Alcohol can be a profitable revenue stream for your restaurant. It’s an easy win — the markup is high, the labor requirements are low, and the products have a long shelf life. In fact, the average restaurant makes about 20% to 25% of its income from alcohol sales. Before you can add beer, wine or spirits to your menu, however, you’ll need a valid liquor license.

What is a liquor license?

A liquor license is the permit you need to make, distribute or sell alcohol legally. These licenses are usually issued by your state, but counties and cities may also set additional restrictions. While every area has its own rules, most liquor licenses regulate factors such as:

• The types of liquor you can sell
• When you can sell alcohol
• Where customers can consume the alcohol they buy
• Limits on alcohol sales
• Who can buy alcohol from you
• Price limits on alcohol

It’s important to understand the specific liquor laws for your state, county and city — after all, you’ll need a license before you can sell a single drink. Most areas offer several license classes to suit different establishments. Common classes include:

• Beer and wine. These licenses allow you to sell beer, wine, cider, and occasionally other malt beverages. Most areas have distinct beer and wine licenses for bars, restaurants, wineries, breweries and catering businesses.
• All-liquor. This license goes by many names, but it typically permits you to sell beer, wine and spirits.
• Tavern. A tavern license is designed for establishments where alcohol makes up the majority of sales.
• Hotel. Hotels that serve alcohol on the premises need this type of license, which may offer both on-premises and off-premises consumption.
• Brewing. A brewing license allows an establishment to brew its own beer and sell it to customers. Other licenses may also be required.

Most states have multiple variations on these licenses that specify whether you need to sell food, if customers can take their drinks to go and rules for live entertainment. Make sure to start early; the application process can take months.

How to get a liquor license

Your state’s liquor-control body, which is often called the Department of Alcoholic Beverage Control (ABC), typically handles the licensing process. It can tell you how to get a liquor license and advise you of any local laws that might affect the process. Some states require you to have a seller’s permit and appropriate business tax registrations before you can apply.

The process can vary by state, county and city but usually involves a variation of these steps:

1. File an application. Contact your state’s ABC and file an application. You may be able to apply online; in certain areas, however, you’ll need to bring the application to the nearest ABC office. Expect to pay an application fee. You may also be able to apply for a temporary permit to sell alcoholic beverages before the official review process is complete.
2. Post a public notice. Many areas require you to post a public notice in your restaurant to let customers know you’re applying for a liquor license. Certain states have additional rules for publishing a notice in the local newspaper or advising neighboring homes and businesses about your plans.
3. Pay license fees. Depending on your area, you can expect to pay anywhere from $500 to $4,000 or more. There may also be additional fees if you need inspections or multiple licenses. You’ll also need to pay a renewal fee every 1 or 2 years.
4. Wait for the licensing review. During this process, which can take anywhere from 1 month to 1 year, officials review your application. They’re likely to investigate you and your premises, as well as local laws. If you qualify, the state will either mail or hand-deliver your license.
5. Post license and required notices. Most states require you to display your physical liquor license behind glass. Some also require alcohol warnings for minors and pregnant people.

Given the potential length of the application review, it’s important to integrate it into your planning process. Expect delays if issues arise or if your state has met its quota for new liquor licenses. If that’s the case, you will likely need to make do with a beer and wine permit until the next period begins.

Other bar licenses you may need

The liquor licensing process can be complex; you may need more than one permit, depending on the structure of your business. For example, if you plan to host live music, you’ll often need a separate license. In New York, it’s called a cabaret liquor license. Michigan has separate permits for businesses that offer catering, dancing, or entertainment. If you’re offering food, plan to get a health permit and a food service license.

You might also need a special alcoholic beverages license to:

• Offer extended hours
• Sell liquor at a secondary location
• Host events
• Have a second bar
• Sell alcohol to members only
• Operate at a private golf club or a ballpark

Each license comes with its own fee, which could be anywhere from $500 to $1,000 or more. Most licenses are administered through the state ABC, but your city council may have additional requirements when you’re applying for a new license; the city clerk can provide details.

Grow your alcohol selection with Grubhub

Since 2020, alcohol delivery has been a growing trend; customers appreciate the ability to enjoy a drink with their meals at home. A number of states now allow restaurants to offer alcoholic beverages in addition to their regular menu. It can be a worthwhile investment — on Grubhub, the average order value increases by $14-$15 when you add alcohol.

If your state permits, Grubhub makes it easy to add alcohol to your delivery menu. You’ll need to package drinks separately and advise customers that delivery drivers will check IDs at the time of drop-off. You can streamline the process by taking steps to optimize your restaurant for beverage delivery. Choose secure packaging, for example, and make sure to provide insulation for hot or cold drinks.

Whether you’re hoping to offer alcohol sales on-site or with delivery orders, a liquor license is a must. Start the process well in advance and you can be ready to serve drinks as soon as you open to the public.