How to Start a Liquor Store
Opening a liquor store has challenges beyond those faced by other small start-up businesses. In addition to operations, finance, distribution, security, employment, advertising and marketing, you will face mountains of paperwork as you deal with local, state and federal regulations. Once you have cleared these hurdles, however, you will have a business that can be very profitable.
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Things You'll Need
- Business plan
- Budgets
- Location and building (leased or purchased)
- Utilities
- Liquor license
- Zoning permits
- Distributor accounts
- Inventory (from distributors)
- Store equipment (shelves, cash register, refrigerators, security system, computer)
- Exterior amenities (lighting, signage)
- Federal, state and local tax identification numbers
Instructions
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Research, Planning and Paperwork
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Beverage alcohol is a highly regulated industry. Before you take any steps to start your new business, you must research all of the regulations carefully. While some laws are federal, such as 21 being the legal drinking age, each state has its own restrictions. Some cities, towns or counties also have regulations that may supersede those of the state.
The laws can include permissible hours of operation, days the store can be open, whether you can sell liquor at all in your state (in the case of "control states"), and whether your store can carry non-alcoholic items such as cigarettes or mixers. You must have a complete understanding of all of these issues before you can know whether you can run a profitable business.
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Any new business must start with a comprehensive business plan. A good business plan will provide in-depth information about how you plan on funding your business, short- and long-term marketing plans, sales goals, forecasting, constraints, competition and risk mitigation plans. Many websites offer free business-plan templates.
Your business plan will not only be the road map that you will use to open and operate your business, but any bank or investor considering funding your operation will want to see this document as well.
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Once you have researched the regulations, created your business plan and have all of your financing, it is time to tackle the paperwork. First, you must register your business and obtain a federal Employer Identification Number (EIN). This is necessary to pay the taxes for your business and withhold taxes from employees. This can be accomplished through the Secretary of State's Office.
You then must contact your state's Alcoholic Beverage Commission and apply for a liquor license. The ABC will be able to tell you what type of license or licenses you need.
Starting Your Business
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The beverage alcohol industry is a three-tiered distribution system. The beer, wine and liquor manufacturers sell their products to a distributor who in turns sells the products to the retailer. As you will discover in this industry, there are exceptions to every rule. Most of the control states do not have a distributor acting as a middle man; the manufacturers sell directly to the state Alcoholic Beverage Commission, which also acts as the retailer. Some states like Texas have a four-tiered distribution system where the manufacturer sells to a distributor that sells to a larger retailer, which in turn sells to smaller retailers.
You will need to understand the distribution system in your state and open accounts with the distributors that sell the products you want to carry. In most states, you can expect a set of distributors to sell beer while the rest sell spirits and wine.
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Your business plan should already have laid out the competitive landscape in the area you plan on starting your liquor store, as well as the average alcohol consumption for that area. Based on these factors, you can then start to look for a building that meets both your requirements.
Once you have secured the building, you will need to set it up as a retail space. You will need shelving, refrigerators, a cash register, credit card processor and a security system. For signage and decorations for the various brands you will be carrying, contact your distributors.
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Since your marketing strategy is already laid out in your business plan, it is time to launch. Your distributors can help you with pricing incentives, but you will be responsible for any print, online or event marketing.
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Tips & Warnings
Before you set up inventory in your new store, contact your distributors. They will provide you with a space plan to optimize sales through the correct brand placement on the shelves.
Stay up to date and in compliance with regulations. You can be fined for violations and your liquor license can be revoked.
Resources
- Photo Credit Photograph by Carlos Paes, Lisbon
