Adding Liquor license to existing beer and wine permit? Possible restaurant purchase?

[horn4life 3,838]

I may have an opportunity to buy into a business near my house that currently has a wine and beer permit, but no liquor license.  The current owners have sort of aged and burnt out and the main reason I am looking is that I think with a liquor license, and some menu changes I could easily expand the monthly sales. There are a lot of other variables, in that basically I would be buying out the shares of their corporation, but the addition of the liquor license is the key component for me.

I used to be in the bar business and have helped a few restaurants expand their footprints with some good simple advice they heeded.  i have also seen folks go right down the rat hole,  because they thought they were there to party rather than make money.  I have a couple of smart folks i can get solid input (criticism) from, that I think will help reduce my risk. 

I did some research on the costs but I am simply unfamiliar in how the transfer of a wine/beer permit would work if I was buying a corporation? Much less the process of adding liquor to a wine and beer permit? My assumption is that it would be easier and cheaper to add the liquor to the existing permit, before I buy out all of corporation.  I would NOT buy out all the partners at once as want some continuity in transition. Ultimately I would be the sole owner, and likely bring in my own operating partner. 

Anyone, anyone know anything about liquor licenses, bar/restaurant purchases, and the permitting process?  

Thanks in advance!

[Guest Lobo]

Where is this?  If it's in Travis County/Austin...I can recommend the guy that got a full bar permit built across the street from the School for the Deaf.  He's that good.  And then to drive the point home that they fucked with the wrong lawyer, he's the one that made sure the liquor license for the Torchy's on South Congress will never see the light of day.  

[RPM 26,623]

I'm sure there's a Permit Service locally that can take care of everything for you. Harris Permits Service took care of everything for me in Tarrant County. Easy peasy.

[HouTex 1,939]

Do you have to buy shares in the corp? An asset purchase may be the way to go. If it has to be a purchase of the equity interest you need to diligence the hell out of it to ensure you know what you are buying and the extent of the liabilities that go with the corp. And try to get surviving reps and warranties in the event misrepresentations are made. Though it may be difficult to collect if you win the lawsuit. I’m no help on the permit issue.

[Brew 3,049]

There is no way in hell that I would buy the shares of an existing Corp in that business. Do an asset purchase and limit your exposure. As far as the permit, go to City Hall and talk with them about the process and the pitfalls. Typically, if you have no criminal record and a decent background check and there are no location restrictions, it should not be that difficult a process and will just require a few checks. However, that is local to my area and may be completely different where you are.

[horn4life 3,838]

LOBO- yes Austin!

So the concern on the shares of the existing corp are risky because of potential hidden liabilities, like lawsuits that might be filed, or non-disclosed liabilities, correct?  Just trying to clarify.

One of the main reasons I was looking at buying out the corporation was to avoid having to bring up the bathrooms to ADA code.  I don't know if I can avoid this expense with an asset purchase? Or can I? My understanding was a straight purchase removed all the grandfathered code requirements.  Am I wrong here? If I have to bring everything up to current code I can't afford really to do what I want without bringing in another partner.  The place is making ends meet, but it's not thriving, and there is a lot of room to move a lot more folks though the place each day.  

The other fly in the ointment is the landlord. At first they did not want to renew the lease, but they also realized that the concerns regarding ADA code made it wiser to let the current tenant go month to month.  Simply as they did not want to take on the expense of a new buildout. Or at least that's my current understanding. I would need to have at least a pre-negotiated lease extension option to really go all in, so there are a lot of moving parts.  

Thanks again guys for the input!!!!

 

 

[Armybrat 41,399]

Prior to the turn of the past century, my brother’s business partner put $1,200 in a plain envelope and handed it directly to a local state senator, who in turn made a phone call to get their stalled liquor license appoved the next day.

[Guest Lobo]

I'll send a PM.  

[Brew 3,049]

13 minutes ago, horn4life said:

LOBO- yes Austin!

So the concern on the shares of the existing corp are risky because of potential hidden liabilities, like lawsuits that might be filed, or non-disclosed liabilities, correct?  Just trying to clarify.

One of the main reasons I was looking at buying out the corporation was to avoid having to bring up the bathrooms to ADA code.  I don't know if I can avoid this expense with an asset purchase? Or can I? My understanding was a straight purchase removed all the grandfathered code requirements.  Am I wrong here? If I have to bring everything up to current code I can't afford really to do what I want without bringing in another partner.  The place is making ends meet, but it's not thriving, and there is a lot of room to move a lot more folks though the place each day.  

The other fly in the ointment is the landlord. At first they did not want to renew the lease, but they also realized that the concerns regarding ADA code made it wiser to let the current tenant go month to month.  Simply as they did not want to take on the expense of a new buildout. Or at least that's my current understanding. I would need to have at least a pre-negotiated lease extension option to really go all in, so there are a lot of moving parts.  

Thanks again guys for the input!!!!

 

 

Your first paragraph is correct for liability purposes. There is no effective transaction at the corporate level so all known/unknown liabilities are still there. From a tax standpoint you get no tax benefit for a stock transaction and just have basis in your shares. In an asset sale you can depreciate/amortize what you pay.

On the second paragraph I assume ADA will only kick in if you pull permits for renovations. There are certain aspects that the building would be grandfathered on even in a permit situation. You would need to talk to a contractor and attorney to see what exposure you have, but I Think if you’re just going to operate as is the structure of the transaction would not matter.

On the 3rd paragraph, if they are month to month then you need to make the deal contingent on executing a lease you are comfortable with. Food service establishments have problems if they have to relocate typically. People are tied to specific locations.

Outside of all that, talk with someone about structure before you sign anything. I can’t see where a corporate structure would be better than an LLC structure but some of that is location dependent.

[elfenix 34,749]

sounds like you need a lawyer who knows wtf they're doing in an existing restaurant purchase transaction.

[horn4life 3,838]

Thanks guys, yes on the lawyer, just not there yet.  Still in the research and free advice on Surly stage!

[Updawg 2,385]

Seems like the lease is the biggest issue. If you get booted is that place going to work somewhere else? Assuming you can afford a new place. Austin is changing quick these days.

[horn4life 3,838]

NO lease no deal that's for certain.  

The landlord would rather just collect cash, they really do not want to remodel or invest in converting the space on their dime is my understanding,  The current location is the only reason I am interested at all.  I could ride my bike back and forth, and I drive by and see the spot underutilized.  Probably won't work for one reason or another, but worth sitting down and finding out whether there's a deal to be made or not?

[TwiceHorn 32,076]

Also, kind of a general pro tip.

Avoid the use of "partner" in all but the most informal settings.  Partnership is the default legal setting for two-or-more person business ventures and is probably undesirable without a detailed partnership agreement.  A partnership can even arise where there is a corporation or other entity.

One of the key elements to being treated as a partnership, by either your ostensible partner, or third parties who may want to put you personally on the liability hook, is to represent that you are "partners" with someone.

It would take a bit of a shithead to do that to you, but the world is full of em.

[horn4life 3,838]

On 12/8/2019 at 12:30 PM, TwiceHorn said:

Also, kind of a general pro tip.

Avoid the use of "partner" in all but the most informal settings.  Partnership is the default legal setting for two-or-more person business ventures and is probably undesirable without a detailed partnership agreement.  A partnership can even arise where there is a corporation or other entity.

One of the key elements to being treated as a partnership, by either your ostensible partner, or third parties who may want to put you personally on the liability hook, is to represent that you are "partners" with someone.

It would take a bit of a shithead to do that to you, but the world is full of em.

Very good advice, just like presenting your girlfriend as something more can wind you up in a common law marriage. VERY GOOD POINT and THANK YOU!

I'm not certain if the risk is worth the reward, as really there is no value at all currently.  The only value that could be created is if I came in and just started cleaning the place up.  Then use my marketing prowess to push more warm bodies into the place. The Kitchen is small as shit and disorganized. There is some dead equipment that is just taking up space, but that kitchen would need to be a huge part of my effort going forward. As I want to sell a lot of both food and drink.  I sure as hell don't want to sell a ton of booze without some quality food.  

One of the things I thought might bring me an advantage was that the bathrooms being not to code are a barrier to entry for other potential suitors taking over the space.  The landlord is planning on doing some pretty big upgrades to the space, and in my mind that means they are going to simply get the space ready to go for a new lessee IMO. However the Landlord has also shown a willingness to work with the current owners, so there still might be an opportunity.  I think that if I could blacken the bottom line and show a physical improvement via simply updating the interior bit by bit.  That along with a concrete budget and plan for further improvements I would invest in, might be enough to influence the current landlord to give the current owners some sort of extension option, with an escalating rent. However, without a pre-negotiated option to extend the lease, i'm not going to throw my money into the sinking ship, yet there is a real opportunity to increase the sales dramatically with a face lift and some good marketing. 

So how do I get from where I am to where I MIGHT want to be, contractually?  They corporations has some loans on the books from the current owners, that they obviously would like to get back.  Right now that money is just going to disappear unless I or somebody else highly motivated steps in. So the idea is to give me potential future leverage and ownership, but not take on any of their current liabilities.  What's the best way to do this????  I was thinking perhaps executing some option to buy newly issued shares that would dilute the current ownership? Then buy out the current owners over time at a predetermined share price, after the corporation pays back the loans they have given to the corporation. Right now the owners are running the place simply hoping against hope that somebody is going to write them a check for the loans. Something I would never ever do up front.

If I can sit down with the current owners and the landlord to perhaps come to some sort of option to extend the lease, I would be willing to start pushing some money in on remodeling and new signage and start my marketing campaign. As well as do the legwork and hire the attorney to push through the zoning change and liquor license. The zoning change would be valuable to the landlord if the current business goes under. So my thought is that if they truly do want to work with the current business, and they saw the ongoing remodel and re-zoning work they might work with them (us). Or they may have already decided to move on? 

Anyhow right now probably more risk than reward, but if I could get an option from the landlord to extend the lease... then maybe it would be worth the effort, but right now it's boat with a leak and they don't have the will or supplies to stop the ship from eventually sinking. 

 

 

 

[NeverMarryAStripper 22,294]

That would still stick you with any hidden liabilities of the corporation