The Triple Threat of Applying for the Right to Sell Alcoholic Beverages

The permitting process for any business, but especially those selling alcoholic beverages, can be extremely confusing, expensive, time consuming, different in each locality, and often makes little sense.   The State of California licensing process is comprehensive and typically far more stringent than the local processes.  The state licensing process, administered by the California Department Alcoholic Beverage Control, is what is referred to as a “discretionary” process.  In other words, issuance of the license is determined on a case by case basis.  The license can be issued, denied, or most typically issued with a custom tailored set of restrictions.  The decision is made by ABC staff, or if opposed or appealed, by an Administrative Law Judge or Appeals Board.  Decisions are based on ABC staff discretion applying regulations, laws, policies, and court opinion as they, in their discretion, believe is appropriate.  Perhaps most significantly, in the more sensitive or potentially controversial applications ABC relies heavily on the “local governing body . . . or its designated subordinate officer or body.” (B&P Code sec. 23958.4(b)((2)).  The ABC works closely with local police departments in determining whether license issue is appropriate, or restrictions on the license would be appropriate.  Additionally,  notice of the license application, and the right to protest must be mailed to all residents within 500 feet of the business premises, and must be published in a Court approved newspaper.  The ABC process can be quite lengthy (minimum of 3 months and typically longer) and expensive (consultant fees minimum $5,000; ABC fees $3,000 to $4,000; and if purchasing a license is necessary, e.g., sales of distilled spirits, or licensing in a “moratorium” city, tens of thousands of dollars)

So what additional permits or processes are required and why are they necessary?

First is what is referred to as the determination of “public convenience or necessity.”  About 15 years ago or so, State law was amended so that local governments were given the exclusive opportunity to determine whether certain types of licenses in certain areas served the public benefit.  Although these areas are referred to as areas of “undue concentration,” most commercial areas fall under this designation.  The types of licenses for which this determination is outsourced to local governments are retail licenses for selling alcoholic beverages for consumption other than where sold (“off-sale” or “off-site”) and licenses for bars, pubs, and taverns.  Some municipalities have created elaborate separate processes for determining public convenience or necessity, often with their own public notices and hearings.  Some jurisdictions combine this process with a conditional use permit process (CUP).

Second, other jurisdictions have separate independent processes for both a PCN determination and a CUP (e.g., City of San Diego), after which the applicant must still go through the ABC application process with its own public notice and hearing provisions.  These latter municipalities have the most burdensome processes, and the redundancy is hard to justify. More typical are the municipalities that either have a separate PCN process but no CUP requirement, or have the PCN determined as part of a CUP process.

It is critical that the prospective new business, or expanding business, understand the local regulatory and permit environment at the earliest opportunity.  Such environment will effect the cost, time, and certainty of the project.  Contingency periods should be negotiated in the lease (i.e., a period during which the tenant may cancel the lease).  Budgets should incorporate the costs.  The project team should be assembled with local expertise.

About William Adams

Attorney at Norton, Moore, & Adams, LLP.
This entry was posted in Uncategorized and tagged , , , , , , , , , , . Bookmark the permalink.