alcoholic Beverage Control (ABC)—which is what you need to serve on-premise wine, beer, and distilled spirits—is exceptionally costly and excruciatingly tedious. “[Los Angeles has a] kind of puritanical over-regulation of spirits versus beer and wine,” says the restaurant consultant Max Dornbush.
To put it in simple terms, the price of a wine and beer license (Type 41) is $1,500 whereas the market value of a Type 47 license currently hovers around $145,000. Except it’s not that simple. First, you must apply for a permit, a process that costs tens of thousands of dollars, not to mention patience and time, given the high likelihood of bureaucratic setbacks. To do that, you need to hire someone like Eddie Navarrette, also known as Fast Eddie, to expedite. Navarrette is the chief consultant of FE Design & Consulting and the most well-known restaurant permit expeditor in Los Angeles. For somewhere between $10,000 and $12,000—depending on the type of restaurant—he files the application, speaks to the neighborhood on your behalf, and gains the support of the local police department. (Navarrette is also an industry advocacy leader, as the executive director of the Independent Hospitality Coalition—more on that below).
As part of the process, restaurants must put up a sign notifying the community of their application, which neighbors are allowed to protest. If—in most cases, when—the application is protested, a hearing will be scheduled for sometime in the future, oftentimes an entire year later, and fees could double. Then, there’s the cost of the application: $20,000 to the city of Los Angeles, not including mailing fees required to alert community members within 500 feet of your restaurant about the public hearing, where they’re invited to provide support or opposition.
“So you’re looking at $30,000–$34,000 just to get started, and that’s not the alcohol license itself, it’s just the entitlement for it,” says Navarrette. The reason you need someone like him is because, as Dietz puts it, “the city systems are not set up to help you succeed if you’re not an expert on it. The expectation is that the people managing [the application] are expediters who've handled it before, so every part of the process is not explained.”
There are a few ways to lower these costs. The first is winning the lottery. Unlike Type 41 licenses, there is a statewide cap on Type 47 licenses. Only one license per 2,000 people per census tract is legal, and no more than 25 new licenses can be issued per 12-month period. Every October, the ABC conducts a lottery to distribute those 25 licenses. The cost of entry is $17,000, and several hundred restaurant owners enter each year. A second priority drawing, which costs about half that, grants another 25 winners the opportunity to purchase a license from another county in California, where the secondary market rate might be lower than in Los Angeles. Losers of the lottery, such as Adler (who entered for the past two years to no avail), get all but $500 back and must purchase a license from a broker. Brokers buy licenses from closing restaurants and auctions created when restaurants fail to pay renewal fees or taxes, then profit off the resale. “Prices stabilize or go down a bit right before the lottery in October because why would I buy one off you if I might win one? The second the lottery is over, the prices spike again,” Adler says.
Another situation that can curb costs and eliminate red tape is inheriting a grandfathered permit from previous tenants. Before Michael Francesconi and Matthew Glaser opened the Italian restaurant Donna’s and its next-door sister bars, Lowboy and Bar Flores, in Echo Park, their piece of Sunset Boulevard real estate was home to Barragan’s, a Mexican restaurant serving margaritas since 1961. “From wall to wall, it has the ability to serve alcohol as long as we have an operational kitchen,” Francesconi says. At some point in the ‘80s, there was a line drawn in the sand—if you hadn’t served alcohol previously, you needed to get a conditional use permit to do so, whereas if you had been operating before that point, you simply needed to maintain that use over time. Thus, Francesconi and Glaser were spared the costs and hurdles of the permitting process. “They say if you serve liquor, you have to have two security guards on premise at all times, and you have to serve in these hours, you’re restricted to these types of music… largely when you get a grandfathered liquor license, there’s just no list of those conditions, they’re all absent from your paperwork,” Francesconi adds. Their costs were limited to a $2,929 transfer fee, plus fingerprinting and then the cost of the license itself. So that’s approximately $73,000 (since the secondary-market price was $70,000 when they bought it) instead of the standard process, which can reach the astronomical potential of $200,000.
As of recently, there’s another way to skirt the intensive permitting process. Early in his advocacy career, Navarrette championed the Restaurant Beverage Program, an administrative procedure that passed in March of 2022 and removes the need for a conditional use permit—thus bypassing the neighborhood council, community meetings, and weigh-in from the local police department, plus the cost of an expeditor—and is easy for any operator to apply for. The application is $6,000, and as long as you comply with a set of “community protections,” including hours of operation from 7 a.m. to 11 p.m. and no live entertainment, you’ll be permitted to purchase a Type 41 or Type 47 license. The only caveat is that your council district gets to decide whether or not the RBP applies, and certain districts, such as 1 and 9, don’t allow it. Also, unlike standard-issue permits, RBP permits are location-specific and non-transferrable, meaning if a new tenant takes over the space, they will not inherit the ability to sell alcohol. (As Navarrette notes, the RBP hurts his business but helps restaurants.)
“The point of the Restaurant Beverage Program is to cut out the bureaucratic red tape, and so they're not writing individual conditions for you; you just have to meet the 60 criteria they've already set for the program,” says Dietz, who was recently approved by the program for Sogo Roll Bar. She and her co-owners opened the Los Feliz sushi restaurant mere months before the pandemic and were subsequently financially derailed from applying for an alcohol permit. Once they were out of the weeds, Dietz had heard about the RBP, and decided to wait until it was passed to move forward more affordably and seamlessly. “We were probably one of the first to apply,” she says.
Say none of these stipulations are available to you, and you’re subject to neighbor complaints, a single one of which will lead to a public hearing. “It takes almost two years to resolve a protest on the ABC license application,” says Navarrette. “Let’s say people came out and were up in arms about another alcohol license or there’s a church nearby and they have some ill feeling about alcohol, that could push back the process and make it more expensive, and they can also use a second process as an opportunity to protest you further.”
Dornbush says he’ll only advise clients to go through the process of obtaining a Type 47 license if there’s a strong case for the return on investment. “Under the wrong circumstances, it could very easily balloon, and that’s when you have to really look at what’s the probability of success and what’s the ROI, especially for a new restaurant that’s opening on a shorter term lease, or a lease that’s towards the top end of what the restaurant can likely afford,” he says. “It’s a challenging landscape compared to many other cities that are more friendly and amenable to it.” In New York City, for example, it can take between 40 days to six months to acquire an on-premise beer, wine, and liquor license, which costs $4,352. Other associated costs are kept to a minimum.
“How do you rationalize dropping $145,000 on a liquor license? I’m going to, but I don’t know how. There are not a lot of industries where that level of regulation applies to a small independent business.”
At this point, you’re probably wondering why it has to be like this. Many of these rules—including the number of liquor licenses that can be issued—haven’t been amended since 1961. Some parts of Los Angeles have moratoriums on new alcohol licenses that date back to the 1992 riots. To say they are outdated is an understatement. According to Navarrette, it’s because of the “demonization” that alcohol has had. Most lawmakers are fearful of passing legislation due to fear of anti-alcohol groups, he says, which are a result of the religious conservatism that exists in Los Angeles. Yet, Navarrette argues, putting small independent restaurants in the same box as liquor stores is unfair. “Their policy has always been, ‘you’re going to contribute to people drinking more, dysfunction, and opportunities for domestic violence.’ Of course, all of these things exist, and we don’t want to be a part of that, but people are not going to a restaurant to pay $20 for a cocktail to get messed up. They’re gonna go to the liquor store and buy a fifth of vodka,” he says.
Dornbush agrees that neighbor grievances shouldn’t be the be-all and end-all. “There are a lot of people who object based on noise or public nuisance type complaints. But I’m not personally convinced by those arguments that the supposed and potential negative effects outweigh the likely benefits to restaurant owners and to the hospitality, restaurant, and nightlife culture and economy in Los Angeles.” He thinks the end goal should be loosening restrictions and making more licenses available to help drive prices down.
One positive development is that the ABC recently proposed a revision to tighten up the review process for neighbor complaints to reduce fraudulent oppositions, including using fake addresses and names, which Manny Diaz, Navarrette’s business partner, says are all too common.
Change would be beneficial, both for diners and especially restaurateurs, who would welcome the opportunity to increase their bottom line. “You read piece after piece about how margins are shrinking and costs are going up. It’s really hard with all these headwinds for restaurants right now. I think liquor is a huge boon to being able to survive as a mom and pop,” says Francesconi. Dietz says they've quickly seen a change in their numbers since adding wine and beer to the menu at Sogo Roll Bar. “Without the ability to serve alcohol, it’s next to impossible to stay open.” While $145,000 is too high a price to shell out for potential revenue from liquor sales, she says that she’ll continue to apply to the lottery in hopes of leveling up for only $17,000. Adler says the same is true for Cobi’s, which only sells wine and beer.
“Policy traditionally does not keep up with the progress of the industry at all,” says Navarrette. “Many of these things aren’t as meaningful to a larger business, like Buffalo Wild Wings, but to a smaller business, it might mean all the difference.” He believes that the number 2,000 (people per census tract per license) should be cut in half and that the limit of 25 licenses per year should be doubled or eliminated completely. Furthermore, he argues that the state should enforce the regulations, as opposed to lawyers, so that California can benefit (i.e., profit) from an increase in licenses. This would also eliminate the role of predatory brokers. “They will literally call restaurants that are on the verge of closing, or that didn't win the lottery, and ask them if they want a license or if they want to sell a license. They'll be very aggressive, and they won’t stop calling you because they're all competing for the same business,” he says.
“Charge me more per year to use it or limit [licenses] based on geographic territory, but the fact that it’s costing me this much to serve booze is insane,” says Adler. “How do you rationalize dropping $145,000 on a liquor license? I’m going to, but I don’t know how. There are not a lot of industries where that level of regulation applies to a small independent business.”
When Beethoven Market opens at the end of the summer, there will be cocktails on the menu. Still, Adler’s Type 47 license remains in limbo. He had several complaints from neighbors, as expected, and now his hearing will take place next year. In the meantime, he’s been granted an Interim Operating Permit, which enables him to serve booze so long as he pays cash upon delivery. Financially, the situation is not ideal. With a license, he could operate net-30, paying his suppliers out after he’s had time to make sales. The license he secured will likely fall out of escrow, and his hope is that it’ll still be available once he’s permitted; otherwise, he’ll have to source a new one.
“I don’t want to be open until the wee hours of the morning. I don’t want people to be getting drunk and pissing on your lawn. I just want to be open until 9 o’clock on weekdays and 10 o’clock on weekends, nothing crazy,” says Adler. “All I want is for people to get to know each other and share a drink.”
loved this peek behind the curtain — your writing is so informative and concise thank you so much for taking the time, emily. appreciate you!!
this is insanity lmao.
awesome read.