When Priscilla Denithorne and her husband, Richard, bought the New Holland Pub in 1989, they paid $250,000 for the whole operation.
The Pub closed last September when the Denithornes sold the East Main Street real estate alone for $520,000.
That transaction excluded a piece of paper that’s now worth nearly what they paid for everything 27 years ago: the liquor license.
Denithorne said she recently agreed to sell the restaurant’s liquor license for $230,000, benefiting from a bidding war for the license.
“Yeah, I was surprised because I never sold a liquor license before,” said Denithorne, who used a broker to handle the process.
“I didn’t know what it would go for.”
Prices for restaurant liquor licenses have skyrocketed in the last several years in Lancaster County, driven by new demand.
Supermarket chains such as Weis and Giant need the licenses to open beer cafes in their existing stores.
In addition, new developments are adding license-seeking restaurants and supermarkets to the mix.
The new demand is putting pressure on prices for a finite supply of liquor licenses — 230 in Lancaster County, per state regulation.
“The liquor license market in the last two years has gone from $125,000 to north of $200,000,” said Aaron Zeamer, an attorney with Russell, Krafft & Gruber who specializes in liquor license transactions in Lancaster County.
“It has gotten significantly more expensive in what is a relatively short period of time,” he said.
Cost of liquor licenses
Since the supply and demand for restaurant liquor licenses varies from county to county, so do the prices.
Two years ago in Philadelphia, licenses cost around $60,000, but now go for around $190,000, according to MaryLou Galyo, a hospitality broker with the Sofranko Advisory Group.
“There’s only a certain amount. It’s not like there are going to be new ones added,” said Galyo, who advises restaurant clients in Philadelphia.
Rich Hewitt, a broker who handles liquor license sales in New Jersey and Pennsylvania, said prices in Lancaster County are now around $220,000.
In York County, average restaurant liquor licenses are $200,000 while Adams County is $120,000, Dauphin County is $110,000 and Lebanon County is $100,000, according to Hewitt.
In Cumberland and Chester counties, restaurant liquor licenses can sell for $350,000, he said.
“It’s nuts,” Hewitt said. “They’re going up everywhere.”
One Lancaster County restaurant operator said that only two years after being offered $160,000 for his liquor license, he was recently offered $215,000.
Gary Huether Jr., a co-owner of Arooga’s, which recently opened a sports bar on South Centerville Road, said he would now expect to pay $200,000 and up in Lancaster and Cumberland counties.
Grocery store competition
Before the recent price inflation, Zeamer said prices had been relatively stable around $125,000, occasionally creeping up toward $150,000.
Zeamer agrees that the biggest recent factor pushing prices up is demand from grocery stores that buy them to open beer cafes.
“In my opinion, it’s odd that they are buying restaurant licenses because they’re not functioning like a restaurant” he said. “It’s a square peg in a round hole.”
Grocery stores that want to sell beer have to get a restaurant license and create a separate space inside their stores with its own entrance and seating for at least 30, among other things.
The first beer cafe opened at the Lititz Weis Markets in March 2014.
Weis now operates three beer cafes and also has a liquor license for a fourth one in Willow Street. Weis has plans for a fifth one in Lancaster County but has yet to disclose the location.
Giant is planning a beer cafe at its store at Lancaster Shopping Center and Darrenkamp’s is moving ahead with one for its Mount Joy store.
Several other local grocery store owners have expressed interest, while Wegmans has announced plans for a Lancaster store that would include beer sales.
Zeamer points out that many of the grocery store chains are larger companies that can afford to pay more for liquor licenses, thereby driving up the price for everyone.
That can put a squeeze on local independents.
Mick Owens, who recently opened a new Mick’s All American Pub outside Mount Joy, said he would like to open more restaurants here.
But the scarcity of available liquor licenses in Lancaster County is one of the factors that would have him considering opening elsewhere.
Zeamer said there have been some legislative proposals that would lower prices, including creating a separate category for grocery store licenses or trying to free up licenses that have lapsed.
Yet Zeamer said none of those proposals have gotten very far in reforming a regulatory system that dates to the era immediately after Prohibition.
“It’s like trying to modernize an old, out-of-date car. It’s an antique at this point,” Zeamer said.
Desperately seeking sellers
Hewitt said that even if buyers are willing to pay $220,000, it’s hard to find available licenses.
“At this minute I have three buyers in Lancaster County, and I don’t have a license,” Hewitt said.
Hewitt said he plans to spend three days in Lancaster County this week to visit around 30 restaurants to broach the topic of selling their liquor license.
“I literally go door to door to talk to the owner if I can,” said Hewitt, adding that it can be a delicate subject to bring up with bar owners.
With liquor license prices at record highs, Hewitt said his sales pitch is more attractive to bar owners who are struggling or thinking about getting out of the business.
“There are many restaurants in Lancaster County that are in operation that are being pressured,” Hewitt said.
With more commercial development coming to Lancaster County and more grocery stores possibly eyeing liquor licenses, Hewitt doesn’t think liquor licenses will get cheaper soon.
“I think they will hold their prices if not go up higher,” Hewitt said.