It’s not uncommon to sit down to a nice meal in Idaho, reach for a cocktail menu, and find it missing from the table.
The reason diners might have to settle for beer and wine in Idaho might not be that restaurant owners across Idaho are teetotalers or offering liquor to customers isn’t profitable. It’s because of state law.
Idaho has a unique liquor licensing system where cities are only allowed to issue a certain amount of liquor licenses based on population rather than just issuing them to anyone who asks. This creates a system where liquor licenses are brought and sold for hundreds of thousands of dollars in high-demand areas, businesses come to rely on their value to keep their doors open, and some who hope to sell liquor are left out in the cold when they can’t come up with the cash to buy or lease one.
The debate over resolving this issue raged in the statehouse for years, only to sputter out several times, leaving the status quo in place. It’s divisive in the hospitality industry, depending on whether you have a license or not and where your interests lie. Nearly everyone agrees it’s a tangled mess of a problem. Still, there hasn’t been much consensus on how to untangle it amongst Idaho’s business organizations, elected officials, investors, large resorts, and restaurants, both those with fully stocked bars and without.
A legislature with dozens of new faces is set to start governing in January. The issue could soon come up for discussion again with different players around the table and, perhaps, different results.
How does it work?
No matter how small, every city gets a minimum of two licenses.
But after that, population dictates how many licenses can be issued. Each time a city adds 1,500 people based on yearly U.S. Census Bureau estimates, another license comes online. If a business is at the top of the waiting list, they get offered a liquor license from the Idaho State Police’s Alcoholic Beverage Control division for $425. That license holder can start the process to sell liquor with it, lease it out to someone else, or sell it to anyone else in the city limits.
Depending on where you are, this wait isn’t short. Business owners in resort areas with small permanent populations but huge numbers of visitors (with a demand for dining) could wait decades for a license. Six new licenses came online in Boise this year due to population growth, and those offers went out to people who have been waiting since 2011, but that’s a drop in the bucket compared to other places in Idaho.
“In the grand scheme of things, that’s not a very long list,” Nicole Harvey, ISP’s Licensing and Litigation Manager, told BoiseDev. “I have people on the list older than me who have been on the list since 1978. (In Boise) it’s not like some of our smaller cities where we’re not seeing any population growth or at least enough to allow for another license.”
On the flip side, in some areas, liquor licenses are waiting for anyone to sign up and claim them. In rapidly growing Canyon County, for instance, there are 12 licenses available in Caldwell and another 16 in Nampa. Meridian has 72 licenses operating right now, with 84 allowed per state code. Harvey said she can hardly keep people on the waitlist because new licenses come available so quickly. Fast growth means lots of new licenses.
So, how do you avoid the wait list in a high-demand city like Boise or a slow-growing city in rural Idaho? It won’t come cheap.
Liquor licenses are available on the secondary market. License holders who decide to sell can list them for any amount they choose. The average liquor license in Boise is selling for $375,000 right now. It used to hover around $40,000 in Garden City, but a license just went for $275,000 there. And even with Meridian’s short waiting list and rapid growth, a license just went for $500,000.
Businesses can also lease a license from another owner so they can sell spirits without owning a license, but that is an extra monthly fee that cuts into their margins to a degree some business owners feel like they can’t afford.
No license? No cash? Tough luck
The restaurant and bar business is notoriously difficult.
One thing that helps grease the wheels of restaurants and bars to keep them profitable is the sale of liquor, which is cheaper to produce than beer and wine but typically sells for more due to the higher alcohol content. These profit margins are a big boost if you can get a liquor license and are a major reason licenses are so valuable, particularly in a market where not everyone can have one.
Spacebar Arcade, a bar where visitors can play classic arcade games in downtown Boise, doesn’t have the harder stuff available to visitors. But that’s not for lack of trying. Co-Owner Will Hay took over the business in 2018. His business name is on ISP’s waitlist (where he’s currently 95th in line), and he has sought to buy one, but the six-figure price tag wasn’t attainable without a business loan.
Hay also sought to lease a license, but he couldn’t find one available, and the monthly cost wouldn’t have been sustainable, he said. He said the state needs to change and open up the market so people like him can get a license without going deep into debt for a chance to compete. He argues the current system rewards people who invested in liquor licenses years ago who now use them for passive income by leasing them to businesses like his, instead of allowing liquor licenses to simply regulate businesses who sell a certain product and be open to all.
“They’re looking at it as an investment, but this is my livelihood,” he said about some liquor license owners who lease out their license. “This is how we provide for our families.”
Outgoing Sen. Jim Rice, R-Caldwell, introduced an unsuccessful bill attempting to address some concerns about the supply of liquor licenses in 2019. He said the current system doesn’t promote temperance like the code writers intended but instead “promotes speculation in licenses.”
But, he said, because liquor licenses are priced so high, they are currently important assets to the businesses who hold them. Sometimes business owners will use liquor licenses as collateral to land business loans or use the license to sell their business for more money than they otherwise could when they’re ready to retire. Rice says any changes to Idaho’s liquor license system should also protect the investment current business owners made in a way that transitions to a new system instead of abruptly opening the market up.
“It’s not as simple as you think to fix,” he told BoiseDev. “You’ve got good people on all sides of that issue, and that’s something that should be stated in your article. We can’t have an ‘oh well, we’re going to take sides approach’ to get something done. We have to look at what’s practical both from the position of the state and what’s practical from the position of everybody else and what’s fair.”
Should longtime liquor sellers get a second license to sell?
A new reform pitch could hit the Idaho Legislature in the 2023 legislative session, this time from a group of local restaurants and food/beverage producers.
FARE Idaho, a nonprofit that does lobbying and promotions for Idaho-based restaurants, farms, and craft alcoholic beverage producers, is planning to put forward a bill next. The organization says it will give Idaho the best of both worlds by protecting the investment of small businesses and allowing more licenses to hit the market. They say this would ease prices for people like Hay.
The proposal would allow any restaurant or bar using the same official business name, like an LLC, for at least 25 years to be awarded a “historic license” that would be attached to the business and non-transferable. Then, that business could turn around and sell its original license to anyone the owners choose. There would be no restrictions on who they could sell it to, whether a real estate investor or a big chain restaurant.
This legislation would bring another 15 licenses online in Boise alone in the first year and between 90 and 100 new licenses statewide, including in a few in resort cities like Driggs. Five of the 13 people on FARE’s Board of Directors own a bar or restaurant. This includes the owners of Bittercreek Alehouse/Diablo & Sons, Humpin’ Hannah’s, The Reef/The Brickyard Steakhouse/The Front Door Taphouse, Sangria Grille in Moscow, and One Shot Charlie’s in a suburb of Coeur D’Alene.
FARE Idaho President Dave Krick says he wouldn’t benefit from this legislation immediately because he changed his business name ten years ago. He argues it would add more licenses to big markets like Boise. He says more supply is the key to bringing prices down to make things more accessible, rather than just opening the market to anyone to sell liquor.
“Why we like this is it doesn’t disrupt the current system, and it rewards people who have been invested in it,” he said, sitting on the patio of his downtown Boise restaurant Diablo & Sons. “It tends to be people who are your local fabric restaurant…It creates an incentive for people who own licenses to open up a little bit more. This is a winner’s bill that I think values small business and can open up inventory.”